Our comments

The instability of the market situation is prompting the increasingly widespread use of adjustment clauses in contracts. They make the remuneration or price agreed by the parties more resilient to the negative effects of economic changes, which is particularly important in the case of long-term contracts.

Adjustment clause and civil law

Civil law regulations give parties a great freedom in the creating of adjustment clauses. However, this does not mean that everything is allowed. If the adjustment clause is wrongly drafted, for example granting one of the parties complete arbitrariness in setting the price, or is imprecise, it can be declared invalid. In such a case, the remuneration or price will apply according to the originally agreed values. As a consequence, there will be an obligation to reimburse funds unduly received.

What was at issue in this case?

Certainly, a court settlement was successful, as a result of which our client received a refund of the remuneration paid to the contractor, based on a defective contractual clause. The conflict concerned the remuneration paid by the trader for the supplies received. The supplier changed the price on the basis of an adjustment clause in the general terms and conditions of the contract and charged the trader new prices in the following months – because there was an adjustment clause in the general terms and conditions of the contract that granted the trader the right to unilaterally set prices.

However, this clause was incorrectly drafted, which we pointed out in our legal positions. Our client, who was in a difficult situation and could not terminate the contract, continued to pay at the new prices, but before making payment based on the new price stated that he did not agree to the price change. As it was not possible to reach an out-of-court settlement with the supplier, our client decided to go to court.

Can the price be set by one party to the contract unilaterally?

Price setting can be done by one party to the contract, but only under certain conditions. The right to change the price should include a term or condition that authorises one party to change the price and objective criteria for determining the price increase.

In our client’s case, the adjustment clause contained conditions for updating the price, but lacked an objective method for determining the new price.

How did the case proceed?

After the provider filed an objection to the payment order and an exchange of further procedural positions, before the date set for the first hearing, the law firm received a settlement proposal from the service provider. The proposal concerned the settlement of all mutual claims of the parties resulting from the parties’ previous cooperation. The client, after considering the Law Firm’s opinion on the settlement, decided to accept the proposal.

Settlement – but why?

The settlement enabled the client to avoid years of litigation and recover more than 90 per cent of the amount originally claimed.

The case demonstrates that clauses that allow for unilateral pricing, without any indication of an objective method for shaping the future price, provide a basis for successfully challenging price changes. This can lead to claims for reimbursement of monies already paid.

A correctly drafted adjustment clause is fundamental to the stability of a contract, especially in a dynamically changing economic environment, such as, for example, the recent recurring inflation in Europe.