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Price Fluctuation Clause
Price Fluctuation Clause
A price fluctuation clause permits contract price adjustments based on market price or raw material cost changes. It mitigates price volatility risk in long-term contracts.
Key components include:
- Market index rates such as commodity prices.
- Specific raw materials like steel, oil, or copper.
- Adjustment frequency such as quarterly or annually.
Examples include:
- A construction contract adjusting steel prices quarterly.
- An oil supply agreement reevaluating prices annually.
This clause ensures adaptability to market conditions, protecting both parties from unforeseen cost shifts.