Price revision

Definition

Price revision allows the parties to adjust the price after signing, either automatically on a trigger or through a structured renegotiation. Unlike pure indexation, revision often involves a review of underlying costs, market conformity or changed circumstances. A well-drafted revision clause specifies the trigger, method, frequency and what happens if the parties cannot agree.

Example

A multi-year managed-services contract is subject to a price revision at the start of year three based on a benchmarking exercise.

Why this is a business risk

A price revision clause without a clear deadlock mechanism leaves parties exposed if they cannot agree. Either the existing price continues indefinitely, which may be unacceptable to the supplier, or a dispute over price blocks contract performance. For buyers, an uncapped revision right can erode cost certainty in long-term relationships.

How to manage it

• Define the trigger for revision clearly: a specific date, a benchmark result, a cost threshold or a combination.
• Include a deadlock mechanism: if the parties cannot agree on a revised price within a defined period, specify whether the existing price continues, an expert decides or the contract terminates.
• Cap the maximum change achievable in any single revision to protect both parties from extreme outcomes.
• Set the revision date as a calendar reminder with enough lead time to prepare the benchmarking or cost analysis required.
• Document the agreed revised price in a written amendment so the version history of the contract reflects each price change.