This clause specifies which currency the payment will be made in—for example, US dollars, British pounds, or euros. This matters because exchange rates fluctuate, and if you're paid in a currency different from where you spend money, you face currency risk. If you're a UK business but get paid in US dollars, the pounds you receive depend on the dollar-to-pound exchange rate on payment day. The contract should clearly state the currency to avoid confusion and disputes about what amount was actually owed.
Negotiate to be paid in the currency of your home country or where your main costs are—this eliminates your exchange rate risk. If you must accept payment in a foreign currency, specify the exact exchange rate that will be used (locked in on a specific date) rather than leaving it floating. For large payments, consider asking for payment in multiple currencies split between your home currency and the other party's currency to share the risk. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause specifies which currency the payment will be made in—for example, US dollars, British pounds, or euros.
Why should I care about this clause?
This matters because exchange rates fluctuate, and if you're paid in a currency different from where you spend money, you face currency risk.
What are my options?
If you're a UK business but get paid in US dollars, the pounds you receive depend on the dollar-to-pound exchange rate on payment day.
How does this affect small businesses?
The contract should clearly state the currency to avoid confusion and disputes about what amount was actually owed.