clause

  

Definition

Stipulation, subdivision, or a numbered part or section of a document, that clarifies, defines, or explains the subject matter. Clauses are the 'ifs,' 'buts,' and 'ands' of a contract, proposal, or statute.

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The Most Favored Customer Clause

One useful but fairly uncommon type of contract stipulation is a most-favored-customer clause. Under such an arrangement, no one gets a better price than this customer, or if someone else does then this customer's price drops to that level. This affects future negotiations (it makes things tougher on that customer's competition, and it gives the vendor an excuse not to negotiate with them, if that's what the vendor wants, since its hands are tied.) But it's then easier for that vendors rivals to target its customers, and harder for it to do the reverse. Sometimes this raises the price the vendor can charge, because each customer doesn't negotiate as much, assuming future customers will.

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