Legal Definitions - price-renegotiation clause

A price-renegotiation clause is a specific provision within a contract that allows the parties involved to discuss and potentially modify the agreed-upon price for goods, services, or other contractual obligations. This adjustment can be initiated either at predetermined times or when one of the parties decides to invoke the clause, providing flexibility to adapt pricing to changing circumstances over the life of the agreement.

Here are some examples:

• Imagine a five-year contract between a coffee bean supplier and a large coffee shop chain. Due to unpredictable weather patterns and global market shifts, the cost of raw coffee beans can fluctuate wildly. To account for this, their contract includes a price-renegotiation clause stating that either party can request a review of the per-pound price every 18 months, or if the global market price for coffee beans changes by more than 15% in any six-month period. This allows them to adjust the price to reflect current market realities, ensuring fairness for both the supplier facing increased costs and the chain wanting competitive pricing.

• Consider a software development company hired by a startup to build a complex mobile application over two years. The initial project scope and associated costs are estimated at the outset. However, the contract contains a price-renegotiation clause that permits a re-evaluation of the development fees after the first year, or if the startup decides to introduce significant new features that were not part of the original plan. This clause ensures that if the project's complexity or scope expands unexpectedly, the development company can be fairly compensated for the additional work, or the startup can adjust its budget accordingly.

• A large manufacturing company enters into a long-term agreement with a logistics provider to manage all its shipping and warehousing needs for seven years. Given the potential for fluctuating fuel prices, labor costs, and evolving regulatory requirements in the transportation industry, their contract includes a price-renegotiation clause. This clause specifies that the service fees can be reviewed and potentially adjusted every two years, or if there's a substantial, unforeseen increase in fuel costs (e.g., a 25% rise over a six-month period). This mechanism helps both parties manage financial risks and ensures the pricing remains viable and equitable throughout the extended service period.