What Does “Milestone Payment” Mean in a Contract?
Payment tied to completion of specific project phases or achievements, rather than time-based or final delivery payment.
Detailed Explanation
Milestone payments align payment with progress, benefiting both parties. Service providers get paid as they work; clients only pay for completed work. Milestones must be clearly defined and objectively verifiable.
Poorly defined milestones lead to disputes about whether they're achieved. 'Complete Phase 2' is vague; 'Deliver approved wireframes for 10 screens' is specific.
Example in a Contract
“Payment shall be made in four equal installments: (1) upon contract execution, (2) upon completion of design phase, (3) upon completion of development phase, and (4) upon final delivery and acceptance.”
Why It Matters
Milestone structures affect your cash flow and risk. Push for deposits and early milestones to avoid doing significant work before getting paid. Ensure milestones are objectively verifiable.
Related Terms
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