Price adjustment clause: moving a price after signing

Sample clause

a three year commercial cleaning contract between Northgate Cleaning and the body corporate of a mid rise office building in Perth

7. Price review 7.1 The Rates in the Rate Schedule are fixed for the first twelve (12) months from the Commencement Date. 7.2 After that period, Northgate Cleaning may adjust the Rates once in each twelve month period by giving the Client at least sixty (60) days written notice before the adjustment takes effect. 7.3 A notice under clause 7.2 must state the current Rate, the proposed Rate, the date it takes effect, and the reason for the adjustment. 7.4 A single adjustment under clause 7.2 must not increase any Rate by more than five per cent (5%). 7.5 If an adjustment takes effect, the Client may terminate this Agreement by written notice given within thirty (30) days of the notice under clause 7.2, effective on the date the new Rate would begin. The Client is liable for Services performed before that date at the previous Rates. 7.6 No adjustment applies to Services already performed or to a fixed price quoted for a specific task before the notice was given.

Sample wording, not legal advice.

Variants

What to negotiate

• The cap

  Customers want a stated ceiling on any single increase. Suppliers want room for a year when costs move sharply. The usual landing point is a cap on the routine adjustment, with a separate and narrower right to pass through a named cost that is evidenced, so an unusual year does not need a general uncapped right.

• Notice and the exit right

  The exit right is what makes a unilateral adjustment acceptable, and its length decides whether it is real. Thirty days to accept or leave, against sixty days notice of the change, is workable. A fourteen day window on a contract that takes three months to retender is an exit right on paper only.

• Work already quoted

  Suppliers sometimes forget to carve out fixed price work already quoted, and customers always notice. The clean position is that an adjustment applies only to services performed after it takes effect and never to a task already quoted at a fixed amount, which removes the most common source of a disputed first invoice after a review.

The risk of leaving it out

Without an adjustment clause the rate is fixed for the whole term, and the supplier either absorbs rising costs or starts looking for reasons to end the contract early. Customers often prefer that outcome until the third year, when the supplier is losing money on the job and service quality becomes the negotiation instead of price.

Unilateral variation and unfair terms

A right for one party to change the price at will, in a standard form contract with a consumer or small business, is one of the examples the unfair contract terms regime specifically has in view. Three features push a clause toward the safe side: the increase is limited, the customer is told before it applies, and the customer can end the contract without penalty if it does not suit. A clause with all three is a procedure. A clause with none of them is a discretion, and a discretion is what gets struck out.

Common mistakes

The clause allows an adjustment but never says when the new rate takes effect, so the first adjusted invoice is disputed. It sets a cap in percentage terms without saying whether the cap compounds year on year. It gives an exit right without saying who bears transition costs. And it says nothing about a decrease, which matters in a falling market when a customer asks why an index linked clause only ever moves one way.

Where it sits in a generated document

Price review sits next to the fee clause and refers to the rate table rather than repeating numbers, which is what keeps the two from drifting apart. A generated service agreement is classified as numbered in structure, so the review mechanism, the cap and the exit right each get their own sub number and a notice letter can cite clause 7.5 exactly. The rate table itself is generated as a table block in the same document.

Documents that carry this clause

Service agreementBeacon Systems supports Harlow Freight’s IT for an initial 24 months from 1 October 2026 at $8,400 a month plus GST, with 40 hours included and $220 an hour beyond them. Twelve numbered clauses cover the services, a four level severity table, client duties, fees with a CPI adjustment, confidentiality, privacy, IP, a liability cap, termination and a three step dispute ladder.Monthly retainer agreementA studio sells a physio practice twenty four hours a month. Almost every clause exists to answer one question that ordinary contracts duck: what happens to the hours nobody used.Rate cardA studio publishes what each role costs by hour, by day and by booked week, then explains the arithmetic between them. A day is seven billable hours inside a seven and a half hour day, and a booked week is ten per cent off five of those.

Questions people ask