This clause requires you to pay a set amount of money to the other party every year, regardless of how much you actually use their service or product. For example, you might commit to paying £50,000 per year even if you only need £30,000 worth of goods. The clause matters because it locks you into spending money you might not need, and the other party can enforce this through the courts if you refuse to pay. In UK and US law, this is a binding financial obligation—you cannot simply stop paying because business is slow or your needs change.
Before signing, negotiate a "true-up" clause that lets you pay only for what you actually use, with the annual minimum as a floor that gets credited back if you exceed it. If the other party won't budge, try to lower the minimum amount or add an escape clause that lets you exit if your business circumstances change significantly (for example, if you lose a major customer). ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause requires you to pay a set amount of money to the other party every year, regardless of how much you actually use their service or product.
Why should I care about this clause?
For example, you might commit to paying £50,000 per year even if you only need £30,000 worth of goods.
What are my options?
The clause matters because it locks you into spending money you might not need, and the other party can enforce this through the courts if you refuse to pay.
How does this affect small businesses?
In UK and US law, this is a binding financial obligation—you cannot simply stop paying because business is slow or your needs change.