Glossary · contract

Evergreen Clause

Also called automatic renewal clause, auto-renewal, rollover term, perpetual renewal.

A term that renews itself for a further period unless you give written notice to cancel inside a specified window before the anniversary — and the window is usually short, early, and easy to miss.

Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.

What it means

The clause has three moving parts: an initial term, a renewal period, and a notice window. A common construction gives a twelve-month initial term renewing automatically for successive twelve-month periods, cancellable only by written notice given not less than 60 and not more than 90 days before the anniversary date.

That "not more than" is deliberate. Notice given too early is as ineffective as notice given too late.

Where you meet it

  • Factoring agreements, where it is close to universal
  • Merchant processing agreements, often alongside an equipment lease with its own separate term
  • Lockbox, deposit account control and service agreements attached to a facility
  • Asset-based lines and some bank facilities
  • Equipment maintenance and software contracts bundled into a finance package

What renews with it

The minimum volume commitment. The exclusivity. The early termination fee. The fee schedule, sometimes with a permitted increase on renewal. Cancelling the facility and cancelling the ancillary services are frequently two separate exercises with two separate windows.

Statutory help is limited

Some states regulate automatic renewal terms, mostly for consumer contracts, and a few reach certain commercial agreements. The protections are uneven and none of them should be assumed to cover a commercial finance agreement. Check the agreement, not the general rule.

Where this one catches people

The cancellation window is the whole clause, and it does not care why you missed it. Miss it by a week in either direction and you are committed to another full term, with the minimums, the exclusivity and the exit fee intact. Businesses discover this when they have already signed with a replacement provider and are then paying two.

Do three things on the day you sign. Diary the notice window — both ends of it — with a reminder two weeks before it opens. Read the notice provision and record exactly what method and address are required, because "we told our rep" is not notice and neither, usually, is an email. And write the anniversary date in the same note, because renewal terms run from a date the agreement defines and which may not be the date you signed.

When you do send it, send it by the specified method, keep the receipt, and follow up to get written acknowledgment.

Where you will meet this term

Business Line of Credit Invoice Financing Asset-Based Lending Credit Card Processing

Read next

Early termination fee (ETF)A charge for exiting a facility before its stated term, standard in factoring and equipment lease contracts a… Exclusivity clauseA term binding a business to work with one broker or funder for a period, or barring it from shopping the sam… Fee scheduleThe exhibit listing every charge a facility can incur outside the headline rate: wires, lockbox, minimums, au… Invoice factoringSelling receivables to a third party at a discount for immediate cash, with the buyer taking over collection … Merchant accountThe account with an acquiring bank or processor that lets a business accept card payments and through which c… Minimum Volume FeeA charge that makes up the gap when you factor, process or borrow less than the volume you committed to, so t… Notice ProvisionThe clause setting how formal communication under the agreement must be delivered, to which address, and when… RenewalNew funding from the same funder while an existing advance is still outstanding, where the remaining balance … Termination feeA charge for ending a facility before its contracted period expires, standard in factoring and asset-based ag…

Evergreen Clause — common questions

What does evergreen clause mean?

A term that renews itself for a further period unless you give written notice to cancel inside a specified window before the anniversary — and the window is usually short, early, and easy to miss.

Where does evergreen clause catch people out?

The cancellation window is the whole clause, and it does not care why you missed it. Miss it by a week in either direction and you are committed to another full term, with the minimums, the exclusivity and the exit fee intact. Businesses discover this when they have already signed with a replacement provider and are then paying two.

Is evergreen clause the same as an interest rate?

Evergreen Clause is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.

Which products does evergreen clause apply to?

Business Line of Credit, Invoice Financing, Asset-Based Lending, Credit Card Processing.

Is there a worked example of evergreen clause?

Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.

What else should I read alongside evergreen clause?

Early termination fee, Exclusivity clause, Fee schedule, Invoice factoring, Merchant account.

Has this definition been checked?

Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.

Is this legal advice?

No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.

Can I suggest a term?

Yes — [email protected]. The glossary grows from what people are actually shown in contracts.