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After parties enter into a contract, changed circumstance might result in one of them being dissatisfied with the price. Anticipating this, the parties could include a price adjustment mechanism in the agreement. If the mechanism is imperfect, some dissatisfaction will remain. This dissatisfaction may result in litigation with the dissatisfied party asking the court either to excuse performance or revise the contract price. For example, large changes in fuel prices since 1973 generated considerable litigation.

In this paper, I suggest a framework for analyzing price adjustment in private contracts. Contrary to most economists and lawyers, I argue that price adjustment problems have little to do with attitudes toward risk. Rather, the problems are those suggested by the "relational exchange" approach to contracts. This argument will be developed in Part II.


Business Organizations Law | Contracts | Law


Price Adjustment in Long-Term Contracts, Victor P. Goldberg, Wisconsin Law Review. Copyright 2018 by the Board of Regents of the University of Wisconsin System. Reprinted by the permission of the Wisconsin Law Review.