The pitfalls of self-renewing contracts
With more than 10 years experience in the telecommunications and utilities industries, I've seen some radical changes. But here's something that hasn't changed: companies continue to devise inventive ways to take your money. One of the more insidious is through self-renewing contracts.
When I meet with a business owner, we discuss how we can work together to reduce their utilities and telecommunications expenditures. The conversation inevitably begins with a dialogue about their contractual obligations to their current supplier. In my experience, 80 percent of my prospective clients don't realize their contracts contain a self-renewing clause. In fact, some contracts have both a self-renewing clause and a fiscal commitment - also known as a "Monthly Usage Guarantee" (ironically termed a "MUG" in the industry).
A self-renewing clause stipulates that your contract - regardless of duration or date of signature - automatically renews at the same rates (or higher!) at which you first signed your initial contract. This provision remains in effect unless and until you indicate in writing your desire to terminate the contract. Typically, you need to give your service provider at least 60 days notice of your intent to terminate - or your contract self renews.
When your contract self renews:
· You get locked into a company that may no longer be competitive.
· You can't take advantage of new technologies or price plans.
· You lose significant leverage in negotiating for better or more appropriate plans.
Here's the key to telecommunications and utilities savings: When you enter into a contract with a service provider, give them the self-renew nullification letter. This letter notifies the service provider of your desire to nullify the self-renew clause at the end of your initial contract.
If you're about to sign a new contract for these services, draft and sign a self-renew nullification letter. Have your sales representative sign. Keep a copy for your records.
If you're already in a contract, or you're not sure, ask your sales representative if your current contract is self-renewing. If he or she tells you it is, here's what you need to do:
· Draft a self-renewal nullification letter.
· Call your provider's customer service department and get the address, fax, and e-mail for where you have to send the completed letter.
· Sign the letter and send it Certified Mail, Return Receipt Requested to the address customer service provided.
· E-mail and fax a copy of the completed letter; keep copies for your records.
When carriers merge, price plans and service offerings change. New companies enter the market offering discounted rates to capture market share. If you're locked into your contract, you can't take advantage of these offerings. So free your company from the bonds of self-renewing contracts: Use the self-renew nullification form.
About the author:
Ben Hall is founder and CEO of OverVIEW Consulting of Webster, a contingency-based consulting firm with local representation in Massachusetts, Connecticut, Rhode Island, and Southern New Hampshire.
Ben has more than 10 years of experience in the fields of telecommunications and energy.
His company's services have won endorsements from the Worcester Regional Chamber of Commerce and are recommended by the Milford Area Chamber of Commerce. Ben also sits on the Board of Directors for the Webster Dudley Oxford Chamber of Commerce and as well as the Worcester Area Make a Wish Golf Tournament Committee.
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