An evergreen contract renews itself automatically at the end of each term unless somebody gives notice to stop it. The term keeps rolling, hence the name. Evergreen clauses are extremely common in supplier agreements and software subscriptions, and they are not inherently unfair: they save both sides renegotiating something that is working. What makes them expensive is that the decision to continue is made by silence, and silence is easy to produce accidentally.
How the mechanism works, and where the trap is
The agreement runs for an initial term. Unless one party gives notice a stated number of days before the end, it renews for a further term, usually the same length. The trap is the combination of a long notice period and a long renewal term: a ninety-day notice on an annual term means that from day two hundred and seventy-five you have already committed to a second year, and nothing announces that day.
Why they are not automatically bad
For an agreement that works and that you would renew anyway, an evergreen clause removes an annual administrative task from both sides. The problem is not the clause, it is the absence of a decision. An evergreen contract with a diarised decision date is fine; the same contract with no date recorded is a standing bet that somebody will remember.
How to handle one properly
Record the notice period and compute the decision date, which is the end date minus the notice days. Put a reminder before that, not on it, because the decision needs a conversation and possibly a letter. At the decision date, decide deliberately: continue, renegotiate, or serve notice. Recording the decision and the reason means next year's version of the same conversation takes five minutes.
What to negotiate when one is proposed
Two asks, both usually available. Shorten the notice period, because thirty days is as workable as ninety for a supplier who is performing. And cap any price uplift attached to renewal, because an uncapped increase on an evergreen term is a blank cheque with a deadline you might miss. Both are more easily conceded at signature than at renewal.
Questions people ask about what is an evergreen contract
What is an evergreen contract?
An agreement that renews automatically for successive terms unless a party gives notice to stop it within a stated period before the end of the current term.
Are evergreen contracts legal?
Yes, and they are common in supplier and subscription agreements. Some jurisdictions add disclosure requirements for consumer contracts; business-to-business evergreen clauses are ordinary.
How do I get out of an evergreen contract?
Give notice in the form and within the window the agreement specifies, counting backwards from the renewal date by the notice period, and keep proof of delivery.
Should we avoid evergreen clauses?
Not necessarily. They save work on agreements you would renew anyway. What matters is recording the notice period so continuing is a decision rather than an accident.