The document outlines the price review provision in long-term contracts, emphasizing the need to balance interests of buyers and sellers while adapting to market changes and ensuring fairness. It discusses hardship principles under civil, US, and English law, detailing triggers, mechanisms, and legal remedies related to unforeseen events that affect contract execution. Key elements to include in contracts are identified, such as price revision triggers and dispute resolution processes.

1. PRICE REVIEW Provision
Sampe L. Purba

2. 9 Okt 2024 Sampe Purba - PRICE REVIEW Provision 2
Price Review - Philosophy
•to balance the interests of both buyers
and sellers in long term contract, like
contracts 10 years or more
•Contract price may periodically adjusted
to reflect changes in market conditions,
cost structures and the economic
environment.

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Price Review Philosophy
1. Mitigating Long Term Risk
 Market Changes
 Inflation and Cost fluctuation
2. Ensuring Fairness and Equitability
 Fair market value
 Indexation and market reference
3. Avoiding disputes
 Dispute resolution
Transparency and Predictability

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Hardship
•  unforeseen event that alters the Contract’s
equilibrium, that excessively burdensome for one party
• Key aspect of hardship
 Unforeseeability
 Excessive burden
 Fundamental Change in Equilibrium
Good faith negotiation
Legal remedies

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Example of Hardship
• Economic Hardship: A sudden and drastic increase in the cost
of raw materials, which makes it unfeasible for a supplier to
deliver goods at the agreed-upon price.
• Regulatory Hardship: New government regulations or tariffs
that significantly increase the cost of compliance, making it
difficult for one party to meet its obligations without incurring
losses.
• Environmental or Natural Disasters: Events like earthquakes
or floods that disrupt supply chains or production facilities,
causing delays or increased costs.

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Concept of Hardship under Civil Law
 Rebus sic stantibus
 the contracts are binding as long as the circumstances remain the
same as at the time of the agreement
 often governed explicitly under the civil code
 Legal Provision
- In France Civil Code art 1195, In Germany section 313 , a party may
allow to renegotiate
 Court involvement
Recognizes and governs hardship explicitly, often allowing courts to
modify or terminate contracts to reflect changed circumstances

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Hardship under US Law
 Doctrine of “impracticability” and “Frustration of Purpose”
 Impracticability (Uniform Commercial Code 2-615) ,
excessively difficult or costly, ant the non-occurrence of the
event. I excuses a party from performing a contract
Frustration of Purpose making performance of the contract
meaningless or without value
Court involvement  Addresses similar issues through
impracticability and frustration of purpose, but courts are
generally cautious in excusing or modifying contractual
obligations.

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Hardship under English Law
More stringent than US law. Frustration is considered by law
narrowly
As per English law, if a contract is frustrated, it is
automatically terminated, and the parties are discharged
from their obligations
Doctrine Pacta sunt servanda is stronger than hardship
Court involvement: Very restrictive, primarily using the
doctrine of frustration, which leads to termination rather
than modification, with no general recognition of hardship as
a basis for changing contract terms.

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The Common Features to be explicitly put in
Contract :
• The trigger for price revision
• The mechanism for price revision
• Dispute resolution
• Application of the revised price  going forward or
retrospective
• Frequency of application
• Excluded rights of application

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References
•Peter Roberts https://www.amazon.com/Gas-LNG
-Sales-Transportation-Agreements/dp/041411129
X
•Chatbot. AI generated sources
•https://DONDE-LEVY-in-FREEMAN-LEVY-Eds-G
as-LNG-Price-Arbitrations-2020-The-Arbitrators-R
ole-pp.-131-141.pdf
•Sampe Purba –
https://www.slideshare.net/sampepurba

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