This clause says that prices or performance will be compared against market rates or competitors' offerings to make sure they're fair. For example, a software company might agree that its annual fee won't be more than 10% higher than what three similar competitors charge. Benchmarking protects both sides: the buyer knows they're not overpaying, and the supplier knows the price is based on real market data, not guesswork. The legal principle here is "good faith"—courts in both the UK and US expect parties to deal honestly, and benchmarking is a concrete way to prove you're doing that.
If you're the buyer, ask for benchmarking against named competitors you actually know about—vague comparisons are useless. If you're the supplier, push back on benchmarking clauses that use outdated data or unfair comparisons; insist on a specific methodology and recent sources. Either way, agree on exactly how and when the benchmark will be measured so there's no argument later. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause says that prices or performance will be compared against market rates or competitors' offerings to make sure they're fair.
Why should I care about this clause?
For example, a software company might agree that its annual fee won't be more than 10% higher than what three similar competitors charge.
What are my options?
Benchmarking protects both sides: the buyer knows they're not overpaying, and the supplier knows the price is based on real market data, not guesswork.
How does this affect small businesses?
The legal principle here is "good faith"—courts in both the UK and US expect parties to deal honestly, and benchmarking is a concrete way to prove you're doing that.