Upfront payment
An upfront payment is money the customer pays before the work starts or the goods are delivered, either the full price or a share of it. It covers the supplier's setup costs and shows the customer is committed, and the contract should say whether it is refundable.
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Sample Upfront payment clauses
Section 6.01 Upfront Payment. Section 6.01 of the Agreement is hereby replaced with the following:
As payment for the rights and licenses granted to Licensee by Sutro under the Agreement, Licensee shall pay to Sutro a non-refundable, upfront payment of Twenty Five Million U.S. Dollars (USD $25,000,000.00) (“Upfront Payment”), which will be paid within [] (as defined in Section 6, below), but not later than [] (“Upfront Payment Deadline”), following execution of this Amendment by wire transfer of immediately available funds denominated in U.S. Dollars to an account designated by Sutro. Notwithstanding the foregoing, if the Licensee is subject to restrictions under Applicable Laws that prevent Licensee from making the Upfront Payment, or the closure of commercial banks, the government tax bureau, and/or the State Administration of Foreign Exchange in the People’s Republic of China prevent Licensee from making the Upfront Payment, Licensee shall provide written notice to Sutro at least [*] before the Upfront Payment Deadline, and the two Parties will then discuss an extension of the Upfront Payment Deadline in good faith. The Parties acknowledge and agree that, if Licensee fails to make the Upfront Payment as set forth above, this Amendment will immediately become null and void, and, without limiting the foregoing, Licensee will owe Sutro the amount set forth in Section 6.01 of the Agreement (as in effect prior to this Amendment) as provided for therein, and Licensee will not owe any obligations to Sutro under Section 6.01a and Section 6.02a of this Amendment, including, without limitation, the “Conditional Upfront Payment,” the “BLA Milestone Payment,” and the “Enhanced Development Milestone Event No. 4 Payment,” as those terms are defined below.
10.7.4 License Agreement Upfront Payment. Notwithstanding the terms of the Agreement, CRISPR will reimburse Vertex for []% of the License Agreement Upfront Payment within [] days after receipt by CRISPR of an invoice for such payment from Vertex. For the avoidance of doubt, (i) the License Agreement Upfront Payment shall be excluded from the definition of Other Out-of-Pocket Costs and will not be included in the calculation of Program Expenses, the use of the Annual OPEX Cap or the determination of OPEX Overage, and (ii) CRISPR shall have no obligation to make any payment to Vertex or any Third Party with respect to the License Agreement Upfront Payment other than as expressly provided in the first sentence of this Section 10.7.4.
10.7.4 License Agreement Upfront Payment. Notwithstanding the terms of the Agreement, CRISPR will reimburse Vertex for []% of the License Agreement Upfront Payment within [] days after receipt by CRISPR of an invoice for such payment from Vertex. For the avoidance of doubt, (i) the License Agreement Upfront Payment shall be excluded from the definition of Other Out-of-Pocket Costs and will not be included in the calculation of Program Expenses, the use of the Annual OPEX Cap or the determination of OPEX Overage, and (ii) CRISPR shall have no obligation to make any payment to Vertex or any Third Party with respect to the License Agreement Upfront Payment other than as expressly provided in the first sentence of this Section 10.7.4. 10.7.5 All Other Payments Under the License Agreement. Vertex payments under Article [] of the License Agreement other than the License Agreement Upfront Payment (including the base annual fees, the License Agreement Contingent Upfront Payment and any potential additional annual fees pursuant to Section [] of the License Agreement) shall be included in the definition of [] and, to the extent applicable, will be used in the calculation and use of the [] and the calculation of the [***].
Source
LianBio- Upfront Payment. Section 6.1(a) of the License Agreement is hereby amended and replaced in its entirety as follows:
Upfront Payment. Subject to the terms and conditions of this Agreement, Licensee will pay Company a non-refundable, non-creditable, and not subject to set-off payment in the amount of [], which upfront payment will be due and payable to Company upon the earlier to occur of (i) within [] following the consummation of the [] preferred equity financing of LianBio after the Effective Date, in a single transaction or series of related transactions, which raises gross proceeds to LianBio of at least [], and (ii) []. Licensee shall promptly notify Company of the occurrence of the consummation of [] such financing.
