cost reduction
Definition
Cost reduction refers to the deliberate steps a business takes to lower its operating expenses while maintaining the same quality of goods or services. In a legal context, this term often appears in contracts, business agreements, or restructuring plans where one party commits to finding savings within a set timeframe or budget.
Example
A supplier contract might require your vendor to deliver a 10% cost reduction over two years by finding cheaper materials without cutting corners on quality. If they fail to hit that target, the contract might allow you to renegotiate or walk away.
Watch Out
When you sign any agreement that promises cost reductions, make sure the contract clearly defines how those savings will be measured and who verifies them, because vague language here can lead to serious disputes.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.