This clause requires the other party to keep a certain amount of their resources, staff, or inventory available exclusively for you, even if you don't use it. For example, a manufacturer might reserve 20% of their production line for your orders. You typically pay a fee for this reserved capacity whether you use it or not. This matters because you're paying for something you might never need, and the other party has less flexibility to serve other customers. It's a way for them to guarantee they can meet your peak demands without having to turn away other business.
Negotiate a "use it or lose it" clause where unused capacity doesn't carry a full fee—you might pay 50% of the reservation fee for unused capacity, or the fee drops if you don't use it within a set period. Also try to get a clause allowing you to reduce the reserved capacity with 30-60 days' notice if your business needs change. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause requires the other party to keep a certain amount of their resources, staff, or inventory available exclusively for you, even if you don't use it.
Why should I care about this clause?
For example, a manufacturer might reserve 20% of their production line for your orders.
What are my options?
You typically pay a fee for this reserved capacity whether you use it or not.
How does this affect small businesses?
This matters because you're paying for something you might never need, and the other party has less flexibility to serve other customers.