Key Takeaways

  • The contract period is the time between the start and end dates during which the agreement is enforceable.
  • Contract periods can be fixed, evergreen, optional renewal-based, or auto-renewing, each carrying different risks and benefits.
  • Clear contract period clauses prevent misunderstandings about obligations, renewal terms, and termination rights.
  • Renewal structures (optional vs. automatic) affect flexibility, predictability, and the risk of being locked into agreements.
  • Properly managing contract periods helps businesses avoid costly disputes and maintain strong contractual relationships.

A contract period, also known as contract time, is the number of days between a specific start date and a specific end date, as outlined in a contract.

Contract Renewals

Because many contracts renew when a term ends, the end date isn't always an end date. Renewals come in different varieties.

Contracts that have automatic renewals may just renew for a certain period. Renewals might automatically happen for more than one period as well.

Why wouldn't contractual parties simply use an auto-renewal period's end date as an end for the whole contract? The most common reason given is that auto-renewals often have some type of wrinkle in them.

Importance of Defining the Contract Period

The contract period clause is one of the most important parts of any agreement because it sets the timeframe for obligations, performance, and enforceability. Without clear language, parties risk confusion about when responsibilities begin or end. A well-drafted contract period should:

  • State the exact start and end dates (or triggering events if dates are flexible).
  • Clarify performance expectations during the active term.
  • Outline how renewals or extensions are handled (mutual agreement, option, or automatic).
  • Identify termination rights before or during the contract period.

For example, a three-year services contract may specify that performance obligations start on the signing date and end exactly three years later unless extended by renewal.

About Evergreen Contracts

It seems some contracts aren't designed to end. Instead, they're written so that they continue as long as possible. In an evergreen contract, renewals continue automatically without notice. The agreement may continue until one party decides to terminate it.

Many businesses and lawyers try to avoid indefinite contracts. However, evergreen clauses still frequently survive in the following instances:

  • Leases
  • Purchasing contracts
  • Service agreements

Evergreen contracts create significant long-term opportunities and risks. They aren't the same thing as long-term contracts. For instance, a 100-year lease may sound like an evergreen agreement since the end date is so far away, but this long-term lease still has an end date. It's a definite term contract.

With this definition in hand, you can see that an evergreen contract isn't the same as an auto-renewal agreement. Auto-renewal contracts renew automatically but only for a specific number of times. An auto-renewing four-year lease, for instance, may include a one-year renewal provision.

Fixed-Term vs. Indefinite Contract Periods

Contract periods generally fall into two categories:

  • Fixed-term contracts: These specify a defined start and end date (e.g., a one-year lease). They provide predictability and certainty for both parties.
  • Indefinite or open-ended contracts: These may run until terminated by either party. While flexible, they carry risks of uncertainty and ongoing liability.

Some industries prefer fixed terms (such as construction or supply agreements), while others benefit from flexibility (such as consulting services). Businesses should carefully weigh predictability versus adaptability when choosing a contract period.

Optional Renewals

Contracts often give one party the right to renew the contract or not.

Consider this example: Parties A and B enter into an agreement that grants Party A the right to renew for two-year periods. Party A decides to exercise that right for four years and then stops.

The contract's language may state something like the following: "Party A has sole discretion to choose to renew this agreement for successive two-year periods. It must exercise its right 30 days before the current period ends."

In an agreement, you may also find a specific number of renewal options a party is entitled to. For example, Party A may renew for a maximum of four (4) additional terms.

Factors That Influence Contract Duration

Determining an appropriate contract period depends on several factors:

  • Nature of the transaction – Short-term projects may require only a few months, while long-term supply or service agreements might last several years.
  • Industry standards – For example, real estate leases often run for one to three years, while software licenses may have annual renewals.
  • Risk allocation – Longer terms may favor stability but increase exposure if circumstances change.
  • Flexibility needs – Businesses seeking agility often prefer shorter terms with renewal options.
  • Regulatory requirements – Some industries impose limits or minimum durations on contract periods.

By considering these elements, parties can balance stability with adaptability, ensuring the contract period supports their operational and strategic goals.

Auto-Renewal Agreements

In the above optional renewal example, Party A states that it's exercising its right to renew the contract.

Contracts can also renew automatically for succeeding periods with no explicit exercise option. In these instances, the contract usually states that it renews for a specific period of time for a set number of times.

It may read something like this: "The Agreement will renew for one (1) year upon current term's termination. It will renew for a maximum of four (4) successive terms."

Why wouldn't parties simply provide an end date that's four years in the future? The reason is that auto-renewal agreements often give either party the right to terminate a renewal before the renewal starts. The parties have the option of a long-term deal without a solid, long-term commitment.

They may include language such as the following: "This agreement will renew for one (1) year upon the current term's termination, provided that neither party gives notice of termination at least 30 days before the end of the current term. This agreement will renew for a maximum of four (4) successive terms."

In general, contract managers and lawyers don't care for auto-renewal contracts because these types of agreements can be filed and easily forgotten. When this happens, the contract renews before anyone involved has the chance to review it. Therefore, parties end up locked into the agreement for whatever amount of time the renewal period is. To avoid this problem, some parties elect to use contract management software.

Many people don't want to be locked into automatic renewals. It's too easy to get busy and forget to review a contract. While notification software can help with this, not everyone will take advantage of it. It's usually best to avoid these types of contracts whenever possible. Look for agreements that have a set beginning and end when possible.

Risks of Poorly Defined Contract Periods

If a contract period is vague or not carefully drafted, disputes can arise over responsibilities and termination rights. Common risks include:

  • Automatic lock-in to renewal terms without review.
  • Ambiguity over expiration, leading to premature termination claims.
  • Misaligned expectations about performance periods.
  • Difficulty exiting agreements that renew without clear opt-out clauses.

To minimize these risks, contracts should use precise wording and may include notification requirements (e.g., 30 days before expiration) to avoid unwanted renewals. Contract management software can also help parties track dates and avoid oversights.

Frequently Asked Questions

  1. What is the purpose of a contract period?
    The contract period sets the timeframe during which the agreement is enforceable, ensuring parties understand when obligations begin and end.
  2. Can a contract have no end date?
    Yes. Evergreen or indefinite contracts continue until terminated by a party, though they may carry higher risks of uncertainty.
  3. How do optional renewals differ from auto-renewals?
    Optional renewals require a party to actively choose extension, while auto-renewals extend automatically unless terminated.
  4. What factors determine contract duration?
    Factors include the type of transaction, industry norms, risk considerations, flexibility needs, and regulatory requirements.
  5. How can businesses avoid unwanted auto-renewals?
    By including clear termination notice provisions, tracking contract dates, and using contract management tools to monitor obligations.

If you need help with a contract period, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.