Price Indexation Clause template clause

    Updated: 22 March 2026

    Please note: these example clauses are intended as a starting point, not as legal advice. Always adapt the text to your specific situation and have important contracts reviewed by a legal professional.

    Clause text

    Article [X] - Price Indexation

    1. The fees set out in Schedule [Y] ("Base Fees") shall be subject to annual adjustment in accordance with this Article, commencing on the first anniversary of the Commencement Date and on each anniversary thereafter ("Adjustment Date").

    2. On each Adjustment Date, the Base Fees shall be adjusted by applying the following formula:
    Adjusted Fee = Base Fee x (CPI_new / CPI_base)
    where:
    - "CPI_new" is the Consumer Price Index published by [e.g. the Office for National Statistics / Bureau of Labor Statistics] for the month falling [3 months] before the relevant Adjustment Date;
    - "CPI_base" is the Consumer Price Index for the corresponding month in the preceding year.

    3. The annual price adjustment shall be subject to:
    (a) a maximum increase of [e.g. 5]% per Adjustment Date ("Cap"); and
    (b) a minimum adjustment of [e.g. 0]% per Adjustment Date ("Floor"), meaning that fees shall not decrease below the Base Fee as last adjusted.

    4. The Supplier shall notify the Buyer in writing of any price adjustment at least [e.g. 60 days] before the relevant Adjustment Date, specifying the applicable CPI figures and the calculation applied.

    5. If the Buyer disputes the calculation, it shall notify the Supplier in writing within [e.g. 15 business days] of receipt of the adjustment notice. The Parties shall resolve the dispute in accordance with the dispute resolution procedure set out in Article [Z]. Pending resolution, the Buyer shall pay the undisputed portion of the adjusted fees.

    6. If the relevant Consumer Price Index is discontinued or materially revised, the Parties shall negotiate in good faith to agree upon a replacement index that most closely reflects the original index.

    What does this clause mean?

    A price indexation clause ties contract pricing to an external economic indicator, most commonly a consumer price index (CPI). This protects the supplier against inflation eroding the real value of its fees, while giving the buyer predictable, formula-based price adjustments instead of arbitrary increases.

    The formula in this template compares the CPI at two points in time to calculate the percentage change, then applies that change to the contract fees. The cap and floor provide guardrails: the cap prevents extreme increases in periods of high inflation, while the floor prevents the supplier from having to reduce prices during deflationary periods.

    Tracking indexation adjustments correctly is a common challenge. CIPS research shows that 80% of invoices do not match contract terms, and indexation errors are a frequent cause. When a contract portfolio includes dozens of agreements with different adjustment dates and reference periods, manual tracking becomes unreliable. A contract management system that calculates and flags upcoming indexation dates helps ensure invoices reflect the correct adjusted amounts.

    When should you use this clause?

    Price indexation clauses are standard in long-term contracts where the parties expect prices to change over the contract period. They appear frequently in facilities management, cleaning services, catering, IT outsourcing, and construction framework agreements.

    The choice of index matters. A general CPI works for most service contracts, but industry-specific indices (such as construction cost indices or energy price indices) may be more appropriate for specialised contracts. Make sure the chosen index is published regularly by a reputable, independent source.

    For organisations managing many contracts, indexation clauses require ongoing attention. According to World Commerce & Contracting, 9.2% of annual revenue is lost to poor contract management, and incorrectly applied price adjustments, whether paying too much as a buyer or invoicing too little as a supplier, are a preventable contributor to that figure. Centralised contract tracking with automated indexation alerts reduces this risk.

    Customize these elements

    • 1Select the CPI index published by the relevant national statistics office for the contract jurisdiction
    • 2Set the cap and floor percentages based on historical inflation ranges and commercial risk appetite
    • 3Define the reference period clearly (e.g. "3 months before the Adjustment Date") to avoid ambiguity
    • 4Specify a fallback mechanism if the chosen index is discontinued or methodology changes
    • 5Consider whether indexation should apply to all fees or only to specific cost components (e.g. labour costs)

    Sources

    Manage all your contract deadlines automatically

    Tracking Contracts alerts you well before every notice period. No spreadsheets, no missed renewals.

    Start free month