October 20, 2017
By: Mary Anne Cody
Have you ever tried to end a service contract only to be told your request is too late, as the contract you signed contained an automatic renewal provision?
Bruce Ovitz of New York had a contract with Bloomberg L.P. for the provision of real-time financial data. The Bloomberg contract was for two years with a two year automatic renewal provision. When Ovitz notified Bloomberg of his wish to terminate (after the cancellation time per the contract) he was told he could not cancel. Ovitz sued and one allegation was the failure to provide the notice required under NYS General Obligation Law 5-903.
A service provider is usually reluctant to have your relationship end. As a result, many service providers insert automatic renewal provisions in their service contracts. Some providers (and many consumers) are not aware of the existence of the New York State anti-automatic renewal provision statute. This statute has been in place for over fifty years. New York State General Obligation Law provides at §5-903 that the automatic renewals for the provision of services to “maintenance or repair to or for any real personal property” is only valid if the person receiving the service receives notice of the renewal. The notice must be provided no more than thirty, but at least fifteen days, prior to the termination date. This notice must be given personally to the recipient or sent by certified mail. The notice must point out the renewal provision in the contract.
In the Bloomberg matter, it may seem surprising that such a large organization was not aware of the New York State statute against automatic renewals. Luckily for consumers the success of Bruce Orvitz in his suit against Bloomberg will help to remind companies of this statute.
If you find yourself unable to break up with your service provider, an analysis of this statute in relation to your contract and the notices provided if any under this contract on an annual basis should be considered.