Auto-renewal and evergreen clauses in Indian contracts: the traps and how to track them

What is an auto-renewal or evergreen clause?

An auto-renewal clause says that at the end of the initial term the contract renews for a further period, usually the same length, unless one party tells the other it does not want to renew. An evergreen clause is the same idea without an end point: the contract rolls on term after term until someone terminates it.

Both are legitimate and often sensible. A facilities contract, a software subscription or a logistics arrangement that has to keep running should not lapse because nobody remembered to sign a renewal. The problem is that the clause is drafted for continuity and enforced on silence. The party that wants out has to act, on time, in the form the contract specifies. The party that is happy to continue does nothing.

That is why a missed renewal is rarely a legal question and almost always an operational one. The clause was agreed at signature; what failed was the calendar.

Where do the traps actually sit?

The renewal clause itself is rarely the problem. The damage comes from the terms around it, which are usually spread across the main agreement, an order form and a schedule:

• The notice window. "Not less than 90 days before the end of the then-current term" means a fixed date that passes without anyone noticing. Some clauses also set an opening date, so notice sent too early is arguably ineffective.
• The form of notice. Many contracts require notice in writing to a named address or officer, sometimes by registered post or courier. An email to the account manager may not satisfy the clause.
• The renewal term. A one-year contract can renew for three years if the order form says so, which is the most expensive single line in many vendor agreements.
• Price escalation on renewal. Fixed uplifts, index-linked increases or a reversion to "then-current list price" all trigger on renewal and are easy to miss in a schedule.
• Minimum commitments and lock-ins. A renewed term can carry a fresh minimum spend or a new lock-in during which termination for convenience is unavailable.
• Asymmetry. One party may have a renewal right or a termination right the other does not. Read both directions, because the clause that matters at renewal may be the other side's.

Can a contract renew by conduct after it has expired?

Often the more dangerous case is the contract with no renewal clause at all, which expires while the work carries on. The vendor keeps supplying, the business keeps using, and invoices keep being paid. Nobody signs anything.

The Indian Contract Act does not require acceptance to be in words. Section 8 provides that performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise offered with a proposal, is an acceptance of the proposal. Section 9 provides that where a proposal or acceptance is made otherwise than in words, the promise is said to be implied. So when one side keeps performing on the old terms and the other keeps accepting and paying, there is a real argument that a contract exists on those terms, even though the paper has expired.

Separately, section 70 provides that where a person lawfully does something for another, not intending to do so gratuitously, and the other enjoys the benefit, the latter must compensate the former or restore the thing. Even if no renewed contract is found, the business that used the service will usually still have to pay for it.

Whether conduct amounts to a renewal, and on which terms, is a question of fact. The practical lesson is simpler: an expired contract that is still being performed is neither safely ended nor safely renewed. It is a contract with uncertain terms, which is the worst position to negotiate from.

Do consumer protection rules limit auto-renewal?

In consumer contracts, yes. Section 2(46) of the Consumer Protection Act, 2019 defines an "unfair contract" as one between a manufacturer, trader or service provider and a consumer whose terms cause significant change in the consumer's rights. The listed examples include entitling a party to terminate unilaterally without reasonable cause, a penalty wholly disproportionate to the loss caused by the breach, and imposing any unreasonable charge, obligation or condition which puts the consumer at a disadvantage. Under sections 49(2) and 59(2), the State and National Commissions may declare unfair terms null and void.

The Central Consumer Protection Authority issued the Guidelines for Prevention and Regulation of Dark Patterns, 2023 on 30 November 2023 under section 18 of the Act. They list 13 specified dark patterns, and "subscription trap" is one of them. A company that sells subscriptions to consumers should review its renewal and cancellation flow against the text of the Guidelines.

Where a renewal is charged to a card, UPI or prepaid instrument, the Reserve Bank's Digital Payments – E-mandate Framework, 2026 also applies to the payment side. The issuer must send a pre-transaction notification at least 24 hours before the debit and give the customer a facility to opt out of a particular transaction or the whole mandate.

For business-to-business contracts, the consumer regime usually does not help. The Act's definition of consumer excludes a person who buys goods or avails of services for any commercial purpose, which covers most enterprise procurement. Between businesses, the renewal clause generally means what it says.

How does termination for convenience interact with renewal?

A termination-for-convenience clause lets a party end the contract on notice without having to show a breach. It is the natural escape from an evergreen contract, and the first thing to check when a renewal has been missed.

Three points are worth checking. First, whether the right exists for your side at all, or only for the vendor. Second, whether it is suspended during a lock-in or minimum term, which may restart on each renewal. Third, what it costs: early-termination fees, payment for the full notice period, or the balance of a committed spend.

There is also a remedies point. Section 14(d) of the Specific Relief Act, 1963 provides that a contract which is in its nature determinable cannot be specifically enforced. A contract either side can end on notice is the kind usually argued to fall within it, which tends to steer a dispute towards money for the notice period rather than an order to keep performing. Whether a particular contract qualifies is for the court.

What should you negotiate into renewal clauses?

If you are the customer, most of the risk can be removed at signature rather than managed afterwards:

• A renewal term no longer than the initial term, and ideally one year.
• A written renewal reminder from the vendor a fixed number of days before the notice window closes, so the burden is shared.
• A cap on price increases at renewal, stated as a percentage or an index, rather than a reversion to list price.
• Notice by email to a named role address as a valid method, alongside any formal method.
• A termination-for-convenience right for your side after the initial term, with a short notice period and no fee.
• An express statement that continued performance after expiry does not renew the contract for a full term, and that holdover is month to month on existing terms.

How do you track notice dates in practice?

Renewals are missed for operational reasons, not legal ones. The notice date was never recorded anywhere a person would see it, or it was recorded against someone who has since left.

The fix is to treat the notice deadline, not the expiry date, as the date that matters. For each contract, record the current term end, the renewal term, the notice period and method, any escalation that applies on renewal, and an owner. Calculate the last day for valid notice and set reminders well before it: 30, 60 or 90 days earlier, depending on how long an internal decision takes. When a contract renews, recalculate the next notice date immediately, because an evergreen contract needs one every term.

Legacy contracts are where this usually breaks, because the dates sit in a scanned PDF and an order form nobody linked to the master agreement. Extracting them once, carefully, is worth more than any reminder tool. Contract management software helps here: IntelloContract's repository records renewals, expiries and obligations, and Smart Import extracts dates from legacy contracts. Whichever tool you use, have a person check extracted renewal and notice terms against the source document before relying on them.

Finally, review renewals as decisions. Thirty days before the notice deadline, the owner should confirm in writing whether to renew, renegotiate or exit. A renewal that happens because nobody decided is the outcome every evergreen clause is designed to produce.