most-favored-nation (mfn)
Definition
A most-favored-nation clause is a contract provision that guarantees you will always receive the best deal the other party offers to anyone else. If a supplier, vendor, or partner gives a better price or better terms to another customer, they must automatically give you those same improved terms. Think of it as a promise that you will never be treated worse than their most favored customer.
Example
You sign a software contract with an MFN clause at $500 per month, and later the vendor starts offering new customers the same plan for $400 per month, so the vendor must drop your price to $400 as well.
Watch Out
MFN clauses can work against you as a seller because they lock you into offering your best pricing to everyone, which makes it very hard to negotiate flexible deals with different customers down the road.
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.