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What is an Evergreen Contract? A Guide to Automatic Renewals
Definition & Meaning
An evergreen contract is an agreement that automatically renews after a specified period, typically annually, unless one party provides notice of cancellation. This type of contract continues to renew until either party decides to terminate it. An evergreen clause can be included in the contract, stating that it will renew on a specific date each year if no notice is given. For instance, a healthcare contract may remain in effect automatically for its duration unless renegotiated or canceled by either party.
Table of content
Legal Use & context
Evergreen contracts are commonly used in various legal contexts, including:
Healthcare agreements
Service contracts
Lease agreements
They are particularly relevant in civil law, where parties may prefer the convenience of automatic renewals. Users can often manage these contracts themselves using templates available from resources like US Legal Forms, which provide legal documents drafted by experienced attorneys.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A fitness center membership may be structured as an evergreen contract, renewing each year unless the member cancels their subscription with a written notice at least 30 days before the renewal date.
Example 2: A software service agreement could automatically renew annually, allowing the provider to continue offering services unless the client provides notice of cancellation prior to the renewal date. (hypothetical example)
State-by-state differences
Examples of state differences (not exhaustive):
State
Notice Requirement
Renewal Duration
California
30 days
Annual
New York
60 days
Annual
Texas
30 days
Annual
This is not a complete list. State laws vary and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Key Difference
Fixed-term contract
A contract that lasts for a specific period and does not renew automatically.
Evergreen contracts renew automatically, while fixed-term contracts do not.
Termination clause
A provision that allows one or both parties to end the contract before its expiration.
Termination clauses may not include automatic renewal provisions.
Common misunderstandings
What to do if this term applies to you
If you are entering into an evergreen contract, carefully review the renewal and cancellation terms. Ensure you understand the notice requirements for cancellation. If you need assistance, consider using US Legal Forms for ready-to-use templates that can guide you through the process. For complex situations, consulting a legal professional may be advisable.
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