Source
IceCure Medical Ltd.UPFRONT PAYMENT
3.1 First Upfront Payment. In consideration for the exclusive distribution appointment under Section 2.1, Terumo shall pay to IceCure, an upfront payment of one hundred fifty thousand U.S. dollars (US$150,000) (“First Upfront Payment”). Terumo shall pay to IceCure First Upfront Payment on the later date between (i) thirty (30) days from the receipt of a valid tax invoice to be issued on the Effective Date ; (ii) fourteen (14) days from the filing of the termination letter of Asia Actual’s Importation License of the Products to Thai FDA and providing the confirmation document of such submission to Terumo (“Due Date of First Upfront Payment”); provided, however, that the First Upfront Payment will be deemed to have been made in time if Terumo has instructed the paying bank to make such payment to IceCure not later than three (3) Business Days before the Due Date of Upfront Payment and such payment is completed within three (3) Business Days after the Due Date of Upfront Payment.
3.2 Second Upfront Payment. In further consideration for the exclusive distribution appointment under Section 2.1, Terumo shall pay to IceCure the Second Upfront Payment within thirty (30) days after receiving the invoice from IceCure on May 1, 2021 and provided that Asia Actual has already filed the termination letter of Asia Actual’s Importation License of the Products to Thai FDA before such date, a payment of one hundred fifty thousand U.S. dollars (US$150,000) (“Second Upfront Payment”).
3.3 Third Upfront Payment. In further consideration for the exclusive distribution appointment under Section 2.1, Terumo shall pay to IceCure within thirty (30) days after receiving the invoice from IceCure on May 1, 2022, a payment of one hundred fifty thousand U.S. dollars (US$150,000) (“Third Upfront Payment”). Notwithstanding the above, in the event that Terumo have not purchase the Minimum Purchase Amount (MPA), as defined in Exhibit 6.4, on the first fiscal year - ending 31 March 2022, and because of such failure IceCure terminates Terumo’s exclusive right to distribute the Products as set forth in Section C to Exhibit 6.4, the Third Upfront Payment would not be required to be paid by Terumo. However, if IceCure invoices for the payment of Third Upfront Payment to Terumo, IceCure shall waive all of its right to terminate the Exclusivity Term from the cause that Terumo does not purchase to reach the MPA on the first fiscal year. For the removal of doubt, the abovementioned exclusion will not derogate IceCure’s rights to terminate the exclusivity right if Terumo shall not purchase the Minimum Purchase Amount (MPA), as defined in Exhibit 6.4, for any other fiscal year following the first fiscal year - ending 31 March 2022.
Bicycle will receive a $30 million upfront payment. The upfront payment and potential discovery, development, regulatory and commercial-based milestone payments could total up to $1.7 billion.
As partial consideration for the rights granted to Audentes under the Option Agreement, Audentes will pay the Issuer a one-time payment in the amount of $20.0 million (the “Upfront Payment”) within 30 days after receipt of an invoice for such payment, which invoice will be delivered by the Issuer on or after the Effective Date. Audentes or any of its affiliates have the right, in its or their discretion and upon written notice to the Issuer, to offset the amount of the Upfront Payment (in whole or in part, until the full amount of the Upfront Payment has been offset) against (i) any payment(s) owed to the Issuer or any of its affiliates (or to any third party on behalf of the Issuer) under or in connection with any license agreement entered into with respect to any GAN Product or Rett Product, including, any upfront payment, milestone payment or royalties owed to the Issuer or any of its affiliates (or to any third party on behalf of the Issuer) under or in connection with any such license agreement or (ii) any amount owed to the Issuer or any of its affiliates in connection with a Change of Control transaction with Audentes or any of its affiliates. As further consideration for the rights granted to Audentes under the Option Agreement, the Issuer and Audentes also entered into the Securities Purchase Agreement.
Zealand Pharma A/S (Nasdaq: ZEAL) (CVR-no. 20045078,) a biotechnology company focused on the discovery, development and commercialization of innovative peptide-based medicines, today announced a financing agreement with Oberland Capital Management LLC (“Oberland Capital”). The agreement includes an upfront payment of $100 million in exchange for a 7-year, interest-only secured note (the “Secured Note”).
