Automatic contract extension

Service

Fixed-term contracts are by far the most common type of contracts in trade. Often the parties - or at least one of them - are so satisfied with the existing business relationship that they want to extend the contract. Usually this is done through a declaration of will made by one of them, most often the consumer, but sometimes you can come across a practice such as automatic renewal of the contract. Is it compliant with the law? In what situations can it be used?

How is the contract automatically renewed?

In many contracts, you can find a provision saying that when a specified period of time expires, the contract is automatically extended by a specified period. As a rule, such a legal solution complies with the law, but the entrepreneur must meet certain conditions. First of all, he must include such a provision in the contract or regulations - he should indicate the time for which the contract is being extended and the lack of additional obligations on the part of the client in connection with the automatic extension of the contract. The entrepreneur is also obliged by the provisions of the Act on consumer rights to inform the consumer about the duration of the contract, and if the contract was concluded for an indefinite period - about the methods of its termination. This provision was extended by the President of UOKiK in the decision No. RKR - 52/2013 of 30 December 2013. In it, he indicates, inter alia, that since the entrepreneur cares about maintaining the contractor, the activities extending their mutual relations should rest with the entrepreneur. It is the entrepreneur who should signal the end of the contract to the consumer and encourage its extension for another specified period (as do, for example, by mobile phone operators). Clear and understandable informing the consumer about the approaching end of the contract is therefore the main condition that the trader should fulfill. However, if the consumer has nevertheless not reacted, the trader may consider the contract to be automatically extended.

Automatic contract extension as an unfair market practice

The automatic extension of the contract indicated in the content of the contract could be treated as an illegal clause. However, due to the fact that the President of UOKiK did not consider it an act harmful to consumers, it will be more correct to classify it as an act of unfair competition. This will be especially true when:

  • the consumer will have to incur separate costs in connection with such extension of the contract, for example an additional fee, or the contract will impose additional obligations on him, which he did not have to fulfill in the previous settlement period, e.g. in the case of a contract with a mobile network operator, the automatic contract extension will be involved the payment of an activation fee and the purchase of a new mobile phone,

  • the consumer was not sufficiently informed about this method of extending the contract and, therefore, he was not able to effectively protest against it - in this case, the way such provisions are formulated in individual contracts and regulations is of great importance,

  • the period within which the consumer should make a declaration of will not to consent to the contract extension in order to make it effective is drastically short - for example, it is three days.

The consequence of recognizing the automatic extension of a contract as an unfair market practice is the fact that consumers may apply the provisions of the Act on Counteracting Unfair Market Practices to defend their interests. Art. 12:

Art. 12. 1. In the event of an unfair market practice, the consumer whose interest has been threatened or infringed may request:

1) abandon this practice;

2) remove the effects of this practice;

3) submitting a single or multiple declaration with appropriate content and in an appropriate form;

4) repairing the damage caused on general principles, in particular requesting the cancellation of the contract with the obligation to reimburse the benefits and reimbursement by the entrepreneur of the costs related to the purchase of the product;

5) adjudication of an appropriate amount of money for a specific social goal related to supporting Polish culture, protection of national heritage or consumer protection.

2. With the claims referred to in par. 1 points 1, 3 and 5, the following may also occur:

1) the Ombudsman;

2) Financial Ombudsman;

3) a national or regional organization whose statutory purpose is to protect consumer interests;

4) poviat (municipal) consumer ombudsman.

It mainly defines the civil liability of entrepreneurs who use such market practices, and also indicates entities that can help the consumer in asserting their rights. It is especially valuable if the automatic extension of the contract is not in accordance with the will of the client and results from insufficiently clear wording of the provisions of the contract or the regulations - professional entities listed in art. 12. paragraph 2, it will be easier for them to judge whether they are actually incomprehensible or intentionally incorrectly worded.

The Act on Counteracting Unfair Market Practices also indicates that entrepreneurs who apply an unlawful automatic extension of the contract may also incur criminal liability:

Art. 15.

1. Whoever uses aggressive market practice is punishable by a fine.

2. In cases related to the acts referred to in para. 1, adjudication follows the provisions of the Act of August 24, 2001 - Code of Conduct in Petty Offenses (Journal of Laws No. 106, item 1148, as amended4)).

It is worth noting, however, that this provision applies to aggressive market practices - the automatic extension of the contract would have to take place due to a significant violation of good commercial practices and be particularly detrimental to the consumer, for example in the case of contracts valid for many months or even years and requiring paying high fees by the consumer.