Contract Clause Library
Audit rights clause
Gives one party the right to inspect the other's records — usage data, billing, security practices — under defined conditions.
An audit rights clause lets a client verify that billed hours, usage metrics, or compliance claims are accurate, without requiring ongoing real-time access. It exists to build trust in a relationship where one party is trusting the other's self-reported numbers, most commonly around time-and-materials billing or data-handling compliance.
Sample wording
Sample language (illustrative, not legal advice)
Client may, no more than once per 12-month period and on 15 business days' written notice, audit Vendor's records directly related to fees billed under this Agreement during regular business hours. Client bears the cost of the audit unless it reveals overbilling exceeding 5%, in which case Vendor bears the cost.
Red flags
- No cap on audit frequency, which can become a form of harassment or a fishing expedition
- No advance-notice requirement, allowing disruptive surprise audits
- Scope broad enough to cover records unrelated to the specific engagement
How MarginFlow reads it
This clause type is extracted mainly for its frequency cap and notice period — MarginFlow flags an audit request that arrives more often than the contract allows, or without the required notice, so it doesn't get treated as routine.
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