Certain additional payments: Overview, definition, and example
What are certain additional payments?
Certain additional payments refer to amounts that one party agrees to pay in addition to the principal or primary obligations under a contract. These payments are often triggered by specific events, circumstances, or conditions, such as taxes, fees, penalties, or reimbursements. The purpose is to cover costs or obligations that arise outside the standard terms of the agreement.
For example, in a loan agreement, the borrower may agree to reimburse the lender for legal fees incurred in enforcing the agreement or to pay additional taxes if required by law.
Why are certain additional payments important?
Certain additional payments are important because they protect one party (often the lender or service provider) from incurring unexpected costs or losses related to the agreement. These provisions ensure that unforeseen expenses, such as taxes, regulatory fees, or legal costs, are covered, maintaining fairness and preventing financial burdens from falling solely on one party.
For businesses, these provisions provide clarity on financial responsibilities, reducing the risk of disputes and ensuring the agreement remains balanced and enforceable.
Understanding certain additional payments through an example
Imagine a company takes out a loan, and the loan agreement includes a provision requiring the borrower to reimburse the lender for any costs incurred if new tax laws increase the lender’s expenses. If a new tax law imposes a levy on financial transactions, the borrower must make an additional payment to cover the lender’s added costs.
In another example, a supply agreement might require the buyer to make additional payments if unexpected regulatory fees or tariffs are imposed on the goods being purchased. This ensures the supplier is not financially disadvantaged due to changes outside their control.
An example of a certain additional payments clause
Here’s how a certain additional payments clause might appear in a contract:
“The Borrower agrees to reimburse the Lender for any costs, expenses, or liabilities incurred as a result of changes in applicable laws, including but not limited to taxes, fees, or regulatory requirements, provided such costs are directly related to the performance of this Agreement.”
Conclusion
Certain additional payments provisions are a key tool for addressing unforeseen costs and maintaining fairness in contracts. By ensuring that one party is not disproportionately burdened by unexpected expenses, these clauses help create balanced agreements that adapt to changing circumstances. For businesses, understanding and negotiating these provisions is essential for managing risk and ensuring transparency in financial obligations.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.