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Text of AB 2863
To view the full text of AB 2863, please click here. The law goes into effect on January 1, 2025, applies to all contracts entered into, amended, or extended after that date.New Requirements for Consumer Subscriptions
Under the new California law, it will now be unlawful for companies who have made an autorenewal or continuous service offer to a consumer in the state to do any of the following:- Fail to present the terms of the offer in a clear and conspicuous manner in visual proximity to the request for consent of the offer, which includes if there is a free gift or trial, a clear and conspicuous explanation of the price that will be charged when the trial ends;
- Charge the consumer’s credit or debt card or any third party account for the automatic renewal or continuous service without first obtaining affirmative consent from the consumer to the automatic renewal or continuous service agreement;
- Fail to provide an acknowledgement that includes the automatic renewal offer terms or continuous service offer terms, cancellation policy, and information regarding how to cancel in a manner that the consumer can retain, and if the offer contained a free gift or trial, the acknowledgement must include a disclosure of how to cancel and must permit the consumer to cancel before the consumer pays for the goods or services;
- Fail to obtain express affirmative consent from a consumer to the automatic renewal or continuous service offer terms;
- Include terms in a contract that interfere with, detract from, contradict, or otherwise undermine the ability of consumers to provide their affirmative consent to automatic renewal or continuous service terms;
- Fail to maintain verification of consumer’s affirmative consent for at least three years, or one year after the contract is terminated, whichever is longer;
- Misrepresent expressly or by implication a material fact related to the transaction;
- Fail to provide consumer with a notice, before confirming the consumer’s billing information that clearly and conspicuously states:
- The service will automatically renew unless the consumer cancels;
- The length and any additional terms of the renewal period;
- The amount or range of costs consumer will be charged and the frequency of those charges, unless consumer stops the charges;
- One or more methods which consumer can cancel the autorenewal or service;
- If sent electronically, the notice must include a link that directs consumer to the cancellation process, or another electronic method that directs the consumer to cancellation; and
- Contact information for the business.
New Requirements for Gifts and Trials
In addition, companies offering free gifts or trials at promotional or discount prices that last for more than 31 days in conjunction with an automatic renewal or continuous service offer will now be mandated to provide the same kind of clear and conspicuous notice no less than 3 days before and no more than 21 days before the expiration of the gift or trial. The only exception to this requirement is in cases of contracts that are not electronic, where the business has not collected or maintained the consumer’s valid email address, phone number, or other means of notifying the consumer electronically. “Free gifts” for the purpose of this law does not apply to a gift that is different than the subscribed product or service.New Requirements for Contracts or Offers with Initial Term of One Year or Longer
If the contract or service offer was for an initial term of one year or longer, companies will now be required to provide the specified notice at no less than 15 days and no more than 45 days before the offer renews.Online “Click to Cancel” Requirement
Companies that sign-up or subscribe consumers online will be required to provide one of two methods to allow consumers to cancel at will by either (a) a prominent link or button within the customer account or profile or within device or user settings, or (b) an immediately accessible termination email formatted and provided by the business that a consumer can email to the business without any additional requirement.Direct Billing Requirement
Companies that direct bill consumers on an automatic renewal or continuous offer basis will be required to provide a toll-free telephone number, email address, and postal address or “another cost-effective, timely, and easy-to-use mechanism for cancellation” that is described in the acknowledgement. If a telephone number is provided as the mechanism for termination, the software or SaaS company will be required to answer calls promptly during normal business hours without obstructing or delaying the ability to cancel. If a voice mail is left by the consumer requesting cancellation, the company shall be required to either process the requested cancellation in one business day or call the customer back regarding the request within one business day.Customer Retention Offer Requirement
Requirement for Material Term Changes
Requirement for Annual Reminder
Implications of Requirements
While these new rules apply only to automatic renewal agreements and continuous service agreements with consumers, they may be applied to small businesses in cases where the businesses are run by sole proprietors. Also, they may be applied in other contexts to businesses on public policy grounds, where the terms of service or contract terms in effect are not at least as good as what is required now by law in the case of consumers.What does this mean for Software, SaaS, Technology, and Internet Companies Who Work on a Recurring or Ongoing Basis?
