Contracts in crisis: pricing challenges due to global tensions

Escalating attacks on energy infrastructure across the Middle East are driving renewed volatility in global resource markets. These fluctuations are already affecting pricing across a wide range of sectors, placing pressure on operational budgets and commercial commitments for businesses of all sizes.

Contractual considerations

The fluctuations impacting contractual pricing mechanisms should be assessed from both the supplier perspective (enforcing the price increases), and the customer perspective (pushback on unilateral modifications of contracts).

As a starting point, Belgian mandatory B2B-law establishes the general (rebuttable) presumption that unilateral modifications to a contract are unlawful. However, the interpretation of any such clauses depends heavily on the broader contractual framework in place between the parties.

Hardship might open the door to renegotiation of contractual obligations when unforeseen circumstances come into play which create an imbalance between the rights and obligations of the parties. It should however be assessed whether a (modulated) hardship clause has been included in the contract (stipulating different modalities, constraints or explicitly excluding hardship) and/or whether parties should rely on the default rules taken up in the Belgian Civil Code.

Force majeure raises the question whether the performance of certain contractual obligations is excused by unforeseen circumstances that render the obligations (absolutely) impossible. Here too, it should be assessed whether a contractual force majeure clause might be invoked in this context, as the default rules of the Belgian Civil Code on force majeure do not necessarily support (unilateral) price increases.

At the same time, indexation clauses must comply with mandatory legislation which entails several limitations. Where those restrictions apply, such clauses risk being rendered unenforceable at the very moment they are needed most.

It should also be borne in mind that your contracts may also be subject to foreign law and/or international treaties/conventions, such as the Vienna Convention on the International Sale of Goods.

A sound response to the current crisis therefore begins with a comprehensive review of all your supplier and customer contracts: which law governs them, and do they contain hardship, force majeure, indexation, or other relevant clauses?  Only once that picture is clear can the threats and opportunities of price increases be properly assessed.

How we can support you

Recent global developments have brought into sharp focus a set of recurring pressure points for companies across all industries: pricing mechanisms, renegotiation pathways, and the (re-)allocation of commercial risks. The contractual framework between the parties may, however, create both room for manoeuvre and constraints when it comes to enforcing particular (necessary) pricing mechanisms.

If you would like to assess the resilience of your contracts, or need support in navigating or renegotiating them, we can assist on both the contractual and strategic fronts.

The legal AI systems in which we have invested enable us to carry out a comprehensive screening of your contractual data in under 48 hours, even where this involves hundreds or thousands of contracts.