Evergreen Agreements

Evergreen contracts are easily passed and forgotten. At the time of signing, it is difficult to imagine forgetting a contract. Organizations can suffer from contractual asnesia in different ways. An Evergreen contract will only be another contract for organizations that produce an astonishing number of contracts. Staff turnover also means that the institutional memory of an Evergreen contract is slightly lost with the last departure. An Evergreen clause can take one of two forms. The contract may provide that it expires on a specified date, with automatic renewal for an indefinite series, until a party terminates in accordance with the contract. Alternatively, a clause from Evergreen could provide that the contract would simply be maintained indefinitely until a party terminates under the procedures set out in the contract. Our Sales Manager, Gareth, has personal experience with Evergreen contracts that are used in other sectors outside of HR labor law. Gareth picks up the story; « I recently enrolled in an online educational program. The provider was based in the UK and it was possible to register online and pay by credit card, as was our own counselling service. This was the easiest way to complete the transaction, but I had a particular question I wanted to answer, so I contacted the sales team by phone. After receiving a satisfactory answer to my question, I happily continued with the purchase and paid for my 2-year subscription by phone.

Once this was done, the seller thanked me for the deal and asked me to listen to a recorded message that they would play over the phone. I did, and to my amazement, the news told me that the agreement had been automatically renewed and that I had to terminate it in writing 3 months in advance if I wanted to terminate it. Although I read the details online and spoke to two people on the phone, it was the first time I had been noticed. It is difficult to perform the above analysis without correctly identifying contracts with Evergreen clauses or without having a clear duration. One of the most common missteps in the fields of finance, law and contract management is to open the table list of contracts and empty the « expiration date » column in the row with the new contract. While an Evergreen clause provides comfort for both parties, as they don`t need to renegotiate the terms of the contract on the expiration date, one party may feel stuck and dissatisfied.

Comments are closed.