Wisconsin Adopts Law Regulating Business-to-Business Automatic Renewal Clauses

In May 2010, Wisconsin adopted a new statute regulating provisions for the automatic renewal of certain contracts. The law is effective May 1, 2011, but some of its provisions will apply retroactively. In recent years, several states have adopted laws regulating automatic renewal clauses in consumer contracts and/or contracts in narrowly defined categories between businesses. However, the new Wisconsin statute specifically exempts contracts with consumers, so that Wisconsin becomes only the second state (the first being New York) to regulate automatic renewal clauses in a broad class of business-to-business contracts.

The new Wisconsin law, 2009 Wisconsin Act 192 (to be codified as Wis. Stats. §134.49), is apparently the culmination of a multi-year effort by an association of Wisconsin small businesses to protect businesses from being unexpectedly bound, as purchasers or lessees, by the automatic renewal of contracts because they fail to notice, or forget, that advance notice of non-renewal is contractually required. It covers most leases, other than real property leases, and most contracts to purchase services. It contains numerous exemptions (for example, telecommunication interconnection agreements) that may have been the result of objections from certain industries.

The approach of the statute is to (1) require up-front disclosure of any provision for an automatic renewal of one month or more, (2) require that a formal reminder be sent to a customer whose contract will otherwise be renewed for more than one year, and (3) prohibit altogether clauses that permit a supplier or lessor to match any offer that a customer obtains from a replacement supplier at the end of the term of a contract. The form and content of the required disclosures and reminders are set forth in detail; when there is non-compliance, the affected clauses are unenforceable. In addition, subject to exceptions for suppliers whose perceived abuse of the clauses is less egregious, suppliers that violate the law may be unable to collect for the use of leased goods, or services actually provided, during automatic renewal terms, and may be liable for double damages as well as attorneys’ fees when a customer enforces its rights under the law.

One issue that seems likely to require further definition under the statute (by amendment or judicial interpretation) will be the extent to which mixed contracts for services and goods are covered. For example, automatic renewal clauses are commonly used in the industrial gasses market, where the customer pays for a service (i.e., delivery of gas to an on-premises tank), and perhaps also for the use of the tank (a lease), not merely for the gas itself.

Foley will continue to monitor how this statute affects companies in Wisconsin or companies that do business in Wisconsin and will provide further updates and analysis.

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and our colleagues.

If you have any questions about this update or would like to discuss this topic further, please contact your Foley attorney or the following:

Richard H. Casper
Milwaukee, Wisconsin
414.297.5612
[email protected]