IACCM Contract Management Forum

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2017-08-14 07:41:12

Exchange Rate


What are the best contractual strategies to protect against exchange rate loss? Are there any clauses that can mitigate exchange rate loss, especially in volatile markets such as in APAC/MEA?

 •  Schweitzer Engineering Laboratories, Inc.  •   2017-08-23 21:11:09
There are a couple of relatively simple clauses which mitigate currency risk, such as:

If the ratio between ___________(local currency) and USD, based on 1 USD equaling X _______(local currency), varies by more than ___%, the Price (rent paid in X ) shall be automatically adjusted to maintain the original ratio of X______ to USD, which existed on the date this Agreement was signed


The parties agree that:

1) the contractual price is based on an identified fixed exchange rate between your currency, X, and the second currency, Y, (called the 'base rate'), and that
2) if the exchange rate on the actual date of payment differs by more than x % from the base rate, then
3) the contract price shall be adjusted accordingly.

Good luck.
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