A rolling contract, also known as an “evergreen contract” is an agreement with no fixed end date, and will continue to operate until one party decides to terminate it. They differ from fixed term contracts, which come to an end after a specific date or when the goods or services have been provided to the customer.
We recently wrote about the implications of providing goods and/or services under an expired contract (see here) and a rolling contract would avoid this issue.
We use rolling contracts in our day-to-day life, such as PayTV subscriptions, streaming services, month-to-month mobile plans and software licensing.
Here are some of the benefits of using rolling contracts in your business:
- Increased Customer Retention: Rolling contracts provide stability for customers, which leads to greater satisfaction and a higher likelihood of retaining their business. By offering rolling contracts, customers can have the peace of mind that they will receive continuous goods or services without the hassle of renewing their contract every few months.
- Predictable Revenue: Rolling contracts can provide predictable revenue streams for your business. With automatic renewals, businesses can plan for the future and allocate resources accordingly. This can also help with cash flow management and budgeting.
- Improved Customer Relationships: Rolling contracts can help to strengthen relationships between customers and your business. By offering rolling contracts, businesses can demonstrate their commitment to their customers’ needs and build trust over time. It also removes the necessity and angst of consistent contract negotiations with your customers, leaving you to focus on customer service.
- Reduced Administrative Burden: With rolling contracts, there’s less administrative burden on both your customers and you. Customers do not need to worry about renewing their contracts, and businesses don’t need to allocate resources to reviewing contracts and renegotiating terms
- Flexibility: Rolling contracts can be customised to meet the specific needs of customers. This allows businesses to tailor their services or service offering to individual customers, which can lead to greater customer satisfaction and loyalty.
In conclusion, rolling contracts offer several benefits for businesses in terms of customer retention, predictable revenue, improved relationships, reduced administrative burden and flexibility. By using rolling contracts, businesses can provide their customers with the assurance that their needs will be met while also streamlining their own business processes.
Of course, if you’re using rolling contracts, there’s some things to be aware of, such as ensuring you include provisions whereby you can increase fees over the course of the contract for CPI and other matters. If you are considering developing a precedent services agreement, which includes a rolling term, please contact our business lawyers who can assist.