Legal Definitions - overage

Overage refers to an amount that exceeds what was expected, planned, or agreed upon. In legal and business contexts, it commonly has two distinct meanings:

• An excess or surplus, particularly of goods, merchandise, or funds, beyond the recorded or anticipated quantity.

• A specific type of rental payment in commercial leases, where a tenant pays a percentage of their retail sales to the landlord, in addition to a fixed base rent, once sales surpass a predetermined threshold.

Here are some examples illustrating the concept of overage:

• Example 1 (Excess Merchandise): A bookstore places an order for 200 copies of a popular new novel. When the shipment arrives and the boxes are opened, the receiving clerk counts 205 copies. The additional 5 books represent an overage, meaning more items were delivered than ordered.

  Explanation: This scenario demonstrates an overage as an excess of merchandise. The quantity received (205) is greater than the quantity expected or ordered (200).

• Example 2 (Inventory Discrepancy): During a routine stocktake at a electronics warehouse, employees physically count 1,500 units of a specific model of tablet. However, the warehouse's digital inventory management system shows only 1,490 units recorded. The difference of 10 units is an overage, indicating a surplus of physical stock compared to the system's records.

  Explanation: Here, overage refers to a surplus in inventory. The physical count exceeds the recorded amount, suggesting a discrepancy that needs investigation, perhaps due to an unrecorded delivery or data entry error.

• Example 3 (Retail Lease Payment): A coffee shop leases space in a shopping mall. Their lease agreement stipulates a fixed monthly rent of $4,000, plus an overage of 3% on all gross sales exceeding $70,000 per month. If the coffee shop generates $85,000 in sales during a particular month, they would pay the $4,000 base rent plus 3% of the $15,000 sales above the threshold ($450), for a total rent payment of $4,450.

  Explanation: In this context, overage is a variable rent component. It's the additional payment calculated as a percentage of sales that go beyond a specified breakpoint, allowing the landlord to share in the tenant's success.