This clause lets one party (usually you) compare the other party's prices or performance against competitors or industry standards, and potentially renegotiate the contract if they're not competitive. It matters because it keeps prices fair over time and prevents you from overpaying as the market changes. However, it's high-risk because benchmarking is expensive, time-consuming, and often contentious—the other party will argue their prices are justified by their superior quality or service. The legal principle is "good faith"—UK and US law both require parties to act reasonably, so a benchmarking clause must be exercised fairly, not as a weapon to squeeze prices down.
If you want benchmarking rights, define exactly what you're comparing (price only? price and service quality? include their switching costs?), who does the comparison (independent expert?), and what happens if you find they're uncompetitive (do prices automatically adjust, or just give you exit rights?). Avoid vague language like "market rates"—specify the actual comparators (e.g., "three named competitors" or "published industry surveys"). Consider whether the cost and effort of benchmarking is worth it; sometimes a fixed price for 3 years is simpler. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause lets one party (usually you) compare the other party's prices or performance against competitors or industry standards, and potentially renegotiate the contract if they're not competitive.
Why should I care about this clause?
It matters because it keeps prices fair over time and prevents you from overpaying as the market changes.
What are my options?
However, it's high-risk because benchmarking is expensive, time-consuming, and often contentious—the other party will argue their prices are justified by their superior quality or service.
How does this affect small businesses?
The legal principle is "good faith"—UK and US law both require parties to act reasonably, so a benchmarking clause must be exercised fairly, not as a weapon to squeeze prices down.