Contractual oversight is a critical yet often overlooked aspect of business operations. At Swinburne Maddison, we regularly advise clients who find themselves unexpectedly bound by renewed contracts, or scrambling to replace services following an unanticipated termination. These scenarios are more than administrative hiccups; they can result in significant financial exposure, operational disruption and reputational risk.
The Hidden Risk of Automatic Renewal
One of the most common issues arises when a business receives an invoice from a supplier it believed was no longer under contract. Upon review, the contract has automatically renewed, often because the notice period for termination was missed. This can be particularly problematic when the business has already engaged a new supplier, leading to duplicate costs and logistical complications. In some cases, the renewed contract includes increased fees, compounding the financial impact.
While consumers benefit from statutory protections against automatic renewals in subscription contracts, businesses do not enjoy the same safeguards. Commercial entities are presumed to have the capacity to negotiate and manage their contractual arrangements. This places the onus squarely on businesses to monitor renewal clauses and termination deadlines proactively.
The Cost of Unexpected Termination
Equally disruptive is the opposite scenario: a contract expires without renewal, catching the business off guard. This often triggers a reactive scramble to renegotiate terms or secure alternative suppliers. If the contract has already lapsed, the business may lose access to a critical service, resulting in delays, increased costs, and strained relationships with clients or partners.
Proactive Contract Management
To mitigate these risks, businesses should implement a centralised contract management system. Whether through dedicated software or a structured internal register, the goal is to ensure visibility and control over key contractual milestones. A well-maintained register should include, as a minimum:
- Key dates: Contract start and end dates, notice periods, and renewal deadlines.
- Summary of terms: Including renewal mechanisms, pricing changes, and termination rights.
- Automated alerts: Advance notifications to allow sufficient time for review and decision-making.
This approach transforms contract management from a reactive task into a strategic function, empowering businesses to make informed decisions, negotiate from a position of strength and avoid costly surprises.
Final Thoughts
Unexpected contract renewals or terminations are preventable. With a proactive, structured approach to contract management, businesses can safeguard continuity, optimise supplier relationships and reduce unnecessary costs.
To strengthen contractual resilience, businesses should consider the following practical steps:
- Audit existing contracts to identify renewal clauses and termination triggers.
- Set calendar alerts for key dates across departments to ensure timely action.
- Assign ownership of contract monitoring to a dedicated team or individual.
- Leverage technology to streamline tracking, notifications, and document storage.
- Seek legal advice where terms are ambiguous or potentially onerous.
If your organisation would benefit from a contract review or support in establishing a centralised register, please contact Jenny Wade at Jenny.Wade@swinburnemaddison.co.uk or call our Commercial Law team on 0191 384 2441.
