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Ben Jones
Ben Jones, UK Lawyer
Category: Law
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We are a limited company that took out a rental on a clocking

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We are a limited company that took out a rental on a clocking system 5 years and 7 months ago. We were looking to just buy a system of our own and called the rental company to find out how much notice we had to give. They informed us that we have just over 4 years left to run on the contact as it automatically renews for another 5 years unless we give notice. On checking the contract it does state that after 5 years the contract will renew for a further 5 years. Is this enforceable?
Hello did you check the contract at the beginning, was it issues in advance?
Customer: replied 2 years ago.
The contract is a very simple A4 page with only a few paragraphs on it. I am the new owner of the business but can assume that my predecessor read the contract but simply missed this clause. Not sure what you mean by "was it issues in advance?"ThanksMario
Sorry Mario, typo - I meant was it issued in advance of the contract starting - did you have sight of the contract before you had agreed to start the services? However, as you were not the one who agreed to this you may not know that so it doesn't matter. I will respond fully shortly
This type of contract is known as a rollover contract as it automatically rolls over at the end of the term, unless cancelled. Such contracts have been used in different industries and can be legal. There were some concerns about their use in certain consumer contracts, like broadband services and the Office of Fair Trading has now banned from being used there, but this is to do with consumer contracts, where one party is a private individual. When it comes to a business contract, you do not get the same protection as if you were a consumer – it is assumed that you are reasonably informed and aware to read the terms and conditions you enter into before starting a contractual relationship so it would be assumed that these terms were available to you before the start and you had a chance to familiarise yourself with them, knowing what you were signing up to. I say ‘you’ and even though it was not you personally, the responsibility would have been transferred over to you when you purchased the business. So yes, such a contract can be legal even if it is for a period of another 5 years. However, that does not mean you cannot end it early. You may do so but at the risk of the company trying to pursue you for breach of contract. What they may try and claim is loss of earnings as a result of your early breach. One my automatically think that this is the equivalent of your fees for the 5 years but not necessarily so. They will have a duty to reduce their losses and look for a replacement client straight away so I they end up finding one to take over your contract then their losses will be cut and you ay have no further ongoing liabilities. So this is what a court would look at when deciding the level of compensation you may be liable for. It is best if you try to negotiate with them over an early release. I hope this has answered your query. I would be grateful if you could please take a second to leave a positive rating (3, 4 or 5 stars) as that is an important part of our process and recognises the time I have spent assisting you. If you need me to clarify anything before you go - please get back to me on here and I will assist further as best as I can. Thank you
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Customer: replied 2 years ago.
Many thanks for your help on this.
You are welcome, all the best