Malus Payment – Key Words & Phrases | Sklover Working Wisdom
What is the meaning of: "Malus Payment"? In many areas of business, contracts commonly include what is called a "bonus-malus" provision. This means that, if future results of an effort, a joint venture, or a sold business exceed a specified performance goal, one side may get an extra payment (that is, a "bonus" payment). A "bonus-malus" provision would also provide that, if results fell below that same specified performance goal, or another specified performance goal, that same party might have to pay back money previously received from the other (that is, a "malus" payment). "Bonus-malus" provisions serve to limit both the upside and the downside risks of unexpected events to both sides in a transaction. Here's an example. If party A sold a consulting business to party B, their contract might include a "bonus-malus" provision that provides (a) if the revenues in the first year exceed $10 million, then A, the seller, would be entitled to a "bonus" payment of $100,000. But (b) if the