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Most Favored Nation Clause

A contractual provision guaranteeing one party terms at least as favorable as those the other party gives to anyone comparable.

Reviewed by GC AI Solutions Team•Updated August 2026

Definition

A most favored nation (MFN) clause is a contractual provision that guarantees one party terms no less favorable than the other party offers to any comparable counterparty. Borrowed from trade law, it is common in commercial pricing, procurement, licensing, and investment agreements: if the provider later gives a better price or term to someone comparable, the MFN-protected party receives it too. The clause turns on how "comparable" is defined, which terms it covers, and whether the benefit is automatic or requires notice. Courts enforce MFN clauses, though disputes over scope are common.

  • Guarantees one party terms at least as favorable as those given to comparable counterparties
  • Defines the comparison set: who counts as comparable, and over what period
  • Specifies which terms are covered: price only, or price plus other commercial terms
  • Sets whether the better term applies automatically or on notice and election
  • Allocates the ongoing risk of being undercut for the life of the contract

Broad price MFNs have drawn antitrust scrutiny, because they can reduce a provider's incentive to discount, pushing drafters toward narrower and clearly defined comparison sets.

What It Does

A most favored nation clause locks in a promise that you will not be undercut. For in-house counsel negotiating vendor and SaaS contracts, it is the term that protects today’s pricing against tomorrow’s better deal for a competitor. The mechanics are simple to state and hard to draft: the protected party gets the benefit of any more favorable term the provider grants to a comparable counterparty. The drafting fight is over three words, “comparable,” “terms,” and “automatic,” because each one decides how much the clause is actually worth.

When You'll See It

A most favored nation clause appears wherever one party fears being undercut over time: SaaS and software pricing, procurement and supply agreements, licensing deals, and investor and financing terms. In-house teams meet it on both sides, demanding it as a buyer and resisting it as a seller. It matters most in long-term or renewing relationships, where the provider will sign other deals during the term. See also: exclusivity, pricing, and change of control.

Examples

Equinix, Inc.

Oklo Inc., Power Purchase Letter of IntentCommercial pricingOne-Sided2024
“During the term of any PPA, Oklo will offer its power (including equipment and services) to us at the Most Favored Nation Pricing (as defined below).”
Source

Complete Solaria, Inc.

Polar Multi-Strategy Master Fund, Contract AmendmentInvestor MFNMutual2024
“In the event the Company enters into other similar agreements with any other investor before or after the execution of this Amendment in connection with the modification of the EPFT Contract, Company represents that the terms of such other similar agreements are not materially more favorable to such other investors thereunder than the terms of this Amendment are in respect to Seller.”
Source

Verizon Sourcing LLC

Synchronoss Technologies, Inc., Application Service Provider Agreement (Amendment)Supplier-pricing MFN, comparable-customer benchmarkOne-Sided2023
“Most Favored Pricing. Supplier represents that the prices ([]) that Supplier charges Verizon under this Section 4 when considered together with all other material terms impacting the costs of providing products and services hereunder shall be no less favorable than those provided by Supplier to any Comparable Supplier Customer, at similar volume levels...”
Source

Blue Star Foods Corp.

JustFoodForDogs, LLC, Supply AgreementProduct-supply MFN, automatic true-upOne-Sided2023
“Most Favored Pricing. If Supplier offers any more favorable term or condition (including pricing) to any other company than that which is offered to Customer for the Products or any products similar thereto then Supplier will extend such favorable terms or conditions to Customer, and this Agreement and any applicable Purchase Orders will be deemed amended to provide those terms and conditions to Customer.”
Source

Negotiate

If you're the buyer:

You want the protection

  • Define the comparison set broadly enough to capture the deals that matter, and specify the look-back and look-forward periods.
  • Cover all material commercial terms, including more than price, so the provider cannot route the benefit around you.
  • Make the better term apply automatically, with an audit right to verify compliance.
  • Require the provider to notify you when it grants a more favorable term.
  • Keep the clause alive through renewals.

If you're the seller:

You want to limit it

  • Narrow the comparison set to truly comparable customers by volume, term, and segment.
  • Limit covered terms to headline price, and exclude one-off discounts, pilots, and bundled deals.
  • Make the benefit apply on the buyer’s election going forward, with no retroactive true-up.
  • Add a sunset so the MFN expires before the contract does.
  • Exclude affiliates and strategic deals from the comparison.

An MFN is only as strong as its comparison set. A buyer who wins the clause but accepts a narrow definition of “comparable” has won very little.

Red Flags

  • A comparison set so narrow that no other customer ever qualifies, making the clause cosmetic.

  • Coverage of headline price only, letting the provider shift value into fees, credits, or bundles.

  • No audit or notice right, so the buyer cannot tell whether the MFN is being honored.

  • A broad price MFN that raises antitrust exposure in regulated or high-share markets.

  • An MFN with no sunset that outlives the commercial logic of the deal.

Most Favored Nation Clause FAQs

What is a most favored nation clause?
A most favored nation (MFN) clause guarantees one party terms at least as favorable as the other party offers to any comparable counterparty. If a better term is later given to someone comparable, the protected party receives it.
What is the purpose of an MFN clause?
It protects a party from being undercut over the life of a contract, keeping its pricing or terms competitive with the best deal the provider offers elsewhere.
What terms does an MFN clause cover?
It depends on the drafting. A narrow MFN covers headline price only. A broad MFN covers all material commercial terms, including discounts, credits, and bundled value.
Are MFN clauses legal?
Generally yes, though broad price MFNs have drawn antitrust scrutiny because they can reduce a provider's incentive to offer discounts. In regulated or high-market-share settings, narrow and well-defined MFNs are safer.
What is the difference between an MFN clause and an exclusivity clause?
An MFN guarantees you the best available terms. An exclusivity clause restricts who the other party can deal with at all. They solve different problems and are sometimes negotiated together.
How do you enforce an MFN clause?
Through an audit or notice right that lets the protected party verify the provider's other deals, plus a true-up or election mechanism that delivers the better term once a violation is found.

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This content is for informational purposes only and does not constitute legal advice.