Regulation of Automatic Renewal Clauses: Traditional Versus Behavioural Law and Economics Approach

Abstract

Many consumer contracts, such as magazine subscriptions, mobile phone contracts or fitness club subscriptions, are fixed-term contracts containing an automatic renewal clause. This paper provides the rationale of why such contracts are signed and what are the economic and legislative impacts of such clauses. The automatic renewal clause provides that the contract will be renewed for a new term unless the consumer gives written notice of his intent to terminate some time prior to the end of the contract. Article provides a behavioural and traditional law and economics’ arguments to regulate inefficient limitations upon the consumer’s authority to terminate.