According to the above theory, economic operators would take into account the costs of contract renewal, (new) negotiation and termination prior to the decision-making process. Any change in the terms of the contract may result in higher «transaction costs» than the renewal of the same contractual terms. The fact remains that there are costs in both situations. However, the contracts no longer apply at the end of the term of the contract, so there are no costs associated with termination of the contract. [1] The duration of the agreement normally begins from its entry into force. Caution should be exercised if you choose to start the term on another date. The contract is also terminated if one of the parties indicates to the other party that it intends to terminate the contractual relationship within the notice period described in the terms of the contract. [34] In general, this declaration of intent is presented some time before the expiry of the contract: «This agreement is automatically renewed for an additional (1) year, unless one of the parties announces its intention to terminate this contract at least thirty (30) days before the expiry of the contract.» or for a number of days before the expiry of the contract: «This agreement is automatically extended by one (1) year if one of the parties informs the other party of its intention to terminate the contract within thirty (30) days from the end of each period.» The Memorandum of Understanding may be issued at any time before the number of days indicated in the first case, while in the second case it must be issued within the time limit of highlighting the number of days. This is mainly due to the transparency of contracts, in which companies do not provide consumers with sufficient or explicit information about the consent period and notice of automatic renewal clauses contained in their contracts or subscriptions. As a result, consumers feel cheated and have an unfair advantage if their contracts were automatically renewed without their consent [4] Another important economic aspect of the clause is its impact on the profitability of the business. [1] The termination of the contract can have a negative impact on a company`s revenues that management can cover by increasing the cost of terminating the contract to consumers. [8] In accordance with traditional economic theory, a rational economic operator would opt for the economically superior alternative which, in this case, would be an extension of the contract.

[1] [9] Initial term. This agreement begins at [date of entry into force/ [DATE, MONTHS]] and continues for [TERM MONTHS] months, unless they are terminated earlier (the «initial period»). The applicability of the automatic extension clause varies from country to country. The clause is regulated in the UK by the Consumer Rights Act 2015, which aims to «protect consumers from abusive contract clauses and notices.» As with the Illinois Automatic Contract Renewal Act (815 ILCS 601/1), the Act emphasizes the transparency of the contract with respect to the duration of the contract and termination: «Your client must know how long his contract must last and how he terminates it (if he does not want it renewed).» He stressed that the treaty should use «fair conditions» to prevent consumers from being harmed.