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Clause

Multi-year and renewal terms

The clause that says how long the engagement runs, whether it renews by itself and what you owe for a year in which you do not claim. It is easy to miss and expensive to get wrong.

This page explains a common clause in general terms. It is not legal advice, and contract law differs between countries. Ask a lawyer to review your own engagement letter.

Sample clause

Written for this guide, not from any real contract

1 This engagement covers the Claim for the Client's current accounting period and 2 renews automatically for each following accounting period 3 unless either party gives written notice at least three months before the end of the current period. 4 The Fee for each renewed period is calculated on the basis set out in clause 2. 5 A minimum Fee of $35,000 is payable for any period in which the Client decides not to make a Claim.

  1. The first term. One period, clearly stated.
  2. Automatic renewal. Not a problem in itself; the next three parts decide whether it is.
  3. The notice date, three months before the period ends. Longer than that is worth asking about. Diary it.
  4. The fee carries forward unchanged. Ask whether it is reviewed at each renewal.
  5. A minimum fee for a year with no claim. $35,000 is the illustrative fixed fee used across this site; the point is that the figure exists at all.

What it means in plain English

Some letters cover one claim. Some cover every year until one side stops them. The sample is the second kind: it covers the current accounting period, renews by itself for each following one unless notice is given three months before the period ends, charges each renewed year on the same basis, and charges a minimum fee for any year in which you decide not to claim at all. The minimum figure is illustrative, from the shared example used across this site.

A rolling engagement can suit a business that claims every year and values continuity. The terms to understand are the notice date, which arrives before you know how this year's claim has fared, and the minimum fee, which turns a year without a claim into a bill.

What to look for

A version that is easy to live with states the term in the letter rather than the standard terms, gives a notice period of three months or less, has the adviser remind you in writing before each renewal date, lets you decide each year whether to claim, and charges nothing for a year in which you do not.

A version to ask more about renews automatically with a notice period longer than three months, carries the fee basis forward for years without a fresh look, charges a minimum, a retainer or an exit fee for a year without a claim, or puts the renewal in a document you have not read. Write the notice date in your diary the day you sign.

Contract law differs by country, and so does what a letter can and cannot do. Ask a lawyer to review your own letter before you sign it.

Questions to ask

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