Are evergreen contracts legal in New York State?

Answer 1

There are many legal cases pertaining to evergreen clauses or "perpetual obligation" terms as they pertain to certain business transactions. For example, federal courts have ruled that evergreen

letters of credit must be "clear and unequivocal." They also have upheld evergreen clauses in collective bargaining agreements. However, few, if any, cases have addressed evergreen clauses as applied to agent

commission agreements. This either means that evergreen clauses have been well written and crystal clear; that they are incredibly one-sided and favor the carrier/master; or that agents don't have the time, will, desire or resources to take on well-heeled multinational corporations. Given the number of recent disputes regarding agent commission payments, we suspect that the lack of evergreen clause cases is a function of

agents facing pro-supplier agreements and the prospect of protracted litigation to enforce the agent agreement. To the extent that evergreen clauses include or may be considered to be automatic renewal or perpetual clauses, state statutes may govern them. In New York, for example, a statute prohibits automatic renewal of contracts for service to, or repair of, personal or real property unless the service provider notifies the other party of the auto-renewal provision 15 to 30 days before the termination notice is due under the contract. So far this statute has not been applied to professional services, although it has been used successfully to prohibit the automatic renewal of an answering service agreement. It is therefore critical to ensure that evergreen clauses in agent agreements apply to professional services, such as generating customers, as opposed to the underlying telecommunications services.