Enforceability of Telecom Contract's Automatic Renewal Questioned

By Kathleen Brown, Executive Director, TelecomAssociation

TelecomAssociation received an inquiry this week from an agent member trying to win a $1,000-per-month business customer from a competing local service provider. The agent’s prospective business customer signed a one-year agreement 27 months ago. The customer was getting ready to switch to the agent’s recommended new provider until the loosing carrier sent the customer the fine print of the contract he signed more than two years ago, which included the following paragraphs regarding renewal and termination.

Renewal: This “Initial Service Term” commitment will automatically extend for additional one (1) year periods (“Additional Service Term”) unless Customer notifies carrier of cancellation in writing at least thirty days prior to the expiration date.

Termination: If customer discontinues service in whole or in part before the expiration of the initial or Additional Service Term, the Customer shall be liable to carrier for termination charges which is the average of the sum of all line charges on the three previous months carrier invoices (excluding taxes), multiplied by the number of months remaining on the term agreement, or for the specific termination charges indicated for the Service.

The carrier is located in New York state and the customer is in New Jersey. The carrier’s contract with the customer does not stipulate which state’s business laws apply. The agent wants to know if other agents from New York or New Jersey have any experience with these automatic renewal terms being tested in court. Please e-mail publishable opinions to [email protected] or post comments here on the Peer to Peer blog.