SB 190

Under current law, a landlord may not enforce an automatic renewal or

extension clause in a residential lease unless the landlord provides advance written

notice of the renewal or extension. This bill creates similar requirements for certain

contracts for the lease of business equipment or for providing business services

(business contracts), if the contracts have an initial term of more than one year. The

bill exempts contracts for the lease or purchase of real property, certain contracts

that require the customer to make minimum annual payments of $250,000 or more,

contracts for the lease of vehicles or medical equipment, certain energy and

telecommunications contracts, and contracts that permit a customer to cancel an

automatically renewed or extended contract period by giving notice up to 30 days in

advance.

Under the bill, if a business contract provides that the contract will be

automatically renewed or extended for an additional contract period of more than

one month unless the customer declines renewal or extension, the seller must

provide the customer with a form containing certain disclosures or include the

disclosures in the contract and obtain the customer's initials. The disclosures

include certain information regarding a renewal or extension, including the duration

of an additional contract period, whether increased charges to the customer would

apply, and the deadline for the customer to act to prevent an additional contract

period.

Also under the bill, if a business contract provides that an automatic renewal

or extension results in an additional contract period of more than one year, the seller

must give the customer a reminder notice prior to renewal or extension. The

reminder notice must contain specified information regarding a renewal or extension

and generally must be provided by mail, by personal delivery, in a monthly invoice,

by a facsimile, or by electronic mail. The bill also voids a business contract provision

that requires a customer to permit the seller to match any offer the customer receives

from, or makes to, another seller after the end of the contract's stated term (right to

match provision).

If a seller fails to comply with the bill's disclosure or reminder notice

requirements, the automatic renewal or extension provision is unenforceable and

the contract terminates at the end of the current contract term. Also, if a seller fails

to comply with the reminder notice requirements or attempts to enforce a right to

match provision, the bill allows a customer to bring an action or counterclaim for

damages. In such an action or counterclaim, a seller is not liable if: 1) the seller has

established and implemented written procedures for complying with the reminder

notice requirements and the prohibition against right to match provisions; 2) the

seller's conduct was not willful or malicious; and 3) the seller refunds amounts the

customer paid after the contract was renewed or extended.