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Commercial Division Decision Spotlights the Limits of the “Automatic Renewal Doctrine” for Contracts

In Mountain & Isles, LLC v. Gillz, LLC,[4] Justice Masley of the Commercial Division provided a useful reminder of the continuing vitality of New York’s “automatic renewal doctrine” for contracts and its limitations.

New York’s “automatic renewal doctrine” provides that if a contract calls for a set expiration date but the parties nevertheless continue to act pursuant to the contract after its expiration, the contract may be deemed to be renewed for another period.[5]  Although the automatic renewal doctrine is typically applied in employment, master-servant, or landlord-tenant cases,[6] it has also been held to apply to contracts for services between two business entities.[7]

Mountain & Isles concerned a sales representative agreement under which plaintiff Mountain & Isles was hired by defendant Gillz to sell Gillz-branded apparel.  Although the contract specified a term of January 1, 2017 to December 31, 2017, Mountain & Isles continued selling Gillz-branded apparel through May 2, 2018, when Gillz terminated the contract. 

Mountain & Isles subsequently sued Gillz[8] for breach of contract,[9] and Gillz moved to dismiss the claim.

In opposing Gillz’s motion, Mountain & Isles contended that even though the agreement on its face had expired on December 31, 2017, it was nevertheless renewed as a matter of law by the parties’ continued business relationship after that date.  The Commercial Division rejected this argument, explaining that the automatic renewal doctrine did not apply here because the parties had “expressly contemplated the conditions under which the Agreement would automatically renew”—namely “if [Mountain & Isles] met certain sales goals during the first one-year term”—and the agreement “further provides unambiguous terms for future renewals, termination, and the parties' obligations with respect to those contingencies/options.”[10]  Because the agreement was “clear as to renewal and future terms” and “reflects the parties’ specific intent to renew under only the express terms in the [a]greement,” the automatic renewal doctrine did not apply and Mountain & Isles could not sue to enforce the contract after its expiration date.[11]

Mountain & Isles not only provides a useful reminder that the automatic renewal doctrine remains good law, but also suggests that the doctrine applies only where a contract lacks specific provisions governing the terms for future renewal or termination.

By Benjamin F. Jackson and Stephen P. Younger

[4] No. 652206/2018, 2019 BL 124076 (Sup. Ct. Mar. 27, 2019).

[5] See Cinefot Int’l Corp. v. Hudson Photographic Indus., Inc., 13 N.Y.2d 249, 252 (1963).

[6] Id.

[7] Mountain & Isles, 2019 BL 2124076 at *3 (citing Cinefot, 13 N.Y.2d 249).

[8] Mountain & Isles also brought sued against Brian Drennan, a former Mountain & Isles employee who was hired by Gillz.

[9] Id. at *1-3.  Mountain & Isles also brought several other claims against the defendants, which are addressed in the court’s decision. 

[10] Id. at *2.

[11] Id. at *3.