1.  In respect of existing business-to-business (B2B) agreements that do not contain an explicit price adjustment clause:
    1. a. Is the supplier permitted to unilaterally increase prices (or does it have other rights regarding price increases)? If so, to what extent?
    2. b. Do (extreme) price increases give the customer the right to terminate the agreement? If so, are there any specific rules or regulations to comply with?
  2.  In respect of future B2B agreements:
    1. a. Is it permissible to include an explicit price adjustment clause in the agreement? If so, what price adjustment clauses typically exist in your jurisdiction?
    2. b. What legal issues need to be considered (if any) to ensure that the price adjustment clause is enforceable? Is there any key legislation or case law that parties should be aware of regarding enforceability of price adjustment clauses in your jurisdiction?
    3. c. Are there any other issues that parties should consider when formulating a price adjustment clause (e.g. any sector-specific regulation)?
  3.  Do any additional considerations or rules apply to the inclusion of price adjustment clauses in business-to-consumer (B2C) agreements?

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1. In respect of existing business-to-business (B2B) agreements that do not contain an explicit price adjustment clause:

a. Is the supplier permitted to unilaterally increase prices (or does it have other rights regarding price increases)? If so, to what extent?

Generally, the supplier is not permitted to unilaterally increase prices if the agreement does not contain a price adjustment clause. 

b. Do (extreme) price increases give the customer the right to terminate the agreement? If so, are there any specific rules or regulations to comply with?

Generally, yes. Where the price has been agreed between the supplier and customer, if the supplier increases the price unilaterally, it will amount to a repudiatory breach of the agreement, which gives the customer the right to terminate the agreement. If the customer wishes to terminate the agreement, such intention should be communicated to the supplier expressly and unequivocally. The customer should avoid any conduct which may be implied as an affirmation of the agreement following the repudiation. Unless the contract provides otherwise, there are no specific rules or regulations which need to be complied with. 

2. In respect of future B2B agreements:

a. Is it permissible to include an explicit price adjustment clause in the agreement? If so, what price adjustment clauses typically exist in your jurisdiction?

Yes, it is permissible. Typically, a price adjustment clause may be included in B2B agreements to address circumstances such as an increase in the supplier’s costs, additional charges for unforeseen circumstances affecting delivery or performance of the agreement, and changes in quantities or specifications of the goods ordered.

The wording of the clause, particularly the mechanism of the price adjustment, should be clear. If the drafting of the price adjustment clause is ambiguous, the contra proferentem rule will be applicable where the unclear contract wording will be construed against the interests of the party that benefits from the rule.  

The clause should also not be unduly onerous. As a general rule, a clause that is particularly onerous or unusual will typically not be incorporated into a contract unless such clause has been fairly and reasonably brought to the other party’s attention. Although a price adjustment clause is generally not considered to be onerous or unusual, this is subject to the context and wording of the particular clause. 

c. Are there any other issues that parties should consider when formulating a price adjustment clause (e.g. any sector-specific regulation)?

Parties may consider whether competition issues are engaged where, inter alia, (i) price floors or ceilings are included in a price adjustment clause; (ii) the increase or decrease in price will affect the volume of goods being supplied to the market; and (iii) an exclusive distributor is involved.  

Consideration should also be given to force majeure clauses which may also be applicable depending on the scope of such clause. 

3. Do any additional considerations or rules apply to the inclusion of price adjustment clauses in business-to-consumer (B2C) agreements?

In addition to the principles and issues set out above for B2B agreements, if the price adjustment clause is incorporated into a B2C agreement, such clause will also be subject to statutory protection for consumers such as the Unconscionable Contracts Ordinance (Cap. 458) (“UCO”). If the court determines that the clause is unconscionable, the clause may be void or rewritten by the Court. When assessing whether the price adjustment clause is unconscionable under the UCO, the court would consider various factors set out in section 6 of UCO (e.g. the relative strengths of the bargaining positions of the customer and supplier, any undue influence or pressure was exerted on the customer, whether the customer was able to understand the relevant agreements). 

To prevent the terms from being deemed unconscionable under the common law and/or the UCO, an opt-out mechanism may be included for customers (i.e. the possibility for the customer to opt out of the contract if he/she does not agree with the change in the contract) in the case of significant price changes.