Most favoured customer clause (MFC) template clause

    Updated: 2 August 2026

    Please note: these example clauses are intended as a starting point, not as legal advice. Always adapt the text to your specific situation and have important contracts reviewed by a legal professional.

    Clause text

    Article [X] – Most favoured customer

    [X].1 Price guarantee
    Supplier warrants that the prices and commercial terms set out in this agreement shall not, during its term, be less favourable than the prices and terms Supplier applies to any other customer purchasing comparable products or services in comparable circumstances.

    [X].2 Comparable circumstances
    In assessing whether circumstances are comparable, regard shall be had to at least: annual purchase volume, the term of the agreement, the agreed payment period, the service level, and the extent of any additional services.

    [X].3 Notification
    As soon as Supplier grants more favourable terms to another customer in comparable circumstances, Supplier shall notify Customer in writing within [number, e.g. 30] days and shall offer the same terms to Customer.

    [X].4 Effective date and back payment
    The more favourable terms shall apply to Customer with retroactive effect from the date on which Supplier granted them to the other customer. Supplier shall credit or set off the difference against the next invoice within [number, e.g. 30] days.

    [X].5 Audit right
    Customer may, no more than once per contract year and at its own expense, instruct a registered accountant to verify Supplier's compliance with this Article. The accountant shall be given access only to such data as is necessary for that verification and shall report to Customer solely on whether this Article has been complied with, without disclosing identifiable data relating to other customers. If the verification reveals a discrepancy exceeding [percentage, e.g. 2]%, the cost of the audit shall be borne by Supplier.

    [X].6 Exceptions
    This Article shall not apply to: one-off introductory discounts running for no more than [number, e.g. 3] months, prices established through a public tender, and supplies to Supplier's affiliated undertakings.

    [X].7 Scope
    This Article concerns only the relationship between Supplier and Customer and is not intended otherwise to restrict Supplier's freedom to set its prices independently.

    What does this clause mean?

    A most favoured customer clause, commonly shortened to MFC or MFN, obliges your supplier not to treat you worse than its other clients. If a comparable customer secures a keener price, you become entitled to it automatically. The clause shifts the burden of vigilance: instead of scanning the market each year to discover whether you are overpaying, the supplier carries an active duty to tell you.

    The heart of the provision is paragraph 2. Without a workable definition of comparable circumstances the guarantee is hollow, because any supplier can then maintain that the other client is simply a different case. Naming volume, term, payment period and service level explicitly makes the conversation concrete and testable.

    Two warnings belong with it. The first is a competition law point: broadly drafted MFC provisions can in some circumstances dampen price competition, and in a few sectors, online platforms above all, they have attracted regulatory attention. Where the supplier holds a strong market position, legal review is sensible. The second is commercial: a supplier who knows that every discount automatically flows through to its entire customer base will simply stop granting discounts. An MFC clause can therefore narrow your negotiating room as well as widen it.

    World Commerce & Contracting puts the revenue lost to poor contract management at 9.2% of annual turnover, and pricing terms that are never revisited after signature are a recognisable part of that leak. Paragraph 5 is accordingly not a formality: a guarantee without an audit right is a statement of intent.

    When should you use this clause?

    An MFC clause earns its place in multi-year contracts with substantial annual volume, where switching is not straightforward and the supplier operates differentiated pricing. Think wholesale supply arrangements, software licences and framework contracts for maintenance or consumables. For one-off purchases, or with a supplier working from a published price list, the clause adds little.

    Do not combine it with a price indexation clause without working out how the two interact: indexation raises your price by reference to an index, while the MFC clause lowers it by reference to market behaviour. State which prevails. Where you mainly want to test market conformity periodically rather than correct automatically, a benchmarking clause is the lighter option and usually lands better commercially. See also price revision for the wider question of when a price may be adjusted mid-term.

    Customize these elements

    • 1Define the comparison group in paragraph 2 as tightly as you can. "All other customers" is unenforceable; "customers in the Benelux with annual volume between X and Y" is not. The more concrete the group, the smaller the chance the discussion founders on definitions
    • 2Choose deliberately between a notification duty (paragraph 3) and a pure audit right (paragraph 5). A notification duty puts the initiative with the supplier but is hard to prove; an audit right is demonstrable but costs you money and goodwill. In a long-running relationship the combination works best
    • 3State in paragraph 5 that the accountant will not disclose identifiable data on other customers. Without that limit a supplier will refuse the audit right, and rightly so: it owes confidentiality obligations to those customers too
    • 4Make sure the exceptions in paragraph 6 genuinely match your supplier's commercial practice. Ask about it during negotiation. A list of exceptions you drafted yourself rarely covers the arrangements actually used in the market
    • 5Agree what happens if the supplier breaches the notification duty. Back payment alone gives it little reason to report, since staying silent then costs nothing. An uplift on the amount repaid, or a link to the penalty clause elsewhere in the contract, is what makes the provision enforceable in practice

    Sources

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