The $17M Contract Renewal Oopsie
In the wrong circumstances, a missed renewal can be a very costly mistake. As in millions of dollars’ worth of costly mistake.
It’s never a good idea to miss a contract renewal, but sometimes it can be expensive… very expensive. Just ask Park City Mountain Resort.
Sometimes you will miss a contract deadline and get away with it. Forgot to extend that customer or supplier agreement? No worries, you can just ask nicely and repaper the deal. Sometimes. But don’t count on it. In the wrong circumstances, a missed renewal can be a very costly mistake. As in millions of dollars’ worth of costly mistake.
About 12 years ago, this is exactly what happened to Park City Mountain Resort. They had a sweet lease deal dating back to the 1970s under which they paid about $150K to lease a very lucrative area of ski terrain. Someone at PCMR sent the lease renewal out on May 2, 2011, two days after the April 30 deadline. In the litigation that followed, the market value of the lease was assessed at over $17M, and PCMR lost the case. In short, missing the lease renewal by two days was a $17M mistake. Ouch.
There are several lessons that legal ops and contracts teams can take away from this story:
- Make sure you know your contract renewal dates.
- Understand what happens if you miss a deadline - will the contract expire or will it auto-renew?
- Understand the consequences of any “accidental” expiry (or renewal) – would it be a million dollar mistake, a nothing burger, or something in between?
- For any such “accidents” that would materially hurt your business, make sure to build a robust tracking and alert system with no single point of failure.
Now, admittedly, it can seem like an overwhelming, expensive task to capture and track every expiry date and renewal deadline, especially for a large contract portfolio. But, it doesn't have to be. Automated contract analytics software like ours makes it faster and more cost-effective than ever to capture this sort of data.
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