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Contracts

Jun. 24, 2021

Inflation and forward contracts: time to dust off the old playbooks

When prices increase at constant and predictable rates, forward commitments made today will match economic conditions when performance is due. When prices increase suddenly and unexpectedly, forward contracts set at fixed prices might leave the buyer with a windfall and the seller with a corresponding impairment.

Cody Brittain

Structure Law Group, LLP

Cody specializes in business litigation.

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As inflation worries dominate headlines, commercial parties and their counsel should dust off their 1970s-era playbooks.

When prices increase at constant and predictable rates, forward commitments made today will match economic conditions when performance is due. When prices increase suddenly and unexpectedly, forward contracts set at fixed prices might leave the buyer with a windfall and the seller with a corresponding impairment. ...

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