Q&As

Which price index is most appropriate for use as a reference point in a price review clause for a manufacturing agreement? Are the Services Producer Price Index or Producer Price Indices appropriate? Are there any ways of linking price review clauses to accurately reflect changes in the price of raw materials and/or manufacturing costs?

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Published by a ÀÏ˾»úÎçÒ¹¸£Àû Commercial expert
Published on: 25 October 2021
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A price variation clause is often included in a contract where the parties wish to cover inflation risk in respect of a price contained within the contract. Such clauses typically reference the price index to which any variation in price for the goods and service provided under the contract should be calculated (and an applicable date or period against which the index is applied to the base price). See Precedent and accompanying Drafting Notes: Price variation clauses.

It is a matter of commercial negotiation which index is applied to a price variation

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Index definition
What does Index mean?

A market containing all the stocks of a particular asset. For example, the FTSE (Financial Times Stock Exchange) All Share Index contains all the public limited companies listed on the UK equity market issuing shares.

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