When Your Contract Doesn't Fix a Price, Who Decides What You Get Paid?

When Your Contract Doesn't Fix a Price, Who Decides What You Get Paid?​

A juice-blend supplier and a Brazilian orange concentrate producer signed a deal for 3,600 metric tons a year. Part of that volume had a locked-in price. The rest — 800 metric tons annually — was left "to be agreed" year by year. When the buyer refused to pay for a shipment and the deal soured, the case ended up in the UK Court of Appeal, which had to answer a question that trips up small businesses constantly: if two parties never actually agreed on a price, is there even a contract — and if so, who gets to decide what's owed?

The answer, in that case and under similar US law, was yes: courts can and do fill in a price the parties never nailed down, as long as it's clear both sides intended to be bound. That's reassuring if you're the one owed money. It's a lot less reassuring if you're the one who thought "we'll figure out pricing later" meant you had room to negotiate.

If you run a small business with a long-term supply contract, a retainer arrangement, a multi-year vendor deal, or any agreement where the price isn't a single fixed number, this is worth twenty minutes of your time. Open-ended pricing is everywhere in small business — freelance retainers with "rates subject to review," supply contracts with "price per current market rate," service agreements that renew at "then-current pricing" — and most owners have no idea how the law treats it when things go sideways.

What an "Open Price Term" Actually Is​

An open price term is any part of a contract where the parties agree to be bound to a deal, but don't pin down exactly what will be paid. In the US, this is governed for the sale of goods by Uniform Commercial Code § 2-305, adopted (with minor variations) in every state. It applies in three common situations:

1. The price is never mentioned at all. Two companies agree on quantities, delivery schedule, and specs — but nobody writes down a number.
2. The parties agree to agree later, and then don't. This is the most common real-world version: "pricing to be negotiated annually" or "rate to be confirmed at renewal," followed by a stalled negotiation.
3. The contract points to an external benchmark that disappears. A price tied to "the published market rate for X" stops working if that index stops being published or the named appraiser goes out of business.

The critical legal question in all three cases is intent. Courts ask: did both sides actually mean to be bound to a deal, with the price gap as a detail to sort out later — or was a final, agreed price always a precondition to any contract existing? If it's the latter, there's no contract at all, and either side can walk away. If it's the former, UCC § 2-305 fills the gap for you: the buyer owes a "reasonable price at the time for delivery."

How "Reasonable Price" Gets Determined​

If a dispute goes to court (or arbitration), a reasonable price isn't just whatever one side felt like invoicing. It's typically established through:

• Market price — what comparable goods sold for, in a comparable location, around the time of delivery
• Course of dealing — how you and this specific customer or vendor have priced things in the past
• Usage of trade — the standard pricing convention in your industry

This cuts both ways. If you're the one owed payment and you invoice above the going market rate with no track record or benchmark to back it up, a court can — and will — knock your price down to what similar goods or services actually cost elsewhere. One frequently cited illustration: if three comparable suppliers were selling lumber at $7 a board-foot and you invoiced a customer at $10 with an open-price contract, don't expect a court to enforce the $10.

When One Side Gets to Set the Price​

Plenty of contracts explicitly hand pricing power to one party — "seller shall set the price for each shipment" is common in supply agreements, and it shows up in retainer language too ("consultant will bill at their then-current standard rate"). UCC § 2-305(2) puts a good faith limit on that power: the price has to be set "honestly in fact" and within the range of what other comparable sellers are charging. You don't have to give your best price. You do have to be able to show the number wasn't picked to exploit the other side or discriminate between customers for no legitimate reason.

Practically, this means: if you're the party with pricing discretion, keep a paper trail. Save the market data, the vendor quotes, the cost inputs you used to set a number. If a customer ever challenges an invoice as unreasonable, "here's how we calculated it, and here's what comparable providers charge" is a far stronger position than "that's just what we charge."

When the Other Side Won't Play Ball​

If pricing was supposed to be negotiated or set by an outside benchmark, and the process breaks down through one party's fault — they refuse to engage, or they fail to arrange a required appraisal — the other party generally has two options: treat the contract as cancelled, or fix a reasonable price themselves and proceed. Neither is automatic; both usually require formal notice and a documented basis for whatever price you land on.

Why This Matters More in 2026​

Open pricing isn't a legal curiosity — it's a response to genuine cost unpredictability, and that unpredictability has gotten sharply worse. Raw material costs rose roughly 5.4% in 2025 and are projected to climb another 4.4% in 2026, driven in large part by tariffs on imported materials and components. Steel and aluminum tariffs alone pushed mill product prices up more than 20% and 33% year-over-year in some categories. Contractors and suppliers report real strain: nearly half of general contractors surveyed said a project had been canceled, postponed, or scaled back in the past six months specifically because of tariff-driven material costs.

That's exactly the environment where "we'll set the price closer to delivery" starts looking attractive to sellers — and exactly the environment where buyers get burned if they don't understand what "reasonable" means once the number finally shows up on an invoice. If your business signs multi-month or multi-year supply, service, or licensing agreements right now, assume price volatility is the norm, not the exception, and write your contracts accordingly.

How to Protect Yourself, on Either Side of the Table​

If you're the one who might need to invoice a variable amount:

• Tie pricing to a named, specific, and durable index — a published commodity price, a government cost index, a defined formula — rather than vague language like "market rate." A benchmark that can disappear or become ambiguous just recreates the same problem.
• Put a third-party price-setting mechanism in the contract for genuinely negotiated pricing — an appraiser, an industry association's published rate, or a defined escalation formula tied to a cost index.
• Document your reasoning every time you set a price under discretionary authority. A dated note showing your cost inputs and comparable market rates is cheap insurance against a bad-faith accusation later.
• Add an explicit escalation and dispute-resolution clause: what happens, procedurally, if the parties can't agree on a renewed price. Silence here is what turns a pricing disagreement into litigation.

If you're the one who might receive a variable invoice:

• Before signing, ask what happens if you and the vendor can't agree on next year's price. If the contract doesn't say, assume a court will import a "reasonable price" standard — and that you'll be arguing over market comparables if it ever gets contentious.
• Keep your own file of comparable vendor quotes and market pricing as you go, not just when a dispute starts. It's the same evidence a court would want to see, and having it ready is far better than reconstructing it under pressure.
• If a contract lets the other side set price unilaterally, negotiate for a cap, a floor, or a formula — even a loose one — rather than accepting pure discretion. "Reasonable" is enforceable in court but expensive to litigate; a formula avoids the fight entirely.

If you'd rather avoid an open price term altogether: say so explicitly. Courts look for intent, so use language like "the parties do not intend to be bound until a final price is agreed in writing" if that's genuinely your position. Silence, ambiguity, and starting performance under the deal (shipping goods, doing the work) before price is settled are all read as evidence you did intend to be bound — open price term and all.

Keep Your Books Ready for Variable Pricing​

Open-price contracts don't just create legal exposure — they create a bookkeeping problem too. If you're invoicing under a formula, an index, or negotiated terms that reset periodically, your revenue recognition and accrued-liability entries need to track why a number changed, not just the new total. That's exactly the kind of audit trail plain-text accounting is built for: every price adjustment, index reference, or renegotiated rate becomes a version-controlled entry you can trace back to its source, instead of a static number buried in a spreadsheet. Beancount.io gives you that transparency for free — get started today and see how much easier disputed invoices are to defend when your books already show your work.