- Conditions Subsequent. No later than October 1, 2023 (the “Upfront Payment Deadline”), the Company shall pay to the Purchasers, or the Designated Agent for the benefit of the Purchasers an amount of the Outstanding Balance of the Notes equal to $1,000,000 (the “Upfront Payment”). Failure to pay the Upfront Payment by the Upfront Payment Deadline shall constitute an immediate Event of Default under the Purchase Agreement pursuant to Section 9.1(a)(i) of the Purchase Agreement.
Pursuant to the Product Rights Agreement, Alimera has paid to the Company an upfront payment of $75 million (the “Upfront Payment”). Alimera paid a portion of the Upfront Payment directly to First Citizens BancShares, Inc. (“First Citizens”) as successor to Silicon Valley Bank (“SVB”) to enable the release of any and all liens that First Citizens may have on the Transferred Assets. Alimera will also make four quarterly guaranteed payments to the Company totaling $7.5 million during 2024 (“Guaranteed Payments”). Alimera will also pay royalties to the Company from 2025 to 2028 at a percentage of low-to-mid double digits of Alimera’s annual U.S. net sales of certain products (including YUTIQ®) in excess of certain thresholds, beginning at $70 million in 2025, increasing annually thereafter (”Royalties”). Upon Alimera’s payment of the Upfront Payment and the Guaranteed Payments, the licenses and rights granted to Alimera will automatically become perpetual and irrevocable.
Arrowhead Common Stock, and four milestone payments totaling $70.0 million. Under the terms of the Company’s agreements with Amgen, the Company has received $35.0 million in upfront payments, $21.5 million in the form of an equity investment by Amgen in the Company’s Common Stock and $30.0 million in milestone payments. The Takeda License Agreement resulted in a $300.0 million upfront payment, and the Horizon License Agreement resulted in a $40.0 million upfront payment. Finally, the GSK License Agreement resulted in an upfront payment of $120.0 million, which was received in January 2022. The Company had $86.4 million of cash and cash equivalents, $122.6 million of marketable securities, $192.9 million in short-term investments, $201.6 million of long term investments and $703.6 million of total assets as of March 31, 2022, as compared to $184.4 million of cash and cash equivalents, $126.7 million of marketable securities, $56.6 million in short-term investments, $245.6 million of long term investments and $710.1 million of total assets as of September 30, 2021. Based upon the Company’s current cash and investment resources and operating plan, the Company expects to have sufficient liquidity to fund operations for at least the next twelve months.
FINANCING THE TRANSACTION
The early deposit portion of the Upfront Payment will be made on closing, with the balance of the Upfront Payment to be paid over the construction of the Santo Domingo project. At December 31, 2020, the Company had approximately US$193 million of cash on hand and approximately US$1.8 billion of remaining capacity under the Company’s US$2 billion revolving credit facility. With operating cash flow in 2020 of approximately US$765 million, the Company has ample capacity to service any additional debt resulting from this transaction, especially given the low interest rate and flexible nature of the covenants under the Company’s revolving credit facility.
“4.2Certain Additional Consideration. Century shall pay CDI the following:
(a)[] percent ([]%) of the $100 million total upfront payment received by Century under the BMS Collaboration Agreement, payable within [***] days after receipt of such upfront payment by Century, it being understood that a payment for issuance of Century’s common stock is not considered an upfront payment;
What is an upfront payment?
An upfront payment is money paid at the start of a deal, before the work is done or the goods are delivered. To pay upfront means to pay in advance: either the whole price, or a share of it, with the rest due later. A designer asking for 50% before starting, a contractor asking for a deposit before ordering materials and a software vendor billing a year’s subscription in advance are all asking for an upfront payment.
For the supplier, it covers early costs and filters out customers who are not serious. For the customer, it is a risk: they pay before they see results, so the contract should say what the payment covers and when it is refunded.
