A contract price adjustment mechanism allows contract prices to be revised at defined intervals or upon defined triggers, such as raw material cost indices, harvest outcomes or currency movements, balancing buyer price stability with supplier exposure to volatile input costs.
In trade practice
In seasonal agricultural supply, parties typically agree an index or benchmark, such as a published commodity price series or a harvest-yield threshold, that activates a review. The clause must specify the review frequency, the data source, any cap on adjustment and the notice period. A common mistake is referencing an index without naming a fallback if that index is discontinued. Either party’s procurement or commercial team initiates the review and both must sign off any revised price in writing before the next shipment.
In a specification
The clause is written into the contract as a numbered provision stating the trigger event, the calculation method, the maximum permitted adjustment per review period and the governing data source.