Q&As

Where a business to business (B2B) contract provides for a fee to be increased annually at the supplier’s ‘prevailing rate’, is there a requirement for such rate increase to be ‘reasonable’?

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Produced in partnership with Lynne Counsell of 9 Stone Buildings
Published on LexisPSL on 21/01/2019

The following Commercial Q&A produced in partnership with Lynne Counsell of 9 Stone Buildings provides comprehensive and up to date legal information covering:

  • Where a business to business (B2B) contract provides for a fee to be increased annually at the supplier’s ‘prevailing rate’, is there a requirement for such rate increase to be ‘reasonable’?
  • B2B contracts
  • Construction of commercial contracts
  • Implied terms
  • Unilateral variation
  • Summary

Where a business to business (B2B) contract provides for a fee to be increased annually at the supplier’s ‘prevailing rate’, is there a requirement for such rate increase to be ‘reasonable’?

This Q&A deals with the situation where a business to business (B2B) contract provides for a fee to be increased annually at the supplier’s ‘prevailing rate’. The issue is whether there is a requirement for such rate increase to be ‘reasonable’.

B2B contracts

Unlike contracts between a business and a consumer, contracts between two businesses are not subject to the various statutory provisions that confer protection on consumers such as the Consumer Rights Act 2015, the Consumer Protection Act 1987 and the Consumer Protection from Unfair Trading Regulations 2008, SI 2008/1277.

The Unfair Contract Terms Act 1977 does place some restriction on terms to which businesses can agree. However, the ‘reasonableness’ test as set out in that act only applies to exclusion clauses limiting liability.

In essence, businesses are generally entitled to enter into whatever commercial agreements they agree between themselves.

Construction of commercial contracts

In analysing

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