Upfront payment vs. deposit vs. down payment vs. retainer
| Term | What it is | Typical use |
|---|---|---|
| Upfront payment | Any payment made before delivery, full or partial | Services, custom orders, subscriptions |
| Advance payment | Same as an upfront payment, the more formal term | Construction, supply and EPC contracts |
| Deposit | A partial upfront payment that secures a booking or order, sometimes refundable | Events, rentals, home improvement |
| Down payment | The part of a purchase price paid upfront, with the rest financed | Homes, cars, equipment |
| Retainer | An upfront amount held against future fees, or a regular fee for availability | Lawyers, consultants, agencies |
How much should you ask for upfront?
- Small creative or freelance projects: for example, half upfront and half on delivery.
- Larger service projects: a smaller share upfront, then milestone payments for the rest.
- Custom goods: enough to cover materials you cannot resell.
- Subscriptions and memberships: the full period upfront, monthly or yearly.
Check local rules before setting a deposit for consumers. In California, for example, a home improvement contractor may ask for a down payment of no more than USD 1,000 or 10% of the contract price, whichever is less (Business and Professions Code § 7159.5).
Upfront payment wording examples
- On a quote: “A 50% upfront payment is due on acceptance of this quote. Work starts once it is received.”
- In an email: “To book your project start date, we ask for an upfront payment of 30% of the project fee. The balance is due on delivery.”
- On an invoice: “Upfront payment (30% of USD 12,000): USD 3,600. Payable before work begins.”
- Non-refundable: “The upfront payment covers setup costs and is non-refundable once work has started.”
- Refundable: “If we cancel the project before work starts, we will refund the upfront payment in full within 14 days.”
Upfront payment clause example
Sample clause: Upfront payment
Add this clause to a contract, send it and get it signed in fynk.
Use it in fynk for freeHow to set upfront payment terms once and reuse them
Upfront terms often vary by deal because they are typed in by hand. In fynk, the upfront percentage, due date and refund rule are fields in your templates, so every quote and contract uses the same approved wording and only the numbers change. When a customer’s draft asks you to start work before payment, AI Review checks it against your playbook and flags the missing upfront payment before you sign.
Which contracts contain an upfront payment clause?
Service and freelance agreements, construction and EPC contracts, custom manufacturing and supply contracts, event and venue bookings, software subscriptions and real estate purchases. These free templates already include one:
Free templates with this clause
Contract proposal template for software and IT servicesThe first 10% of the price is due when the statement of work is signed, before any development starts.
Use the free template
EPC agreement templateThe buyer pays an agreed percentage of the price as an advance payment within a set period after signing, followed by progress payments.
Use the free template
Construction contract templateThe owner pays a deposit when the contract is signed, credited against the stage payments and capped at any legal limit.
Use the free template
Related clauses
- Down payment A down payment clause specifies the initial, non-refundable portion of the total cost that a buyer must pay upfront to secure the purchase of a product or service. This clause outlines the amount, timing, and any conditions associated with the down payment, providing assurance to both parties involved in the transaction.
- Retainer A retainer is a fee a client pays in advance to secure a professional's services, such as a lawyer, consultant or agency. Depending on the agreement, it reserves their availability or is a prepayment that later work is billed against, and any unearned part may have to be refunded.
- Milestone payment schedule A milestone payment schedule splits the price of a project into payments that fall due when defined parts of the work are finished and accepted, for example 30% at signing, 40% at the prototype and 30% on delivery. It ties cash to progress, so the client pays for results and the supplier is not funding the whole project.
- Refundable deposit A refundable deposit is money paid in advance to secure a booking, rental, purchase or service that is returned, fully or partly, if the agreed conditions are met. The contract says when it is refunded, what can be deducted and how fast it must be paid back.
Frequently asked questions
There is no real difference. Both mean paying before delivery. Advance payment is the more formal term used in construction and supply contracts, while upfront payment is common in services and everyday use.
Advance payment, prepayment, deposit or payment in advance. Down payment is used when the rest of the price is financed, as with a house or a car.
Only if the contract says so, or if the supplier fails to deliver. Contracts usually make it refundable before work starts and non-refundable after, so state the rule in writing.
A deposit is normal, paying in full is not. Some states cap it: in California, a home improvement contractor may ask for no more than USD 1,000 or 10% of the price, whichever is less.
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