- In respect of existing business-to-business (B2B) agreements that do not contain an explicit price adjustment clause:
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In respect of future B2B agreements:
- a. Is it permissible to include an explicit price adjustment clause in the agreement? If so, what price adjustment clauses typically exist in your jurisdiction?
- b. What legal issues need to be considered (if any) to ensure that the price adjustment clause is enforceable? Is there any key legislation or case law that parties should be aware of regarding enforceability of price adjustment clauses in your jurisdiction?
- c. Are there any other issues that parties should consider when formulating a price adjustment clause (e.g. any sector-specific regulation)?
- Do any additional considerations or rules apply to the inclusion of price adjustment clauses in business-to-consumer (B2C) agreements?
jurisdiction
1. In respect of existing business-to-business (B2B) agreements that do not contain an explicit price adjustment clause:
a. Is the supplier permitted to unilaterally increase prices (or does it have other rights regarding price increases)? If so, to what extent?
No. The supplier can only increase prices if the agreement provides for this possibility.
b. Do (extreme) price increases give the customer the right to terminate the agreement? If so, are there any specific rules or regulations to comply with?
Except for a few rare exceptions under Chilean law for specific agreements, extreme price increases do not give the customer the right to terminate or amend the agreement.
2. In respect of future B2B agreements:
a. Is it permissible to include an explicit price adjustment clause in the agreement? If so, what price adjustment clauses typically exist in your jurisdiction?
Yes. It is standard practice to include price adjustment clauses in agreements with a term beyond one year. Adjustments are generally based on increases to the applicable Consumer Prices Index. In more sophisticated agreements based on the supply or use of commodities, prices can be adjusted considering the variation in costs of those commodities, subject to the mechanism set forth by the parties in the agreement.
b. What legal issues need to be considered (if any) to ensure that the price adjustment clause is enforceable? Is there any key legislation or case law that parties should be aware of regarding enforceability of price adjustment clauses in your jurisdiction?
There are no special legal issues to consider for ensuring the enforceability of a legally binding price adjustment clause. However, if the price increase is justified under the agreement as a punitive remedy to a party’s breach of its obligations (i.e., “in case of breach tariffs will increase threefold...”), the punitive increase in prices cannot exceed twice the applicable base prices.
c. Are there any other issues that parties should consider when formulating a price adjustment clause (e.g. any sector-specific regulation)?
No.
3. Do any additional considerations or rules apply to the inclusion of price adjustment clauses in business-to-consumer (B2C) agreements?
Although price adjustment clauses in B2C agreements are valid, if applicable price increases are excessive or unconscionable and, therefore, abusive to consumers under consumer protection laws, such price adjustment clauses are unenforceable.
