Managing price evolution in long-term contracts
Objective: Implement effective price revision mechanisms and understand when hardship (Art. 1195) may be invoked.
In multi-year MSA and MSPA agreements, price revision mechanisms are essential to maintain the economic balance of the contract.
Legal sources
- Art. 1195 C. civ. - Hardship (revision for unforeseeable change of circumstances)
- Art. L112-1 C. mon. fin. - Monetary indexation (prohibition of indexation on the minimum wage or general price level, with exceptions)
- INSEE - Indices and time series - Reference indices for revision formulae
📊 Indexation clauses
For long-term contracts (MSA of 3+ years), periodic price revision mechanisms are essential to absorb inflation and cost variations.
Standard formula:
Where I = relevant INSEE index (raw materials, wage costs, etc.)
Common indices: CPI, ICT (wholesale and industrial trade), Syntec (intellectual services), construction indices, transport indices.
Caution: Indexation on the minimum wage (SMIC) or the general price level is prohibited by Art. L112-1 of the French Monetary and Financial Code (with legal exceptions).
🔄 Hardship clause (Art. 1195)
A major 2016 innovation! If an unforeseeable change makes performance excessively onerous (but not impossible):
- The affected party requests renegotiation
- Good faith negotiation during the agreed period
- If negotiation fails: termination by mutual agreement or referral to the court for adaptation or termination
Note: Article 1195 is a default rule - it can be contractually excluded. Always check whether the contract excludes hardship!
Practical case - Revision in a multi-year MSA
A buyer signs a 4-year MSA for IT services. The rate schedule is indexed to the Syntec index. In year 3, the index increases by 12% due to the tech talent shortage.
- ✅ The indexation clause applies automatically: the supplier applies the formula P₁ = P₀ × (Syntec₁/Syntec₀)
- ✅ If the increase exceeds the contractual threshold (e.g., 15%), the renegotiation clause is triggered
- ⚠️ If no indexation clause exists, the supplier may invoke Art. 1195 (unless excluded)
"Prices shall be revised annually according to the following formula: P₁ = P₀ × (I₁/I₀), where I refers to the Syntec index published by INSEE. In the event of an index variation exceeding [X]% over a twelve (12) month period, either Party may request a price renegotiation. The Parties agree that Article 1195 of the French Civil Code shall apply to this Contract."