Benchmarking Clause
Also called: Price Benchmarking · Market Comparison Clause
A benchmarking clause gives a customer the right to periodically compare a vendor's pricing or service levels against the market, and requires the vendor to adjust if they fall materially out of line. It's most common in long-term contracts where market rates can shift substantially over the term.
In more detail
Long-term contracts lock in pricing that made sense at signing but can drift far from market rates over several years — a benchmarking clause gives the customer a periodic reset mechanism rather than being stuck with an increasingly uncompetitive deal.
The clause needs a defined, objective benchmarking methodology — a named independent benchmarking service, or a specific peer-comparison process — otherwise disputes about whether pricing is actually "out of line" become their own source of conflict.
What happens if benchmarking reveals a gap also needs defining: automatic price adjustment, a negotiation period, or in some contracts a right to terminate if the vendor won't match market rates.
A five-year outsourcing contract includes a benchmarking clause allowing the customer to commission an independent market comparison every 18 months. If pricing is found to be more than 10% above market, the vendor must either adjust pricing or the customer gains an early termination right.
What our lawyers check
- Whether a defined, objective benchmarking methodology is specified
- How frequently benchmarking can be triggered
- What happens if the benchmark reveals a material gap
- Who bears the cost of the benchmarking exercise itself
Contracts where this clause matters
Related terms
This definition is general information about commercial contracting practice, not legal advice. How a clause operates depends on the specific wording of your agreement and the law that governs it. For advice on your contract, have it reviewed by a lawyer.
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