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My company entered into a 3 year natural gas supply contract with an automatic renewal clause. The supplier renewed the contract for an additional 3 years, telling us they sent a letter reminding us of the opportunity to cancel prior to the renewal. We never received the letter. Is it legal for them to renew the contract without our signature or at least a confirmation of receipt of the letter? Do we have any way to legally cancel the contract without paying their huge cancelation penalty fee?
State/Country relating to Question: Indiana Already Tried: We have contacted the supplier and the Indiana Office of Utility Consumer Counselor. The Indiana Office of Utility Consumer Counselor registered a complaint with the supplier. The supplier responded with a telephone call instructing us that they consider the renewal to be a binding contract with a hefty cancellation penalty.
You can cancel the contract, but the liquidated damages (penalty fee) will be an issue. They cannot "penalize" you for cancelling the contract, but they can ask for damages. The liquidated damages have to related to some actual loss they are incurring for it to be enforeceable.
So the route to go is cancel, refuse to pay fee. If and when they sue for the fee, you respond by saying the fee amounts to a penalty, which is not enforceable. They have to show that they are facing some actual expense because of your cancellation. Whatever that expense is, you will have to pay.
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