True-Up Clause
Also called: True-Up Provision · Usage Reconciliation Clause
A true-up clause reconciles estimated or committed usage against actual usage at defined intervals, adjusting billing to reflect what was actually consumed — commonly used in SaaS contracts with per-seat or usage-based pricing. It prevents a growing mismatch between what's billed and what's actually used from going unnoticed for an entire contract term.
In more detail
Usage-based and seat-based pricing models create an ongoing accuracy problem — a company might add 50 users mid-year without formally amending the contract, and without a true-up mechanism, that gap between licensed and actual usage can persist for the entire term.
True-up frequency matters commercially: an annual true-up means a company could under-license for up to a year before reconciliation; a quarterly true-up catches drift much faster but adds administrative overhead for both parties.
The direction of adjustment should be specified — most true-up clauses only adjust upward (billing for excess usage), rarely refunding for under-usage, which is worth understanding before assuming the mechanism is symmetric.
A SaaS contract licenses 100 users but includes an annual true-up clause. By year-end, the company has actively provisioned 130 users. The true-up reconciliation bills for the additional 30 users retroactively from when they were added, based on the vendor's usage logs.
What our lawyers check
- True-up frequency and how usage is measured or logged
- Whether adjustment is one-directional (upward only) or bidirectional
- Notice provided before a true-up invoice is issued
- How disputes over measured usage are resolved
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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