Legal Mechanisms for Adapting Contracts to Changing Economic Conditions in Professional Dealings

• Published in: Wroclaw review of law, administration & economics administration & economics, 2022-06, Vol.11 (2), p.48-68
• Main Author: Szarszoń, Karolina
• Format: Article
• Language: English
• Subjects: Article 439 of Public Procurement Law Act; clause; Currency; Economic conditions; indexation clauses; Prices; principle of freedom of contract; Principles; professional trade; Purchasing power; rebus sic stantibus clause; valorisation
• ISSN: 2084-1264; 2084-1264
• DOI: 10.2478/wrlae-2021-0017

In accordance with the principle of freedom of contract, expressed in Article 353 of the Civil Code, the parties may shape the legal relationship at their own discretion, inter alia, by including valorisation clauses. Many years of market stabilisation, especially the low inflation rate, led to almost unreflective contracting in business. A number of contracts concluded in recent years do not contain any mechanisms that would allow a change of remuneration due to the change of economic conditions, including in particular, increase of prices. Currently, due to the unstable economic situation and constantly rising inflation, indexation clauses should be widely used to protect parties’ interests. This article focuses on such clauses and the options available to the contracting parties in the absence of incorporation of such reservations in contract. The first part of the article discusses the issue of the indexation clause itself, followed by the issue of protecting the parties from potential losses caused by uncertainty of trade. The following part of article will focus on the secondary action needed to mitigate losses caused by market instability and lack of prior inclusion of indexation clauses in the concluded contract.