Companies working on a recurring or ongoing basis need to start reviewing and updating their contracts and terms of service, as well as their practices and procedures, before the January 1, 2025 effective date of this new law. Most consumer-facing software, technology, and Internet companies will be directly affected, and tech companies targeting a business customer base will also be impacted to some degree.I am pleased to announce that I am a new ProVisors home group leader in the Silicon Valley Region. I will be leading a new Silicon Valley Virtual 1 Group, which will be an all-virtual home group for service providers engaged in Silicon Valley business. The group will meet the first Friday of the month at 11:30 a.m. PT, and we are currently seeking our first members. If you would like to learn more about ProVisors or Silicon Valley Virtual 1, please reach out to me for additional information, either through Linked In or email at kprinz@prinzlawoffice.com. I am excited about this new opportunity and look forward to the challenge of leading a new ProVisors group in this dynamic region. For more information on ProVisors, please visit https://provisors.com.
Silicon Valley Tech Lawyer Kristie Prinz will be speaking at an upcoming one-day Practicing Law Institute Program to be held on October 9, 2024 at the PLI headquarters in San Francisco, California.
Kristie will be speaking on “Drafting Privacy Policies for Devices with No User Interface – What Do You Do?”, along with Peter McLaughlin of Rimon, P.C. The presentation will examine the challenges of managing legal and privacy terms with IOT devices.
The one-day program is titled “Advanced Internet of Things 2024: Deeper Dive, Practical Wisdom” and will also feature presentations by Leonard Naura of Flatiron Law Group, LLP, Ian Ballon of Greenberg Traurig, LLP, Kate Downing of the Law Office of Kate Downing, Megan Ma of Stanford University, and John Yates of Morris, Manning & Martin, LLP. For more information and to register to attend this event, visit the Practicing Law Institute website at this link.
Silicon Valley Lawyer Kristie Prinz introduces The Prinz Law Office in this recording from 8.20.24.
Kristie Prinz Explains why your company should review its key customer contracts in a sluggish economy for this video recorded 8.16.24.
It has become increasingly clear over the past few months that businesses are in a cost-cutting mode, as the economy has become more and more sluggish. While your tech company is likely focusing on its own cost-cutting strategy, have you stopped to consider whether your most significant customers might be doing the same? Is it possible those key customers may be focusing on how to cut the cost of their contract with your business? Could they be talking to one of your competitors? Could they be building their own proprietary product to replace the cost of your product?
A sluggish economy is the perfect occasion to audit and review your key customer contracts for weaknesses that might allow your customer to walk out the door as a cost-cutting move.
You might wonder why you should spend any resources on contracts when business is already sluggish: isn’t this exactly the time when you should be reducing legal expenses, along with all your other cost-cutting efforts?
Well, no, actually. While, it has been my experience that this is in fact what most tech companies do; however, I have been practicing now for 26 years and had the occasion to see a lot of sluggish economies, and given that experience, I would argue that it is exactly the wrong move to make in a sluggish economy. Why would I say this?
Imagine this: it is two months in the future. Over the last 30 days, all of your key customers have stopped paying on their contracts with you and have advised you that they are suspending performance. You are confident that they are just cutting costs and have no grounds to terminate the relationship. You pull out the executed contracts and send them to your tech attorney to review for the first time, confident that he or she will confirm your assessment. However, instead of confirming your position, your tech attorney tells that the signed contracts were poorly drafted and that the customers may have had valid grounds to terminate.
In this scenario, if you had known there was something you could do to interrupt this chain of events and shore up the customer relationships before they collapsed, would it have been worthwhile to do it? Presumably, yes. If the customers were your truly your key customers, you probably had a lot riding on the continuation of those relationships.
If the fact pattern seems far-fetched, I’ve actually seen it play out many times during sluggish economies. The larger and more expensive the contract, the more at risk it is for termination in a sluggish economy. If you are confident it won’t happen to your company, consider what kind of representation you had for the drafting and negotiation of that contract? Did you work with experienced tech counsel who had advised other tech companies through multiple bad economies, and involve that counsel at every stage of the negotiation and drafting process and then implement all of his or her recommendations? Or did you cut a few corners in getting your deal done? Perhaps handled a lot of the negotiation and drafting without counsel, or relied on less experienced counsel that was more affordable? If you are like many tech companies, you probably cut at least a few corners–perhaps you even cut a lot of corners–and the contracts executed by you and your key customers are full of holes.
What would truly be the impact to your software company of a complete loss of your three largest customers? Your six largest customers? Your ten largest customers? How fast could you really recover in a sluggish economy?
