US SaaS contracts
Auto-renewal and price increases: the clause nobody reads
It sits in the middle of the agreement, looks like boilerplate, and decides whether a customer is locked into a 40% price increase they found out about after the deadline to leave. Both sides have a stake in getting it right.
3.2This Agreement renews automatically for successive twelve-month terms unless either party gives written notice of non-renewal at least ninety (90)sixty (60) days before the end of the then-current term. Vendor may adjust Fees at each renewal.Vendor may increase Fees at renewal by no more than the greater of 5% or CPI, on at least ninety (90) days’ written notice; Customer may terminate at the renewal date if it objects.
- Auto-renewal is fine; auto-renewal with an uncapped price increase and a long notice window is a trap, and increasingly regulated.
- Cap the increase (a percentage or an index), require notice of it before the non-renewal deadline, and give the customer an exit if they object.
- Several US states now regulate auto-renewal terms even in B2B; a clause drafted for 2019 may not be enforceable in 2026.
Why this clause is dangerous when it looks harmless
Read on its own, an auto-renewal clause is administrative convenience: neither party has to re-paper the deal every year. The problem is the interaction of three elements that are often in three different places in the document:
- The renewal is automatic unless notice is given X days before term end.
- The vendor may change fees at renewal, sometimes “upon notice”, sometimes with no notice mechanism at all.
- The customer’s only remedy is non-renewal — which requires notice under (1).
Combine a 90-day notice window with a price notice that arrives 60 days before term end, and the customer learns the new price a month after its last chance to leave. This is not a hypothetical; it is the most common cause of the angriest emails in-house lawyers receive.
The vendor’s legitimate interests
Vendors are not villains here. Renewal predictability is what makes subscription revenue worth more than one-off revenue, and a vendor that cannot raise prices ever is trapped by its own contract as inflation and costs move. The goal is a mechanism that is predictable for both sides, not one that removes the vendor’s ability to price.
A fair mechanism
| Element | Customer-hostile | Fair |
|---|---|---|
| Renewal term | Same as initial (e.g. 3 years) | 12 months, whatever the initial term was |
| Non-renewal notice | 90–180 days | 30–60 days |
| Price increase | “Vendor may adjust Fees” | Capped: greater of X% or CPI; or list-price with a cap |
| Notice of increase | None, or after the non-renewal deadline | At least 30 days before the non-renewal deadline |
| Customer remedy | None stated | Right to terminate at renewal if it objects to the increase |
| Renewal reminder | None | Vendor sends a reminder before the notice deadline (now required in some states) |
The regulatory layer
Auto-renewal has moved from a drafting question to a compliance one. A growing number of US states have automatic-renewal statutes, and while most began as consumer-protection laws, several now reach business-to-business subscriptions or are drafted broadly enough to be argued that way. The recurring requirements: clear and conspicuous disclosure of the renewal terms before the customer agrees; an easy cancellation mechanism; and, in some states, advance notice of renewal for longer terms. The FTC has also been active on the consumer side, which shapes what buyers expect in B2B paper.
The practical consequence for a vendor: a renewal clause buried in section 14 of a 40-page MSA, with no reminder mechanism, may be unenforceable against a customer in the wrong state — which means the vendor gets the worst of both worlds, a hostile clause and no renewal.
What a customer should do with a hostile clause
- Ask for the renewal term to be 12 months regardless of initial term.
- Ask for a cap on increases. If the vendor refuses a percentage, propose “then-current list price, not to exceed X% above the prior term’s fee”.
- Insist that price notice precedes the non-renewal deadline by at least 30 days.
- Diarise the deadline anyway. A clause is only as good as the calendar entry.
Renewal terms are the clearest example of a clause that should never be negotiated from scratch. Your standard, your fallback, your walk-away — written down once, applied every time by whoever handles the paper.
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