An automatic renewal clause allows an agreement to continue for a defined period if the existing agreement isn't renegotiated within a specified time measured from the expiration of the current contract. The term of renewal depends on the specific contract language, but such clauses generally provide that the contract shall be automatically renewed for the same period (or some lesser term) unless either party, at some stipulated and predetermined time (i.e., 60 days before expiration), gives notice to the other of its desire to end the agreement. Generally, if the contract doesn't provide a time period for the contract to be subject to renewal, it may be renewed indefinitely.
It is a clause which may be included in various contracts, such as an employment contract or rental lease. Some leases include a provision for the lease to automatically renew for another year if the tenant fails to give notice by a certain date that they do not want to renew. Local laws vary, but in some areas, such provisions in a lease are unenforceable. Some state laws govern automatic renewal clauses, for example, some states require such clauses to be initialed by a tenant, or require notice of renewal to be provided by the landlord a number of days in advance, However, localities within a state may also regulate such clauses, so that they may be enforceable under state, but not local law. Therefore, laws in your area should be consulted to determine applicable requirements. In one example, California state laws requires automatic renewal clauses to be printed in eight-point bold faced type to be enforceable, but local laws may impose other requirements.
Many collective bargaining agreements in the federal sector have a provision, usually located at the end of the agreement, stating that if neither party gives notice during the agreement's 105-60 day open period of its intent to reopen and renegotiate the agreement, the agreement will automatically renew itself for a period of x number of years. An automatically renewed agreement, under certain circumstances, can also serve as a contract bar.
The following is an example of a state statute dealing with automatic renewal clauses:
"Notwithstanding the provisions of any residential lease, in order to enforce any automatic renewal clause of a lease of an original term of two months or more which states, in effect, that the term shall be deemed renewed for a specified additional period of time of two months or more unless the tenant gives notice to the landlord of an intention to quit the premises at the expiration of the term due to expire, the landlord must give notice to the tenant as provided in this section. The notice must be in writing and direct the tenant's attention to the automatic renewal provision of the lease. The notice must be served personally or mailed by certified mail at least 15 days, but not more than 30 days prior to the time that the tenant is required to furnish notice of an intention to quit. "