What is a primary advantage of using price adjustment clauses in contracts?

The primary advantage of using price adjustment clauses in contracts is that they allow for reactive changes to external cost variables. When contracts include price adjustment clauses, they enable parties to accommodate fluctuations in costs due to factors like inflation, changes in material prices, or variations in labor costs. This flexibility ensures that contracts can adapt to economic realities, thus helping both parties manage their financial risks effectively.

By including such clauses, the contract can stay relevant and fair over time, reflecting current market conditions rather than locking both parties into a fixed price that may become untenable as costs change. This adaptability is particularly important in long-term contracts where costs can vary due to unforeseen circumstances or changes in the supply chain.