A market-out clause, also referred to as an economic-out clause, is a contractual provision that permits a purchaser to reduce the buying price of a product, such as natural gas, in the event that market conditions render it excessively costly to continue purchasing at the agreed-upon price. This clause also grants the seller the option to either accept the reduced price or terminate the contract entirely. Market-out clauses frequently pertain to rival fuels, such as fuel oil.
An economic-out clause, also referred to as a market-out clause, is a contractual provision that permits a buyer to reduce the purchase price if market circumstances render it economically unfeasible to continue purchasing at the agreed-upon price. This clause is commonly utilised in the oil and gas sector. For instance, if a natural gas pipeline purchaser has a contract to buy gas at a specific price, but the market price of gas experiences a significant decline, the economic-out clause would enable the purchaser to renegotiate the contract price to align with the new market conditions. The owner of the well would then have the choice to accept the lower price or terminate the contract. Market-out clauses can also pertain to alternative fuels like fuel oil. This implies that if the price of fuel oil experiences a substantial drop, the purchaser may have the opportunity to renegotiate the contract price for natural gas. In essence, economic-out clauses offer flexibility in contracts and allow parties to adapt to evolving market conditions.
An economic-out clause is a provision in a contract that allows one or both parties to terminate the agreement if certain economic conditions are not met.
Common triggers for an economic-out clause include significant changes in market conditions, financial distress, or unforeseen economic events that make it impractical or unprofitable for the parties to continue with the contract.
Yes, both parties can typically invoke the economic-out clause if the specified economic conditions are met. However, the specific terms and conditions of the clause may vary depending on the contract.
The enforceability of an economic-out clause depends on various factors, including the language used in the contract and the jurisdiction in which the dispute arises. It is advisable to consult with a legal professional to determine the enforceability of such a clause in a specific situation.
Yes, an economic-out clause can be included in various types of contracts, such as employment agreements, lease agreements, or supply contracts. However, its inclusion and enforceability may vary depending on the nature of the contract and applicable laws.
Yes, like any other contractual provision, an economic-out clause can be negotiated and modified by the parties involved. It is important to carefully review and negotiate the terms of the clause to ensure it aligns with the parties’ intentions and protects their interests.
If one party invokes the economic-out clause, it typically triggers a termination of the contract. The specific consequences and obligations upon termination may be outlined in the contract or negotiated between the parties.
The legal consequences of invoking the economic-out clause depend on the terms of the contract and applicable laws. It is important to review the contract and consult with a legal professional to understand the potential consequences and obligations.
While an economic-out clause provides a mechanism for terminating a contract under specific economic conditions, it should not be used as a means to avoid contractual obligations in bad faith. Parties should act in good faith and consider the overall fairness and reasonableness of invoking the clause.
Yes, parties can agree to waive or remove an economic-out clause from a contract through mutual agreement. However, it is important to ensure that any modifications to the contract are properly documented and legally binding.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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