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Simple English definitions for legal terms
favored-nation clause
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A quick definition of favored-nation clause:
A favored-nation clause is an agreement between two countries or parties that states they will treat each other as well as they treat any other nation that is given preferential treatment. This means that if one country gives special treatment to another country, the country with the favored-nation clause will also receive that same treatment. This clause can also be found in contracts, especially in the oil and gas industry. It is also known as a most-favored-nation clause or MFN clause.
A more thorough explanation:
A favored-nation clause is a provision in a contract or agreement between two nations or parties that requires each to treat the other as well as it treats any other nation or party that is given preferential treatment.
For example, if Country A has a trade agreement with Country B that includes a favored-nation clause, and Country B later enters into a trade agreement with Country C that provides better terms than the agreement with Country A, then Country A is entitled to receive the same better terms as Country C.
The favored-nation clause can also be found in other types of contracts, such as oil-and-gas contracts. In these cases, the clause ensures that the parties involved are treated equally in terms of pricing and other conditions.
Overall, the favored-nation clause is designed to promote fairness and equality in international trade and other types of agreements.