Every short-pay dispute ultimately hinges on a specific contractual provision. If the clause exists and the evidence supports the seller, the deduction is recoverable. If the clause is missing or ambiguous, it is not. This library documents the five essential clause families that govern 90%+ of deduction recoverability decisions, with standard language examples and enforcement logic.
Determines when title to goods transfers, who bears carrier freight charges, and who assumes risk of loss during transit.
FOB (Free on Board) terms are the single most consequential freight provision in a B2B distribution contract. They determine two things simultaneously: (1) when legal title to the goods transfers from seller to buyer, and (2) who pays the carrier's freight bill. Under FOB Shipping Point, title transfers the moment goods leave the seller's dock — the buyer owns the goods in transit and pays all freight charges. Under FOB Destination, title transfers only when goods arrive at the buyer's dock — the seller owns the goods in transit and pays freight.
Most contracts layer a dollar threshold on top of the FOB designation. A typical clause reads: 'Orders exceeding $10,000 net invoice value ship FOB Destination, freight prepaid by Seller. Orders under $10,000 ship FOB Shipping Point, freight collect.' This means a $14,200 order ships freight-free to the buyer, but a $8,500 order does not. The threshold test is applied per-order, not per-line-item.
The most common audit finding under this clause is a buyer debiting freight charges against a seller payment on an order that exceeded the FOB Destination threshold. The buyer's AP system sees a freight line item and deducts it automatically — without checking whether the order qualified for seller-paid shipping. This is phantom freight: a charge that has no contractual basis.
“All purchase orders with a net invoice value exceeding $10,000.00 shall be delivered FOB Destination, freight prepaid by Seller. Carrier selection is at Seller's discretion. Orders with a net invoice value under $10,000.00 ship FOB Shipping Point, freight collect by Buyer.”
If order invoice total > $10,000 and buyer deducted freight charges, the deduction is invalid. Generate dispute citing §4.2, attach signed carrier BOL showing clean dock receipt, and request full reversal of freight debit memo.
Establishes the exact calendar day threshold for cash discount qualification and defines what constitutes 'receipt' of payment.
The '2/10 Net 30' shorthand is one of the most widely used payment terms in B2B commerce, but it is also one of the most frequently abused. The term means: the buyer may deduct 2.0% of the net invoice total if their payment is received by the seller within 10 calendar days of the invoice date. If payment is not received within 10 days, the full invoice amount is due within 30 days.
The critical word in the clause is 'received.' Most buyer AP systems schedule payment to be initiated within 10 days — but initiation is not receipt. A check mailed on Day 8 may not arrive until Day 12. An ACH transfer initiated on Day 9 may not settle in the seller's bank until Day 11. The discount window is measured by the date the funds clear the seller's account, not the date the buyer releases the payment. This distinction is where the majority of unearned discount disputes originate.
A well-drafted clause will specify the evidence required to prove receipt: 'Payment receipt date shall be determined by the date funds are available in Seller's designated bank account, as evidenced by bank settlement or lockbox deposit records.' This gives the seller a concrete, auditable proof artifact — the bank clearance timestamp — to contest any discount taken after the 10-day window.
“Buyer may deduct 2.0% of the net invoice total if payment is received by Seller within ten (10) calendar days from invoice date. Invoices paid after Day 10 are payable at full net amount within thirty (30) days. Payment receipt date shall be determined by the date funds are available in Seller's designated bank account.”
If bank ACH settlement timestamp or lockbox deposit date falls on Day 11 or later, the 2.0% cash discount is disallowed. Generate dispute citing §6.1, attach electronic settlement receipt showing clearance date, and request reversal of the unearned discount amount.
Governs advance notice requirements for wholesale price increases and defines when the new rate becomes effective.
Price protection clauses exist to prevent sellers from surprising buyers with sudden price increases. A standard §3.4 requires the seller to provide written notice — typically 60 or 90 days in advance — before implementing any increase to the published wholesale price schedule. Orders placed before the effective date of the increase are invoiced at the legacy (pre-increase) rate.
