This clause breaks the contract price into smaller payments, each triggered when the supplier completes a specific stage of work (for example, 25% on contract signing, 25% on design approval, 25% on production completion, 25% on delivery). This protects the paying party by ensuring you only pay for work actually completed, reducing the risk of losing money if the supplier abandons the project halfway through. It also incentivizes the supplier to complete each stage on time. However, if milestones are poorly defined or too generous, you might end up paying for incomplete work.
Insist on clear, measurable milestone definitions—"design approval" is too vague; instead write "delivery of design document approved in writing by Client." Tie each payment to independent verification (like inspection or sign-off) rather than just the supplier's word. Weight payments toward the end of the project—for example, 10% upfront, 20% at mid-point, 70% on final delivery—so you retain maximum leverage if problems arise. Include a clause allowing you to withhold payment if a milestone isn't met to acceptable quality standards.
Frequently Asked Questions
What does this clause mean in simple terms?
This clause breaks the contract price into smaller payments, each triggered when the supplier completes a specific stage of work (for example, 25% on contract signing, 25% on design approval, 25% on production completion, 25% on delivery).
Why should I care about this clause?
This protects the paying party by ensuring you only pay for work actually completed, reducing the risk of losing money if the supplier abandons the project halfway through.
What are my options?
It also incentivizes the supplier to complete each stage on time.
How does this affect small businesses?
However, if milestones are poorly defined or too generous, you might end up paying for incomplete work.