Question

A previous edition of the course text stated that "contracting parties are supposed to anticipate the risk that costs may fluctuate." Should parties be given more flexibility to demand a higher price if costs go up? Explain why or why not, including considering potential ethical implications, such as the negative effect on the business due to the price jump.

Answer 1

Contracting parties need to have a feasibility of some hike every year rather than increasing the price whenever it goes up so that it will be easy for both the parties. If prices increases drastically it will be a loss for the business if the contracting parties demand more and if the prices go low it will be a loss for these parties. Hence a mutual agreement must be made which is beneficial to both the parties . This will also be ethical as everything goes by the mutual consent of both the sides rather than one side demanding the other.