If the prospect of this kind of business loss fills you with terror, then this is precisely why you should revisit your significant contracts now.
So, what is it that you can do to shore up your key client relationships now? Well, skilled software counsel can evaluate those contracts and identify the potential liabilities and then work with you to develop a strategy to renegotiate them. By taking the opportunity to renegotiate a weak contract before the contract terminates, you can extend the term of the relationship, fix the legal problems in the contract, and keep the customer happy in the first place by giving the customer a concession that the customer really wants in exchange for the longer relationship term that carries the relationship through the down economy.
Isn’t this a better outcome than losing a key customer altogether over a vulnerability in your contract that is exploited in a cost-cutting effort?
If your tech company has not had its key tech contracts evaluated recently by an experienced tech lawyer, schedule a consultation with me today at https://calendly.com/kristieprinz. Let’s identify the vulnerabilities in your key contracts before a key customer exploits the vulnerabilities as a cost-cutting move and resolve potential problems in the relationships before they arise and become the reason you lose those relationships.
I am pleased to announce that I have been selected to the 2024 Super Lawyers Northern California list. Each year, no more than five percent of the lawyers in the state are selected by the research team at Super Lawyers to receive this honor. Super Lawyers, part of Thomson Reuters, is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. The annual selections are made using a patented multiphase process that includes a statewide survey of lawyers, an independent research evaluation of candidates, and peer reviews by practice area. For more information about Super Lawyers, visit SuperLawyers.com.
I’m pleased to announce that The Prinz Law Office has recently made available three new legal services offerings to our clients. First, we have just launched a new fractional counsel services plan for those of our clients seeking a recurring monthly arrangement with the firm based on an anticipated volume of work at a discounted rate. To view our new fractional services plan, please click here. Second, we have just launched a new subscription services plan for those of our clients seeking a recurring monthly arrangement with the firm based on an uncertain volume of work at a discounted rate. To view our new subscription services plan, please click here. Third and finally, we have just entered into a relationship with several senior paralegals to make available paralegal services through the firm, which our clients may utilize on an optional basis at rates that will be significantly reduced from our standard lawyer rates.
The firm is excited to be able to make these new offerings available to our valued clients. If you have any questions about the new offerings, please schedule a consultation here.
The Prinz Law Office will host a 30 minute webinar on Thursday August 29, 2024 at 10:00 a.m. PT on “Negotiating SaaS Contracts in an Uncertain Economy.” SaaS Lawyer Kristie Prinz will be the presenter, and will address best practices in negotiating SaaS contracts when the economy is unpredictable. To attend, please register for the webinar here.
Kristie Prinz addresses the lessons to be learned from today’s worldwide technology breakdown over a software update in this video recorded on 7.19.24.
Blog Author: Kristie Prinz
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WHY YOUR COMPANY SHOULD AUDIT ITS KEY CUSTOMER AGREEMENTS IN A SLUGGISH ECONOMY
UPCOMING WEBINARS
coming soon!
RECORDED WEBINARS
- Best Practices for Negotiating and Drafting SaaS Contracts (November 2021)
- Negotiating SaaS Contracts & Managing Customer Relationships (March 2020)
- Best Practices for Negotiating SaaS Contracts (Oct. 2019)
- Best Practices for Drafting SaaS Contracts and Managing SaaS Relationships (Feb. 2019)
- Best Practices for Drafting MSAs (2019)
- Legal Developments in Software Industry (2019)
- Best Practices for Drafting SaaS Contracts (October. 2017)
- Best Practices for Drafting SaaS Contracts that Reduce the Sales Cycle & Avoid Disputes (March 2017)
- What You Need to Know About Nondisclosure Agreements (2009)
- What Every Small Business Needs to Know About IP (2009)
- Leveraging an IP Portfolio (2009)
- What Companies Should Know About Business Blogging (Sept. 2009)
- Social and Professional Online Networking (2009)
- Developments and Trends in Blog Law (2009)
- How to Protect Against the Risks of Workers Going Online (2008)
RECENT POSTS
- California Passes New Click to Cancel Law for Subscriptions
- Kristie Prinz to Lead New Silicon Valley Virtual Home Group in ProVisors
- Kristie Prinz to Speak at Practicing Law Institute
- Silicon Valley Lawyer Kristie Prinz Introduces The Prinz Law Office
- Why Your Company Should Review Key Customer Contracts in a Sluggish Economy