Performance shortfall clause: Copy, customize, and use instantly
Introduction
A performance shortfall clause outlines the consequences when one party fails to meet the agreed-upon performance standards or deliverables. This clause specifies the actions to be taken in response to a shortfall, including remedies, penalties, or adjustments. It is designed to protect the non-defaulting party and incentivize compliance with contractual obligations.
Below are templates for performance shortfall clauses tailored to different scenarios. Copy, customize, and insert them into your agreement.
Standard performance shortfall clause
This version covers general performance shortfalls.
If [Party B] fails to meet the performance standards or deadlines specified in this Agreement, [Party A] may provide written notice of the shortfall. [Party B] will have [X] days to remedy the shortfall. If the shortfall is not remedied within the specified time, [Party A] may impose a penalty fee of [X] dollars per day of non-compliance.
Performance shortfall clause with provision for adjustments
This version allows adjustments for shortfalls.
If [Party B] experiences a performance shortfall, [Party A] may agree to adjust the expectations or timeline. The adjustment will be determined by mutual agreement, and [Party B] will be allowed [X] days to meet the revised terms. If [Party B] fails to comply, [Party A] may impose additional penalties.
Performance shortfall clause with provision for termination
This version includes a termination option.
If [Party B] fails to meet the agreed performance standards or milestones within the time specified in this Agreement, [Party A] may terminate this Agreement immediately and seek compensation for any losses incurred due to the shortfall.
Performance shortfall clause with provision for liquidated damages
This version applies liquidated damages.
If [Party B] fails to meet the agreed performance criteria, [Party A] will be entitled to liquidated damages in the amount of [X] dollars for each instance of non-performance. These damages will apply for each day of shortfall and will not exceed [Y] dollars.
Performance shortfall clause with provision for a cure period
This version includes a cure period.
In the event of a performance shortfall, [Party B] will have a cure period of [X] days from the notice of non-performance to remedy the issue. If the shortfall persists after the cure period, [Party B] will be liable for any additional costs incurred by [Party A] due to the shortfall.
Performance shortfall clause with provision for progress reviews
This version includes periodic reviews.
If [Party B] fails to meet the agreed performance standards, [Party A] reserves the right to conduct periodic performance reviews. If performance is found to be below expectations, [Party B] will be required to submit a corrective action plan within [X] days. Failure to comply may result in penalties.
Performance shortfall clause with provision for adjustment of scope
This version applies if the scope is adjusted.
If [Party B] experiences a shortfall in performance, [Party A] may, at its discretion, adjust the scope of work or extend deadlines. If performance remains inadequate, [Party A] may terminate the Agreement and seek damages.
Performance shortfall clause with provision for partial performance adjustment
This version applies to partial performance.
In the event of a performance shortfall, [Party B] may be required to adjust the service fees or deliverables to reflect the reduced performance level. Any penalty will be based on the degree of shortfall relative to the overall project.
Performance shortfall clause with provision for immediate corrective action
This version requires immediate corrective action.
If a performance shortfall is identified, [Party B] must take immediate corrective action. If corrective action is not taken within [X] days, [Party A] may impose a penalty fee of [X] dollars per day of non-performance.
Performance shortfall clause with provision for early warning notice
This version includes an early warning notice.
If [Party B] is at risk of failing to meet the performance standards, [Party A] will issue an early warning notice. If the shortfall continues after the warning, [Party B] will be required to pay a penalty fee of [X] dollars for each day of continued underperformance.
Performance shortfall clause with provision for refund of fees
This version applies to refunds.
If [Party B] fails to meet the agreed performance standards, [Party A] is entitled to a refund of any fees paid for undelivered or unsatisfactory services. The refund will be processed within [X] days of the shortfall being confirmed.
Performance shortfall clause with provision for damages calculation
This version calculates damages.
If [Party B] experiences a performance shortfall, the penalty will be calculated based on the financial losses incurred by [Party A] due to the failure to perform. Damages will be assessed and invoiced within [X] days of the shortfall.
Performance shortfall clause with provision for service suspension
This version allows suspension of services.
If [Party B] fails to meet the agreed performance standards, [Party A] reserves the right to suspend any further services until the issue is rectified. If the shortfall is not remedied within [X] days, [Party A] may terminate the Agreement.
Performance shortfall clause with provision for monetary penalty per instance
This version applies a monetary penalty per instance.
If a performance shortfall occurs, a penalty fee of [X] dollars will be assessed for each instance of non-performance. This fee will be due immediately upon notice of the shortfall and will continue to accrue until the shortfall is remedied.
Performance shortfall clause with provision for a performance review meeting
This version applies to performance reviews.
