Business Law and Corporate Ethics

If Letisha does not pay and Sudson sues her for breach of contract, what legal arguments could be raised in Letisha’s defense against the enforcement of the automatic renewal clause? Explain.

Let us get a brief understanding of what the automatic renewal clause definition is, “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 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.

Get quality help now

Dr. Karlyna PhD

Verified writer

Proficient in: Business

4.7 (235)

“ Amazing writer! I am really satisfied with her work. An excellent price as well. ”

+84 relevant experts are online

Hire writer

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 several 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 face type to be enforceable, but local laws may impose another requirement.”

I would think Letisha would have a good argument in court if it went to court. The salesperson didn’t explain in full detail the full contract although she did sign the agreement. Some agreements have a separate place to sign or another sheet to acknowledge that the salesperson has explained. Not knowing if this company ahs that type of requirement, I would say she has a chance in fighting it with a good lawyer.

What legal arguments could be raised by Sudson in support of the enforcement of the automatic renewal clause against Letisha? Explain.
Sudson can argue that she had a chance before the end of her agreement ended that should could have read the contract. The salesperson could also say that he had explained in full detail to her the whole contract before she signed just to cover his case. Dependent on the date and state of the agreement the company can impose the automatic renewal.

What ethical issues are raised, if any, by Sudson’s practice of using the automatic renewal clause in their lease agreements? Explain.
“While Sudson’s automatic renewal clause may be upheld, there are ethical issues of the company using such a practice. First, many courts have had the opinion that parties should be notified when the lease is up for renewal. It is unlikely that the client would remember about the clause five years later, and the company should be willing to make a courtesy call to keep customers happy.

Also, all parts of the contract should have been discussed before signing. Not informing the client of the automatic renewal policy does not reflect well on Sudson Washer and Dryer Service. The National Association of Equipment Leasing Brokers states in their code of ethics that leasing companies should remain honest and professional in all business transaction. In this case, not discussing all parts of the contract.”

Does the Uniform Commercial Code Article 2A apply in this case? Explain.

I do think it does apply. “UCC article 2A allocates rudimentary contract guidelines like statues of fraud, acceptance of contract, breach of contract, and warranties. UCC article 2A is a set of regulations linking to individual property rental and numerous states have sanctioned these set of laws. Depending on the state that the case is in there are certain laws and statues giving, for example Wisconsin Just this year, legislation passed an automatic renewal statue affecting the enforceability of automatic renewal clauses in certain business-to-business contracts.

The law creates specific disclosure and notice of renewal requirements on contracts. The Wisconsin statute requires: (1) an automatic renewal clause be disclosed at the time the contract is entered into; and (2) a formal advance reminder notice to a customer whose contract will otherwise be renewed for an additional term of more than one year be provided.”

Are there any government or private entities available to Letisha for lodging complaints about businesses which treat consumers unfairly? Explain.

Yes, Letisha, can file grievances with her local the Federal Trade Commission, Better Business Bureau, and web-sites such as Angie’s List. And in certain states with their licensing boards.

If Sudson sues Letisha for breaching the contract’s automatic renewal clause, what do you think the outcome of the case will be? Explain
If Sudson were to sure Letisha for her breach of contract it is more than likely that they would win the case. The UCC section 2a-301 shows a lease contract is enforceable according to the terms agreed by both parties.

Since the Sudson representative and Letisha signed the contract, both parties agree to the terms of the contract. It’s unlikely the court will favor Letisha because the automatic renewal clause wasn’t pointed out. It’s the lessee’s responsibility of reading and understanding all parts of the contract. The agreement clearly states the time limit to cancel the lease and Letisha failed to meet those requirements.

To avoid these issues like Letisha’s with Sudson, it’s advisable for parties to go over the contract together. Lessees may even want to hire an attorney for furthering information and to more explain any part of the contract that he does not understand. By taking the time to read the entire contract before either sign, lessees are protecting their interests.

Automatic renewal clauses are losing their popularity, but they are still used, especially when making leases between businesses. Businesses may want to consider other avenues to keep costumers. But if they are going to use an automatic renewal clause, it will keep customers happy if they are informed of the clause before it’s too late to cancel the agreement.