Automatic Price Increases in Contracts: What You Need to Know

Have you ever opened an invoice and spotted a higher price than expected – without any advance warning or discussion? If so, you’ve likely encountered an automatic price-increase clause. It happened to me today: an invoice that has been the same for a year, was suddenly higher without notice. After checking the contract I realized that the price increase was indeed specifically agreed last year – linked to inflation. I decided to write this article ‘Automatic Price Increases in Contracts: What You Need to Know’ to explain where these price increases are legal (and where they are not).

Although such clauses can be perfectly legitimate – often used to keep contracts aligned with inflation or rising costs – they can also catch you off guard if they’re vague or hidden in the contract or terms & conditions.

Below, you will find an overview of why automatic price increases matter, how they can be fair, what to watch out for and when you’re entitled to refuse or terminate an agreement in case of a price increase. EU law and local law also help us defining if price increases are allowed so we will also touch these rules.

What We Will Cover

1. Why are Automatic Price Changes (Inflation or Otherwise) Important?
2. Considerations & Tips for Sellers
3. Considerations & Tips for Buyers
4. Clauses That Aren’t Allowed
5. What is Allowed?
6. Contract Termination Possibilities
7. Conclusion & How We Can Help

Each section offers practical insights to help you draft, negotiate or review contracts that involve price adjustments, whether you’re the seller or the buyer.

1. Why are Automatic Price Changes (Inflation or Otherwise) Important?

Many businesses rely on automatic price-increase clauses to cover for rising operational costs. These clauses may tie directly to inflation indices or reference fluctuating raw materials, products prices (reseller scenario) and labor expenses. When drafted clearly and transparently, they benefit both parties by reducing the need for constant renegotiation.

For one of our clients that we advised, we added a clause that gave our client the right to increase prices in case of inflation. Additionally we added a clause referring to changes in the price of products they resell.

Inflation-Based Adjustments

Inflation-based increases typically reference a government-published metric – such as a Consumer Price Index (CPI) as well known internationally or another local price index (like Consumentenprijsindex in the Netherlands or Konsumentprisindex (KPI) in Sweden) or a labor-cost index. They are popular in long-term leases and service contracts because they track real-world economic shifts.

When such an automatic increase is desired in your contract, ensure the following:

• Specify the Index: Name the exact metric that is used (see example below ) and mention the relevant reference year.
• Frequency: State how often you will apply the adjustment (usually annually).
• Clear Formula: Provide an example – e.g. by way of adding a specific formula – to avoid discussions and disputes.

Other Cost Drivers

Some contracts cite rising raw material costs, currency fluctuations, prices of products or general “market conditions.”

• Define such ‘Other Costs’: Link these costs to an objective source or index (e.g., commodities exchange).
• Avoid Vagueness: Phrases like “prices may go up if we deem it necessary” often land on gray or black lists.
• Ensure Transparency: The buyer should understand exactly how you calculate each increase.

These other cost drivers are therefore more risky if they are not clearly linked to a specific index or otherwise specified. Unless you very clearly define them, it is possible that these clauses are void, meaning that they are not applicable.

2. Considerations & Tips for Sellers

Sellers want to protect (or improve) profit margins and align prices with market realities. However, it’s crucial to remain compliant with legal rules and maintain trust with customers. Below are best practices to keep your automatic price increase clauses valid and beneficial.

Remember that sudden increase in prices may also negatively impact the customer experience. When one of my clients noticed a sudden increase in their invoices without a previous message, she only had one ask: “how can we terminate this contract”?

Specify the Basis for Increase

Link the price increase to a well-recognized index (e.g. the Consumer Price Index (CPI)) or a verifiable cost driver. When referencing inflation, cite an official source (like a government agency) – see example below – and detail how you’ll apply it. Also include the relevant year (or month) you reference to when calculating the inflation.

In case of inflation wording, for example:

• In the Netherlands refer to the “Consumentenprijsindex (CPI)”, published by Statistics Netherlands (CBS). Add if relevant “op basis van het door het CBS gepubliceerde indexcijfer cao lonen, contractuele loonkosten en arbeidsloon ”,
• For Sweden refer to the ‘KPI’ (the “Konsumentprisindex,”) which is the Consumer Price Index (CPI) in Swedish
• In the UK & USA, refer to the Consumer Price Index (CPI) or another index. For the USA, e.g. the Department of Labor (see here) is a good source.

Set Reasonable Notice Periods

Include a 30-, 60-, or 90-day lead time before the new price takes effect. This notice period allows your clients to plan or opt out, reducing disputes and potential legal challenges. Such notices will also protect you against customers stating that they were not aware of the price increase.

Limit Annual Hikes

When negotiating or when inflation is too high according to customers, consider adding a cap (e.g., “no more than 5% per year”). This approach reassures customers that they won’t face unpredictable spikes.

Check Local Regulations

Familiarize yourself with the EU Directive 93/13/EEC and for the Netherlands the Dutch black & gray list rules (Book 6, sections 236–237). See below more information. Both frameworks can invalidate excessively broad or unfair clauses—such as unqualified “we can raise prices at any time” language.

3. Considerations & Tips for Buyers

Buyers often discover automatic price increases in their contracts only after an invoice arrives with unexpected charges. To avoid unpleasant surprises, it pays to review contract terms and know your rights before you sign your contracts. Professional procurement teams are usually quite trained in identifying this, but when lacking a procurement team, ensure that your team is trained in spotting these risks & considerations.

Demand Specificity

Look for explicit details about the index, formula, or basis for price increases. If the contract only says “we may adjust prices in line with inflation,” ask for clarity: which index, which month/year, and how it’s calculated?

