Retailers, how many of your e-procurement contracts contain evergreen language?

November 12th, 2010

So you want to run an e-procurement event, you do all of the work required like building a specification and then invite your incumbent supplier who tells you can not run the event this year. WHAT?

In this case your supplier wins because your contract contains evergreen language. Some retailer’s think this is a good thing and it could be. Paired with other language that might identify escalator or de-escalator language that protects both the supplier and the buyer against abnormal commodity increases this could be win-win. The bigger issue is who is responsible for monitoring the dates and how will you be alerted if the adjustments don’t take place?

This begs the question; just what are are evergreen clauses within a contract and what do you need to do to be careful with them.

According to Black’s Law Dictionary an Evergreen contract is a contract that renews itself from one term to the next in the absence of contrary notice by one of the parties”

The potential problem with an “evergreen” clause in your contract is that this type of contract automatically renews at the end of the contract term, unless one of the parties notifies the other party that it does not want to renew the contract.  This notice normally must be given within a specified time period such as 60 to 90 days prior to the end of the current contract term. This takes us back to who is going to monitor this time frame and alert you to the fact that something is required?

A significant step in conducting quality e-negotiation events is to understand the contracts you are wishing to negotiate.

We look forward to and appreciate your comments.

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