Meet-or-release contract

A meet-or-release contract (also known as a meet-the-competition clause or right of first refusal clause) is a type of commercial contract that allows a supplier to retain a customer by matching a competitor’s lower price offer. If the supplier chooses not to meet the offer, the customer is then “released” from the contract and may purchase from the competing supplier.

Overview

Meet-or-release clauses are typically used in long-term supply or requirements agreements between manufacturers, distributors, and retailers. They are designed to preserve an existing business relationship while allowing the customer to take advantage of lower prices in the market.

Under such a clause, the customer must usually present evidence of a genuine competing offer that is comparable in terms of product quality, quantity, and delivery conditions. The original supplier is then given a specific time period—often a few days—to decide whether to match the competitor’s offer (“meet”) or to release the customer from the agreement (“release”).

Legal considerations

Meet-or-release clauses are generally enforceable under contract law when negotiated in good faith. However, in some jurisdictions they may raise concerns under competition law or antitrust law if they are used to limit market entry, facilitate price coordination, or otherwise lessen competition. Courts often examine whether the clause promotes healthy price competition or restricts it through exclusionary effects.

Examples

• A steel producer agrees to supply a construction firm at a fixed price per ton, but the contract contains a meet-or-release clause that allows the firm to seek lower prices elsewhere if the producer declines to match a competitor’s offer.
• A software vendor includes a similar clause in its license agreement, giving it the option to match another vendor’s lower renewal price before the customer switches providers.

See also

• Requirements contract
• Right of first refusal
• Most favoured nation clause
• Competition law