Negotiating Price Terms Under Commodity Supply Agreements: Practical Legal Considerations
Summary
This paper discusses several issues that parties to a supply agreement should consider when negotiating the price terms under such agreements. The paper adopts a normative approach to assess the critical negotiation issues relating to price terms and how such
thorny outcomes could be mitigated. The paper highlights frequently encountered issues when negotiating such agreements, then discusses the problems that drive price changes under such contracts and the methods with which parties can counteract the effects of such changes on the parties’ expectations. Having discussed a couple of practical considerations and resolution strategies, the paper finalizes by considering how price-related disputes are resolved under supply contracts. The paper finds that there is no one-size-fits-all approach to reaching a suitable bargain; therefore, parties much be willing to explore several options when seeking to arrive at a workable supply agreement whilst conceding in some instances to gain a better deal in others.
Keywords: Negotiation, price terms, price changes, price uncertainties.