In the event of a performance shortfall, [Party A] will schedule a performance review meeting with [Party B] to discuss the issues and agree on corrective actions. If the performance remains unsatisfactory after the meeting, a penalty fee of [X] dollars will apply.
Performance shortfall clause with provision for independent audit
This version requires an independent audit.
If [Party B] fails to meet the agreed performance standards, [Party A] may engage an independent auditor to assess the performance shortfall. The costs of the audit will be borne by the defaulting party, and a penalty fee will be imposed based on the audit's findings.
Performance shortfall clause with provision for compensation for lost profits
This version applies to lost profits.
If [Party B] fails to perform and [Party A] suffers a loss of profits due to the underperformance, [Party B] will compensate [Party A] for the lost profits in addition to any penalties. The compensation will be determined based on a formula agreed upon by the parties.
Performance shortfall clause with provision for delay-based penalty
This version applies a delay-based penalty.
If [Party B] fails to meet a performance milestone on time, a penalty of [X] dollars per day of delay will be applied until the milestone is met. The delay penalty will apply up to a maximum of [Y] dollars.
Performance shortfall clause with provision for contract renegotiation
This version allows for contract renegotiation.
In the event of a performance shortfall, [Party A] and [Party B] may renegotiate the terms of this Agreement, including performance expectations and timelines. If the shortfall is not remedied after renegotiation, [Party A] may terminate the Agreement.
Performance shortfall clause with provision for suspension of payment
This version suspends payments for non-performance.
If [Party B] fails to meet its performance obligations, [Party A] reserves the right to withhold any further payments until the shortfall is remedied. Any payments already made will not be refunded unless the shortfall is not addressed within [X] days.
Performance shortfall clause with provision for adjustment of payment based on performance
This version adjusts payments based on performance.
If [Party B] fails to meet the agreed performance standards, [Party A] may reduce the payment owed based on the level of shortfall. The reduction will be calculated based on the extent to which the performance standard was not met.
Performance shortfall clause with provision for mitigation of damages
This version applies to mitigation of damages.
If [Party B] experiences a performance shortfall, they will be required to take reasonable steps to mitigate any damages resulting from the failure. Failure to mitigate may result in an additional penalty fee of [X] dollars per day of non-compliance.
Performance shortfall clause with provision for continuous non-performance
This version applies to continuous non-performance.
If [Party B] continues to experience performance shortfalls beyond [X] days after notice, [Party A] reserves the right to terminate the Agreement and seek compensation for all damages incurred.
Performance shortfall clause with provision for additional costs due to delay
This version applies to additional costs from delay.
If [Party B] fails to meet performance deadlines, [Party A] is entitled to recover any additional costs incurred due to the delay, including but not limited to expedited shipping or subcontractor costs.
Performance shortfall clause with provision for extension of timeline
This version allows for an extended timeline.
If [Party B] experiences a shortfall in performance due to unforeseen circumstances, [Party A] may extend the performance timeline by up to [X] days. The extension will be granted only upon written request and subject to [Party A]'s approval.
Performance shortfall clause with provision for review and adjustment
This version includes performance reviews and adjustments.
If [Party B] fails to meet the agreed performance standards, [Party A] may request a performance review meeting. Based on the review, the parties may mutually agree to adjust the performance expectations, timeline, or terms of the Agreement.
Performance shortfall clause with provision for reduced compensation
This version includes reduced compensation for non-performance.
In the event of a performance shortfall, [Party B] agrees to accept a reduction in compensation proportional to the underperformance. The reduced compensation will be calculated based on the percentage of unmet performance criteria.
Performance shortfall clause with provision for immediate corrective measures
This version applies to immediate corrective measures.
If [Party B] fails to meet any milestone or performance requirement, [Party A] may require [Party B] to take immediate corrective measures. Failure to initiate corrective action within [X] days will result in a penalty fee.
Performance shortfall clause with provision for penalties based on severity
This version applies escalating penalties based on severity.
If [Party B] fails to perform its obligations, a penalty fee will be charged, starting at [X] dollars per day. If the non-performance continues beyond [Y] days, the penalty will increase to [Z] dollars per day, based on the severity of the shortfall.
Performance shortfall clause with provision for post-performance evaluation
This version includes post-performance evaluation.
After [Party B] completes the performance under this Agreement, [Party A] will evaluate the performance against the established standards. If any discrepancies are found, a penalty fee will be applied for the identified shortfall.
Performance shortfall clause with provision for suspension of services until correction
This version applies to suspension of services.
