Rising energy bills in 2019: the time to raise prices?

Yes, in most cases you are allowed to raise your prices when your costs increase, for example due to a higher energy bill, higher purchasing costs, or inflation. For one-off sales, you are in principle free to determine your own price. If an agreement is already in place or you work with fixed terms, what is stated in the contract and in your general terms and conditions is decisive. Without a good price revision clause, you often cannot simply unilaterally increase an ongoing price.

Are you allowed to just raise your prices?

For new offers, the principle of free price setting applies. You determine your own rates, you may raise or lower prices, and you may apply different prices to different customers. If your production or purchasing costs increase, you can therefore simply incorporate this into the price you quote from now on.

It becomes more complex once an agreement is already in place. If you have agreed on a fixed price or a fixed term with a customer, you are in principle bound by it. An increased energy bill or higher purchase price does not automatically give you the right to unilaterally raise the agreed price. The terms of the contract and your general terms and conditions take precedence.

What is a price revision clause?

A price revision clause (also known as a price change clause) is a provision in your agreement or general terms and conditions that gives you the right to adjust the price during the contract term under certain conditions. Without such a clause, you usually cannot unilaterally increase a price once agreed upon during the term of the contract. With a well-designed clause, however, you can pass on increased costs, such as energy, raw materials, or levies.

What restrictions apply to price agreements?

Freedom of pricing does not mean that anything goes. There are two perspectives to keep in mind.

Agreements in the supply chain. A supplier or producer cannot dictate prices to their customers without restriction. Imposing fixed or minimum selling prices is sensitive under competition law and may not be permitted under certain circumstances. Working with non-binding recommended prices or applying a maximum price is generally handled differently. Since this depends on the specific situation and the applicable competition rules, it is advisable to have this legally reviewed on a case-by-case basis.

Agreements with your customer. If you are a producer or supplier yourself, you often voluntarily impose limitations on yourself. Distributors and customers want certainty regarding their margins and therefore request fixed prices for a specific period. In return, you count on a stable cost price yourself. If your costs rise unexpectedly, you run the risk of having to bear the higher costs yourself without the possibility of revision.

How do you draft a good price revision clause?

A workable clause takes the interests of both parties into account. For you as an entrepreneur, the goal is to be able to pass on cost increases; for your customer, it is to avoid surprises. A balanced clause often contains a combination of the following elements.

• Clear reason. Specify specifically which cost increases may lead to a price adjustment, such as energy costs, purchasing prices, raw materials, levies, or taxes.
• Fixed review dates. Agree on when you may adjust the price, for example annually, instead of at any random moment.
• Optionally, a maximum. A maximum annual increase percentage provides your customer with peace of mind and makes the clause more reasonable.
• Right of termination with limits. Sometimes grant your customer a right of termination in the event of a price increase, but build in safeguards to ensure that this right is not exercised unreasonably.
• Passing on of external levies. For cost items over which you have no control, such as levies and taxes, you may consider passing them on one-to-one without this creating a right of termination.

Please note: stricter rules regarding price change clauses apply to agreements with consumers than to business contracts. A clause deemed unreasonably burdensome towards a consumer may be invalid. Therefore, tailor the clause to the type of customer and have the text legally reviewed.

What to do in the event of a sudden rise in your energy bill?

Are you currently facing significantly higher energy costs and do you want to know if you are allowed to pass them on? Then work step by step.

1. Check your documents. Retrieve the current agreement and your general terms and conditions, and look for a price revision or indexation clause.
2. Determine the type of customer. Is it a business customer or a consumer? Stricter rules apply to consumers.
3. Follow the agreed procedure. If a revision clause is included, adhere to the agreed notice period and justify the increase with the risen costs.
4. Is a clause missing? In that case, you usually cannot unilaterally impose the increase on existing agreements, but you can agree on it in consultation or incorporate it into new quotations.

Why general terms and conditions are always custom-made

Whether you can pass on increased costs depends entirely on your documents. As a producer or supplier, you have several ways to pass on cost increases, but your general terms and conditions determine whether this is possible and under what conditions.

That makes general terms and conditions a custom-made document. When drafting them, you must constantly take into account the interests of the various parties, their mutual relationship, and the type of customer. Blindly copying someone else's terms and conditions or working with a free online template is therefore rarely a good idea: such templates often do not align with your situation and lack precisely the provisions you need when your costs mount.

Do you want to be sure that you can adjust your prices if your costs rise? Then have your general terms and conditions drafted or reviewed by a specialist, including an appropriate price revision clause. If there is a specific dispute with a customer regarding the price, you can turn to our legal assistance for entrepreneurs.

Frequently Asked Questions

Am I allowed to raise my prices due to a higher energy bill?

With new offers, yes: you are free to adjust your price to your increased costs. With ongoing agreements, it depends on what you have agreed upon. If you have agreed on a fixed price without the possibility of revision, you usually cannot increase it unilaterally.

Can I adjust an agreed price in the meantime?

Only if your agreement or general terms and conditions allow it, for example via a price revision clause. If such a provision is missing, you are in principle bound by the agreed price for the agreed duration.

What is the difference between a suggested retail price and a fixed price?

A recommended retail price is non-binding: your customer is free to deviate from it. Imposing a fixed or minimum selling price is sensitive under competition law and is not always permitted. Applying a maximum price is generally handled differently. Have this assessed on a case-by-case basis.

Does something different apply to consumers than to business customers?

Yes. Stricter rules apply to price change clauses towards consumers. A clause deemed unreasonably burdensome may be invalid. Therefore, tailor your terms and conditions to the type of customer.

What if my general terms and conditions do not contain a price revision clause?

In that case, you often cannot pass on increased costs under existing agreements and bear the risk yourself. It pays to have your terms and conditions supplemented with a suitable clause before costs escalate.

Need help with your pricing agreements or general terms and conditions?

Do you want to be able to adjust your prices if your costs rise, without legal risk? Our legal experts draft your general terms and conditions and custom contracts, with a watertight price revision clause that suits your customers.

• View our customized contracts and general terms and conditions.
• Read more about our expertise in contract law.
• Prefer to brainstorm immediately? Schedule a no-obligation introductory meeting.