What Is an Evergreen Clause?
In legal contracts, an evergreen clause is a provision that causes the agreement to automatically renew indefinitely unless one party terminates it within a strict notification window. In the transportation finance sector, evergreen clauses are among the most restrictive instruments used by aggressive factoring firms.
Anatomy of an Aggressive Factoring Renewal Clause
A typical evergreen clause in a factoring contract might read:
“This Agreement shall have an Initial Term of twenty-four (24) months and shall automatically renew for successive terms of twelve (12) months thereafter, unless Customer delivers written notice of termination via certified mail no more than ninety (90) and no fewer than sixty (60) days prior to the expiration of the current term.”
The Three Primary Risks for Motor Carriers
- Stuck with High Early Rates: When you start as a new authority, factoring rates are typically higher due to perceived risk. Evergreen clauses keep you locked in those higher rates even after you have established years of flawless credit.
- Exorbitant Buyout Penalties: Attempting to break an evergreen contract mid-cycle can trigger buyout fees reaching tens of thousands of dollars.
- Loss of Operational Flexibility: You are barred from using other financing sources or fuel programs due to exclusive UCC filing liens.
How to Protect Your Trucking Business
Before signing any contract, negotiate to strike or modify the evergreen clause. Insist on a 30-day notice requirement at any point after the initial term, or demand a month-to-month agreement once the primary period concludes.
Free Factoring Contract Legal Audit
Have our transportation contract experts review your existing factoring agreement for predatory evergreen language. Contact Trucker’s Choice at (480) 993-4100 for an immediate, confidential evaluation.