If [Party B] experiences a performance shortfall, [Party A] reserves the right to suspend services until the issue is corrected. If the shortfall is not addressed within [X] days, [Party A] may terminate the Agreement.
Performance shortfall clause with provision for agreed-upon shortfall thresholds
This version defines thresholds for shortfalls.
If [Party B] fails to meet the performance standards outlined in this Agreement, a penalty will be imposed only if the shortfall exceeds [X]% of the agreed target. If the shortfall is less than this threshold, no penalty will apply.
Performance shortfall clause with provision for mitigating actions
This version requires mitigating actions.
If a performance shortfall occurs, [Party B] must immediately implement corrective or mitigating actions to address the shortfall. [Party A] may review the proposed actions and, if satisfactory, reduce or waive the penalty fee.
Performance shortfall clause with provision for continued obligations despite shortfall
This version requires continued obligations.
If a performance shortfall occurs, [Party B] is still required to fulfill all remaining obligations under this Agreement. The non-performance penalty will apply only to the shortfall and will not release [Party B] from other duties.
Performance shortfall clause with provision for compensation for delays
This version applies to delays.
If [Party B] fails to meet any agreed performance milestone, [Party A] will be entitled to compensation for any costs incurred due to the delay. These costs may include expedited shipping, labor costs, or any additional fees arising from the delay.
Performance shortfall clause with provision for delayed project penalties
This version applies to delayed projects.
If the project is delayed beyond the agreed completion date, a penalty of [X] dollars will be charged for each additional week of delay. If the delay exceeds [Y] weeks, [Party A] may terminate the Agreement and seek damages.
Performance shortfall clause with provision for a fixable performance shortfall
This version allows a fixable shortfall.
If the performance shortfall is deemed fixable, [Party B] will be given [X] days to remedy the shortfall. If the shortfall is not corrected within this time frame, [Party A] may impose a penalty fee or terminate the Agreement.
Performance shortfall clause with provision for adjustment of service levels
This version applies to service level adjustments.
In the event of a performance shortfall, [Party A] may adjust the agreed-upon service levels for the remainder of the term. These adjustments will reflect the reduced performance levels and will be agreed upon by both parties in writing.
Performance shortfall clause with provision for cost recovery
This version applies to cost recovery.
If [Party B] fails to meet performance standards, [Party A] will recover any additional costs incurred due to the non-performance, including hiring third-party vendors or incurring other expenses, through a penalty fee or adjustment to payments.
Performance shortfall clause with provision for performance milestones
This version applies to specific performance milestones.
If [Party B] fails to meet a performance milestone, [Party A] may charge a penalty fee equal to [X]% of the value of the milestone. This fee will be deducted from any payment due for the milestone.
Performance shortfall clause with provision for escalating penalties for repeated shortfalls
This version applies escalating penalties for repeated shortfalls.
If [Party B] fails to perform on multiple occasions, the penalty fee will escalate. The penalty fee for the second breach will be [X]% higher than the first, and for each subsequent breach, the penalty will increase by [Y]%.
Performance shortfall clause with provision for failure to meet quality standards
This version applies to quality standards.
If [Party B] fails to meet the agreed-upon quality standards, a penalty fee of [X] dollars will be charged for each instance of non-conformance. If the non-conformance continues for more than [Y] days, the Agreement may be terminated.
Performance shortfall clause with provision for periodic shortfall evaluations
This version allows periodic evaluations.
[Party A] will perform periodic evaluations to assess [Party B]'s performance. If, at any evaluation, a shortfall is identified, [Party B] will have [X] days to remedy the issue before a penalty fee of [Y] dollars per day is charged.
Performance shortfall clause with provision for rescheduled delivery
This version applies to rescheduled delivery.
If [Party B] experiences a shortfall in performance resulting in delayed delivery, [Party A] may reschedule the delivery at no additional cost to [Party B]. If the rescheduled delivery does not occur on the new date, penalties will apply.
Performance shortfall clause with provision for non-payment penalty
This version applies a penalty for non-payment.
If [Party B] fails to perform the agreed services by the specified deadline, [Party A] will be entitled to a penalty fee of [X] dollars per day of delay, and any payment due will be withheld until the performance shortfall is corrected.
Performance shortfall clause with provision for failure to meet volume targets
This version applies to volume targets.
If [Party B] fails to meet the agreed volume of deliveries or services, [Party B] will incur a penalty of [X] dollars per unit or service not delivered, calculated at the end of each [time period].
Performance shortfall clause with provision for impact on third parties
This version applies when third parties are impacted.
If [Party B] fails to meet performance standards, resulting in delays or issues with third-party vendors or customers, [Party A] will be entitled to a penalty fee of [X] dollars per incident or delay caused by [Party B]'s non-performance.
