In a licensing deal, if the licensee does not generate adequate sales to cover the minimum guarantee, what must occur?

• A. Redo the Agreement to Reflect the Lack of Sales
• B. Pay the Minimum Guarantee
• C. Not Pay if Sales Are Low
• D. Roll Over the Shortfall to the Next Year of the Agreement

Answer: (B)

In a licensing deal, a minimum guarantee sets a fixed amount the licensee must pay to the licensor regardless of how well sales perform. If sales don’t generate enough to cover that floor, the licensee still owes the minimum guarantee. The point of the guarantee is to ensure the licensor receives a base level of compensation for granting the license.

So when sales are inadequate, the required action is to pay the minimum guarantee. The other options aren’t standard unless the contract specifically provides for them; redoing the agreement isn’t automatic, declining to pay would violate the contract, and rolling over a shortfall only happens if the contract expressly allows it.