By Anirban Sen

NEW YORK Microsoft Corp is in talks about an extension of its acquisition contract with video game maker Activision Blizzard, which is set to expire on Tuesday, so the parties can overcome the remaining regulatory hurdles to their $69 billion deal, a person familiar with the matter said on Monday.

The expiration of the contract would not automatically lead to the collapse of the deal, as it simply affords either company the right to walk away from the transaction.

Nonetheless, Microsoft has been seeking the contract extension to ensure that Activision is not wooed by another potential acquirer or has a change of heart, the source said.

Microsoft and Activision did not immediately respond to requests for comment.

An extension would give the companies more time to find a regulatory solution in Britain, the only major jurisdiction that has forbid them from completing their deal. Microsoft and Activision are negotiating potential remedies with the Competition and Markets Authority which they hope will appease its antitrust concerns.

The terms of the extension under negotiation and whether it would come with more financially advantageous terms for Activision could not immediately be learned.

The companies will continue to negotiate the extension if they do not have an agreement by the end of Tuesday, according to the source, who requested anonymity because the matter is confidential.

On Friday, a U.S. appeals court rejected the U.S. Federal Trade Commission's request to pause Microsoft's acquisition of "Call of Duty" maker Activision. The decision removed one of the few remaining hurdles stopping Xbox maker Microsoft from closing the deal and expanding its gaming business.

(Reporting by Anirban Sen in New York; Editing by Matthew Lewis)