Ask About Notice

Sellers should inform you in advance of any increase. If the contract doesn’t mention a notice period, it might be unfair or voidable. You can challenge or even refuse the change if it’s imposed without reasonable warning.

Negotiate Caps

When you see “other cost factors” included, request more information what these could be and ask to add a maximum annual increase. This helps protect you from excessive or arbitrary price jumps.

Know Your Right to Terminate

In most EU jurisdictions, including Dutch law, you can have a right to terminate your contract if a price hike violates agreed terms or lacks a transparent, objective basis.

4. What Is Allowed?

Not every price-increase clause is a red flag. Plenty of contracts contain lawful and reasonable automatic adjustments, especially when they are linked to inflation. The key lies in clarity, transparency and consumer (or buyer) protection. Here are some features of a valid and enforceable clause.

Transparent Reference to an Objective Index

The clause should name an official index, such as CPI or a published labor-cost statistic, ensuring both parties can verify the data.

One example – there are many variations – of an inflation clause could be drafted as follows:

“Seller will be entitled to adjust the Price for inflation, based upon the increase in the (Choose: Consumer Price Index / Producer Price Index / ….) published by [add exact reference] in [month] of the preceding Year compared to the same month of the Year prior.”

This is not legal advice confirming that you would be able to use this clause for your contract. Please check with us if this would work for your specific contract.

Reasonable Notice & Cancellation Option

A legally sound clause typically includes a notice period, giving the buyer time to decide whether they want to accept the new price or terminate the agreement. Courts often look favorably on this balance. This also creates clarity for both parties and reduces the chances of discussions.

Clear Limitations on Scope

Valid clauses do not allow for unrestricted price increases. Instead, they’ll specify a cap or a formula, preventing sudden, disproportionate hikes. This predictability benefits both the seller and the buyer.

Consistency with Black/Gray List Rules

If a term appears to pass the fairness test – meaning it’s neither overly vague nor unilaterally burdensome – it’s more likely to be upheld under Dutch Civil Code (Book 6) and EU Directive 93/13/EEC. The clause must show a legitimate, transparent and objective basis for price adjustments.

5. Clauses That Are Not Allowed

While many forms of price adjustment are lawful, certain clauses give sellers too much control without protection for buyers. These often appear in standard terms and conditions (T&Cs) and can be automatically struck down if challenged in court.

Black & Gray Lists (Dutch Law)

Under the law in the Netherlands, Dutch Civil Code Book 6, sections 236–237, a clause that lets a business raise the price without clear justification or notice can fall under the:

• Black list: Prohibited under Article 6:236 Dutch Civil Code (clauses always invalid).
• Gray list: Presumed unfair under Article 6:237 BW (requires proof of fairness).

This wording was added to the law due to the following Directive of the EU.

EU Directive 93/13/EEC

EU rules reinforce the same principle across EU Member States.

Basically, any clause in standard (non-negotiated) terms that allows a business to unilaterally raise the price is deemed unfair and automatically void (not applicable) unless there’s (1) a valid, transparent reason and (2) there is a right to cancel the contract.

Note that these rules have been written for consumers and – in principle (exceptions apply) – do not apply for Business to Business (B2B) contracts.

Even though these rules do not apply, the same principles are used to determine by courts whether an automatic price increase can be deemed to be unreasonable and/or unfair.

Also, for B2B contracts, article 6:233(a) of the Dutch Civil Code allows a court to invalidate standard terms that it deems “unreasonably onerous.” But unlike consumer cases, no fixed black/gray lists dictate the outcome – courts weigh the facts of each specific court case.

What You Can Do

• Clearly communicate price change conditions upfront.
• Tie changes to objective criteria (e.g., inflation or indexation).
• Send a prior notice that a price change will be implemented.

6. Contract Termination Possibilities

If a seller implements a price increase that contradicts your agreement, or if the clause itself is invalid, the buyer shoudl contact the seller and enter into negotiation if possible. In many cases (e.g. a consumer using the services of aa SaaS provider) this is not possible, and termination is often the most direct remedy. You can either refuse the price hike (by written notice) or terminate the contract, depending on the circumstances.

Rejecting the Change

If a price jump isn’t backed by an objective index, lacks proper notice, or exceeds a stated cap, you may reject the new rate. The seller must either honor the original terms or risk losing your business.

Walking Away

When a seller insists on applying an unjustified or arbitrary increase, you can terminate the contract. This step is more common in consumer transactions, but similar principles may apply in B2B settings if the clause is significantly unfair.

Legal Remedies

If you cannot resolve the issue amicably, you might consider legal action. Courts can void the offending clause, award damages, or impose injunctions against the seller. However, litigation is time-consuming and costly, so many parties settle or renegotiate before resorting to court.

Before starting legal action, first work on (re)negotiating your contract or consider mediation.

7. Conclusion & How We Can Help

Automatic price increases aren’t always problematic. When they reference a legitimate index, offer clear notice, and allow a buyer to opt out if the new price is unacceptable, they become a fair mechanism for aligning contract terms with real-world costs. Problems only arise when clauses are vague, unlimited, or unilaterally imposed, which might clash with Dutch law and/or EU Directive 93/13/EEC.

• Sellers: Draft transparent, specific clauses in compliance with black/gray list principles and EU fairness rules.
• Buyers: Demand clarity, prior notice where applicable and exercise your right to refuse or terminate if you face hidden or unjustified changes.

If you need help drafting, reviewing, or contesting an automatic price-increase clause, we can assist you. Our team stays current with both Dutch law and EU consumer protection directives, ensuring your contracts meet all legal standards.

Reach out today to Robby Reggers here to book an appointment or email lowa@amstlegal.com with your query.