The audit issue arises when the buyer's AP system does not update the internal price list after a properly noticed price change takes effect. The seller invoices at the new, legitimate rate. The buyer's ERP compares the invoice against the old rate and automatically deducts the difference. From the buyer's perspective, the seller overcharged. From the seller's perspective, the new rate was properly noticed and is contractually effective. The contract controls — and the contract says the new rate is valid.
Axiom maintains a version history of the master price schedule for each customer, timestamped with the notice date and effective date. When a pricing variance is detected, the system checks: (1) Was the seller's invoiced rate consistent with the current price schedule? (2) Was proper advance notice provided? (3) Was the order placed after the effective date? If all three are yes, the buyer's deduction is invalid and the full pricing variance is recoverable.
“Seller agrees to provide sixty (60) days prior written notice before any wholesale price increase. Purchase orders placed before the effective date of any increase shall be invoiced at the legacy rate. Orders placed on or after the effective date shall be invoiced at the new rate per the then-current Master Price Schedule.”
If seller provided ≥ 60 days notice, the price increase effective date has passed, and the order was placed after the effective date — the invoiced price is valid. Buyer's variance deduction is recoverable in full.
Defines the annual purchase volume required before the buyer earns a rebate credit, and when that credit becomes payable.
Volume rebate clauses are designed to incentivize buyer loyalty by offering a percentage credit once annual purchases exceed a defined threshold. A typical structure: 'Buyer earns a 3.0% annual growth rebate if total net purchases in the contract year exceed $5,000,000.' The rebate is calculated on the full year's purchases and is payable quarterly in arrears — meaning the buyer receives the credit after each quarter, but only if the cumulative YTD total is on track to exceed the annual threshold.
The most common dispute arises when the buyer's procurement team programs the 3.0% rebate into their AP system from the first day of the contract year and deducts it from every invoice payment — regardless of whether the $5M threshold has been reached. By mid-year, the buyer may have purchased $1.8M and deducted $54,000 in premature rebate credits. The contract says the rebate is earned at $5M; the buyer took it at $0.
A well-drafted §9.1 will include a settlement mechanism: 'Rebates are calculated and payable quarterly in arrears, subject to verification of cumulative purchase volume by Seller. Premature deductions taken before threshold verification are subject to reversal.' This gives the seller clear contractual standing to reclaim any rebate credit taken before the annual threshold is proven met.
“Buyer shall earn a volume rebate of 3.0% on aggregate net purchases provided total purchases in the contract year exceed $5,000,000.00. Rebates are calculated and payable quarterly in arrears, subject to verification of cumulative purchase volume. Premature deductions are subject to full reversal upon written notice.”
If YTD cumulative purchases are below $5,000,000 at the time of deduction, the rebate credit is premature and 100% recoverable. Generate dispute citing §9.1 with YTD purchase calculation.
Prevents administrative overhead on trivially small deduction balances by establishing a dollar floor below which disputes are not filed.
De minimis provisions exist because it costs money to file a dispute. If the cost of investigating and disputing a $12 short-pay exceeds the recovery amount, neither party benefits from the process. A standard de minimis clause establishes two thresholds: a per-line-item floor (e.g., $50) and an aggregate monthly floor (e.g., $250). Deductions below these floors are automatically written off by both parties.
The clause is straightforward, but enforcement is bilateral — it applies to the buyer as well as the seller. If a buyer takes a chargeback or debit memo for a line-item variance under $50, the de minimis provision has been violated. The buyer cannot claim a $28 freight variance when the contract says variances under $50 are automatically absorbed. The same logic applies in reverse: the seller should not dispute a $15 pricing discrepancy.
In practice, de minimis violations are individually small but collectively significant. A buyer taking 200 chargebacks per quarter at $30 each generates $6,000 in aggregate revenue leakage — all of it below the dispute threshold and all of it technically invalid. Axiom flags these aggregate violations and bundles them into a single quarterly claim for efficiency.
“Neither party shall issue chargebacks or debit memos for individual line-item variances under fifty dollars ($50.00). Aggregate monthly balances under two hundred and fifty dollars ($250.00) per vendor account shall be automatically absorbed. Violations of this provision are subject to full reversal.”
If a buyer chargeback is for a line-item variance under $50.00, the deduction itself violates the de minimis floor and is 100% recoverable. Aggregate quarterly bundles are filed as a single claim.