This clause sets out how prices can change during the contract—for example, allowing increases tied to inflation, or requiring renegotiation every two years. This matters enormously because without it, you're locked into a fixed price even if costs skyrocket or plummet, which can make the deal unsustainable. For instance, a supplier might agree to £100 per unit, but if raw material costs double, they could face bankruptcy unless the contract allows price adjustment. Both UK and US law recognize that contracts can become "commercially impracticable," but courts rarely let you escape them; a clear mechanism prevents disputes and gives both parties certainty.
If you're buying, resist open-ended price increases—insist on a cap (e.g., "no more than 3% annually") and tie it to a specific index like the Consumer Price Index rather than the other party's judgment. If you're selling, don't accept a fixed price for more than 1-2 years without a review clause, or you'll absorb all inflation risk. Always specify exactly how the new price is calculated and when it takes effect; vague language like "fair market price" will lead to arguments. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause sets out how prices can change during the contract—for example, allowing increases tied to inflation, or requiring renegotiation every two years.
Why should I care about this clause?
This matters enormously because without it, you're locked into a fixed price even if costs skyrocket or plummet, which can make the deal unsustainable.
What are my options?
For instance, a supplier might agree to £100 per unit, but if raw material costs double, they could face bankruptcy unless the contract allows price adjustment.
How does this affect small businesses?
Both UK and US law recognize that contracts can become "commercially impracticable," but courts rarely let you escape them; a clear mechanism prevents disputes and gives both parties certainty.