Clawback
A clawback is a contractual provision that requires a customer or employee to return previously paid funds under specific conditions.
A clawback provision allows a company to recover previously disbursed payments if certain conditions are not met, such as a customer failing to meet usage commitments or an employee leaving before a vesting period ends.
Example: A SaaS vendor offers a 20% upfront discount in exchange for a 3-year commitment. The contract includes a clawback clause: if the customer cancels before year 2, they must repay the discount amount received in year 1.
