Market stability is a boon to business planning, but global markets have been roiled by tremendous changes in the last year, forcing companies to reassess strategies and priorities at a dizzying pace. This rate of change goes far beyond what traditional planning models can absorb; instead, businesses are suffering through a period of ‘hypervolatily’ that requires increased agility and flexibility to survive, much less thrive, in this period of uncertainty.
One of the tools that successful companies need to lean on to survive in this period of hypervolatility is well-crafted contracts. Contracts are an essential tool for companies seeking protection amid global hypervolatility and rising geopolitical risks, offering mechanisms to manage uncertainty, address ever-changing tariffs, and respond to legal developments in both the U.S. and foreign markets.
The COVID pandemic was a harsh reminder to business owners and legal professionals around the world that market conditions can change quickly and dramatically and that contracts need to flex to accommodate these changes. Force majeure clauses were suddenly cast into the limelight as suppliers and buyers around the world dealt with the impossibility of meeting their obligations and needs in the face of government lockdowns.
Contracting for contingencies
Contracts are often structured to support multi-year relationships, rather than single transactions. As a result, they are bearing ever-increasing weight—not only as legal documents but as active strategic levers in uncertain times. Their value lies in preemptive structure and in their adaptive features, creating a framework where both parties are incentivized to communicate and be willing to revise terms according to evolving realities.
Addressing Currency Fluctuations: Currency Hedging
One of the most pronounced risks in today’s global commerce is currency volatility. When supply chains and sales contracts span multiple countries, sudden shifts in exchange rates can dramatically erode profits or, in extreme cases, turn a previously profitable deal into a loss. Modern contracts increasingly include currency hedging provisions—clauses that identify which party will bear the risk of currency movements or that mandate the use of financial instruments like forward contracts or options to stabilize costs. Recent industry reports highlight a rise in such contractual language since 2022, driven in part by recurring swings in currencies like the yen and euro. These provisions, when carefully crafted, enable both supplier and buyer to forecast earnings more reliably and agree up front on a shared risk-management approach.
Built-In Flexibility: Price Adjustment Clauses
In an era characterized by rapid cost changes, contracts must allow room to adjust pricing
transparently. Flexible price adjustment clauses, also called escalation or indexation clauses, have become standard practice in sectors from construction to technology procurement. They might tie prices to indexes such as global commodities or inflation rates, guaranteeing fair compensation for increased input costs while maintaining partnership stability. For example, an electronics manufacturer contracting with a supplier might agree to revisit pricing each quarter based on a mutually referenced copper price index. These types of mandated recalibrations based on mutually agreed-upon objective criteria keep disputes rare and relationships intact even when costs spike unexpectedly.
Strategic Review and Joint Steering Committees
More companies are also formalizing strategic meeting requirements within their contracts, mandating periodic reviews between commercial partners. These “contractual check-ins” serve as institutionalized check points to revisit assumptions, share market intelligence, and proactively address emerging issues such as tariffs, regulatory change, or unanticipated supply chain delays. Many multinational corporations are now embedding joint steering committees in their major contracts, with explicit authority to adapt terms as needed. This “best practice” forum replaces acrimonious renegotiation with a spirit of continuous improvement and shared risk, allowing both parties to pivot as circumstances dictate without triggering legal standoffs.
Delivery Flexibility in Disrupted Supply Chains
The past three years have underscored how vulnerable even the best-run logistics operations can be to unforeseen shocks—from pandemic closures to container shortages and wars (trade or actual) disrupting shipping routes. Adaptive delivery mechanisms, once considered niche, have become a contractual norm. These may include rolling delivery windows, alternative port clauses, or tiered force majeure protocols, offering multiple options if a preferred pathway fails. For instance, contracts might allow for shipment rerouting to different destinations, temporary substitutions for unavailable goods, or agreed “buffer stock” levels stored offsite. Such contractual flexibility ensures that, even if strict compliance becomes impossible, essential business flows continue and neither party is forced into costly litigation.
Leveraging Contracts Against Hypervolatility
By using contracts as living documents, companies not only protect themselves from today’s heightened risks, but also position themselves to seize emerging opportunities. Mechanisms like early termination rights, automatic renewal clauses, and renegotiation triggers foster a risk-sharing ethos. The best contracts are not simply legal shields, they are blueprints for collaboration, embedding routines of information exchange, shared forecasting tools, and escalation pathways for unresolved issues.
Legal scholars and commentators note that the most resilient firms continually invest in their internal contracting capabilities: training commercial teams to spot risk exposures, empowering procurement to negotiate flexible clauses, and using digital contract management platforms to transparently track obligations and performance in real time. Forward-thinking leaders treat the negotiation process not as a necessary evil or a one-off event, but as the foundation of a symbiotic relationship capable of weathering abrupt storms.
Conclusion: Contracts as Engines of Agility
No legal document will ever predict—and perfectly address—every future uncertainty. But by embracing flexibility in contract design, companies can absorb shocks, re-negotiate fairly, and adapt supply, pricing, and risk arrangements with less friction and delay. In a business environment where hypervolatility is the “new normal,” contracts, intelligently crafted and diligently updated, are indispensable tools for shared success.
Kirk Samson, General Counsel at Novaspect, is a Director at the International Trade Association of Greater Chicago, a Fellow at the World Commerce and Contracting Association and Co-Chair of the Chicago Bar Association’s Contracts Committee.
