How to Provide for Extending a Contract Term

Many contracts that have a fixed term provide for extending or renewing that term. Before you draft an extension clause, consider the common issues involved and review our sample language. These issues need to be considered before you draft a contract extension provision: Is the extension conditional, i.e., available only after the occurrence or nonoccurrence of some event? Can the agreement be extended by the actions of fewer than all parties or must all parties agree? Is the right to extend available to both parties? Will the agreement be extended unless some action is taken (i.e., automatic extension absent advance notice of an intent to not extend), or only if some action is taken? Will any provisions of the agreement change on its extension (e.g., a rental payment under a lease)? In drafting extension provisions, specify any notice periods, the type of notice required, and any other steps necessary for an effective extension, so that one party isn’t taken by surprise…

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