Your church likely has multiple outstanding contracts. These agreements cover a wide range of services and products. The contracts may be for everything from equipment maintenance service to landscape care.

Most church officers know that due diligence is advisable before signing a contract. During the negotiation period, attention is paid to the terms of the bargain. It is important to understand that due diligence with contracts does not end with the signature on the dotted line. For some contracts, churches must stay alert for years afterwards.

Most contracts are written for a specific period of time. It would be expected that when the time expires, the agreement comes to an end. Rather than end, some contracts have clauses that automatically extend the agreement for a new period. These provisions are called automatic renewal clauses. With such a term, your church could be obligated to continue an arrangement beyond your initial expectation.

For contracts that have an automatic renewal clause, the church must notify the other party that it intends to end the contract when the time expires. The option is often expressed as a notice provision. For instance, the contract may read that a church must notify the other party no later than a certain number of days before the end of the contract in order to preempt the automatic renewal.

The notice provision can vary among contracts. The church may be given as little as 30 days to notify the other party of its intent to end the agreement. In some instances, the notice provision states a minimum and maximum number of days for the advance notice.

Churches should be particularly mindful of the method for notification in the contract. The contract may specify that the notice should be sent to a specific person at a predetermined address by a certain method of communication for the notice to be effective. Read the contract carefully to ensure you are complying with all of the requirements. Failure to follow the notice requirements under the contract could cause the church to be held liable for an extended period of time.

The lesson for churches is to stay vigilant with outstanding contracts. If churches fail to pay close attention to the ongoing duties in the contract, the consequence may be costly. The automatic renewal clause provision is just one example of terms for which a church should be watchful.