Performance shortfall clause with provision for immediate penalty for late deliverables
This version applies to late deliverables.
If [Party B] fails to deliver goods or services by the agreed date, a penalty fee of [X] dollars per day of delay will be assessed, and [Party A] reserves the right to seek damages for any loss incurred due to the delay.
Performance shortfall clause with provision for non-conformance with specifications
This version applies to non-conformance.
If [Party B] delivers goods or services that do not conform to the agreed specifications, [Party B] will be subject to a penalty fee of [X] dollars per instance of non-conformance, in addition to any costs incurred for replacement or rework.
Performance shortfall clause with provision for third-party verification of performance
This version allows for third-party verification.
If a performance shortfall is suspected, [Party A] may engage a third-party auditor or expert to verify the performance issue. Any costs associated with the audit will be borne by the defaulting party, and penalties will be applied based on the findings.
Performance shortfall clause with provision for time-based performance penalties
This version applies time-based penalties.
If [Party B] fails to meet any performance milestone within the agreed timeline, [Party A] will assess a penalty fee of [X] dollars per hour or day of delay, until the milestone is achieved.
Performance shortfall clause with provision for failure to meet quality thresholds
This version applies to quality thresholds.
If [Party B] fails to meet the quality standards set forth in this Agreement, [Party A] will charge a penalty fee of [X] dollars for each instance of non-compliance, in addition to seeking correction or remedy of the shortfall.
Performance shortfall clause with provision for revision of terms due to continued shortfalls
This version allows for revision of terms.
If [Party B] experiences continued performance shortfalls over the course of the Agreement, [Party A] may revise the terms of performance, including timelines, deliverables, or penalties, to address ongoing non-compliance.
Performance shortfall clause with provision for cancellation and compensation
This version allows for cancellation.
If [Party B] fails to meet the performance standards outlined in this Agreement, [Party A] has the right to cancel the Agreement with immediate effect and seek compensation for any damages resulting from the non-performance.
Performance shortfall clause with provision for tiered penalties based on severity
This version applies tiered penalties.
If [Party B] fails to meet the agreed performance standards, a tiered penalty system will be applied based on the severity of the shortfall. Minor failures will incur a penalty of [X] dollars, while major failures will incur penalties of [Y] dollars, as determined by [Party A].
Performance shortfall clause with provision for failure to meet deadlines
This version applies to missed deadlines.
If [Party B] misses any deadline specified in this Agreement, a penalty fee of [X] dollars per day of delay will be charged. This fee will apply until the missed deadline is met, or [Party A] terminates the Agreement.
Performance shortfall clause with provision for final assessment and penalties
This version applies after final assessment.
After the completion of the project or service, [Party A] will conduct a final assessment to evaluate whether the performance meets the specified requirements. If any shortfall is identified, [Party B] will be required to pay a penalty fee of [X] dollars for each instance of non-performance.
Performance shortfall clause with provision for late or inadequate reporting
This version applies to late reporting.
If [Party B] fails to provide required reports or information on time or provides incomplete or inadequate reports, [Party A] will impose a penalty fee of [X] dollars per day of delay or for each incomplete report submitted.
Performance shortfall clause with provision for non-payment of penalties
This version applies if penalties are not paid.
If [Party B] fails to pay any penalty fees resulting from non-performance within [X] days of notification, [Party A] reserves the right to withhold future payments due to [Party B] until the penalty is paid in full.
Performance shortfall clause with provision for incentive reduction
This version applies to incentive reduction.
If [Party B] fails to meet the agreed performance criteria, any performance-based incentives or bonuses will be reduced by [X]% for each shortfall in the performance milestones. This reduction will be applied to the final payment.
Performance shortfall clause with provision for failure to meet contractual obligations
This version applies to failure to meet obligations.
If [Party B] fails to meet its contractual obligations, a penalty fee of [X] dollars will be charged for each breach. [Party B] will also be responsible for covering any additional costs incurred by [Party A] due to the failure.
Performance shortfall clause with provision for notice and cure period
This version includes a notice and cure period.
If a performance shortfall occurs, [Party A] will notify [Party B] in writing. [Party B] will have [X] days to cure the shortfall. If the shortfall is not cured within this period, a penalty fee will be assessed and [Party A] may terminate the Agreement.
Performance shortfall clause with provision for loss of future business
This version applies to future business.
If [Party B] fails to meet the performance expectations of this Agreement, [Party A] reserves the right to reduce the scope of future work or future contract opportunities with [Party B], in addition to charging penalty fees.
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