Pass on price increases? It can be done with a price review clause

The question for many entrepreneurs today is no longer whether there will be price increases but how high they will be. The war in Ukraine is creating unseen bottlenecks in the supply chain and these in turn affect all kinds of prices. A price review clause allows you to adjust the price during a current agreement and thus respond to such sudden price increases.

General terms

Many times, general terms and conditions contain clauses about the payment of the price and the provision to that effect.  The principle is clear: you cannot just unilaterally decide 'out of the blue' to change your price and thus pass on a certain cost. After all, agreements made must be respected. But what if those agreements now stipulate that an agreement already made can be revised? It is there that a price revision clause pops up in general terms and conditions.

A price change: not self-evident

Via a price revision clause, you can therefore adjust your price, but not unconditionally. After all, such a clause gives you the power to make a party decision: i.e. the explicit possibility to unilaterally change an element of the existing agreement. This possibility cannot go unrestrainedly far, which is precisely why the drafting of a valid price revision clause is not self-evident. There is all sorts of legislation and case law that limits the extent to which you can change your price.

Changing a price must first be linked to a sufficiently objective criterion, for example: new legislation or a demonstrable increase in raw material prices. In other words, you must have a valid, objective reason to shift your costs to your customers.

In addition, the validity and enforceability of your clause depends on all kinds of factors, legislation and case law. The validity of your clause under current legislation may depend on the answer to the following questions:

• In which sector does your company operate?
• Is it a fixed-term or open-ended contract?
• Does it concern an agreement B2C or B2B?
• How will the price increase be calculated?
• ...

NOMA @ your service

A prepared entrepreneur is certainly worth two in these times. The unpredictable market once again emphasises the need for an effective price revision clause in your general terms and conditions. NOMA invariably provides entrepreneurs with personalised and, above all, valid price revision clauses via its commercial package: a fixed price for the revision or drafting of your general terms and conditions, including a price revision clause. Would you like more information about this formula? Feel free to contact Larissa Blondeel.