This clause specifies how the exchange rate will be determined if payment is made in a foreign currency. It might say "the rate on the payment date," "the rate on the invoice date," or "a fixed rate agreed today." Exchange rates move constantly, sometimes by 5-10% in weeks. If the clause says you're paid at "the rate on payment date" and the currency weakens before payment arrives, you receive less in your home currency than expected. This clause directly affects how much money you actually receive, even if the contract amount stays the same.
Always push for a fixed exchange rate locked in on a specific date (usually the contract date or invoice date), not the payment date—this removes uncertainty. If the other party won't agree to a fixed rate, insist on a rate "no worse than" a specific benchmark (like the mid-market rate on a named date). For payments more than 30 days away, get the right to use a forward contract (a financial tool that locks in future exchange rates) at your cost, so you control the risk. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause specifies how the exchange rate will be determined if payment is made in a foreign currency.
Why should I care about this clause?
It might say "the rate on the payment date," "the rate on the invoice date," or "a fixed rate agreed today." Exchange rates move constantly, sometimes by 5-10% in weeks.
What are my options?
If the clause says you're paid at "the rate on payment date" and the currency weakens before payment arrives, you receive less in your home currency than expected.
How does this affect small businesses?
This clause directly affects how much money you actually receive, even if the contract amount stays the same.