Foreign Currency Obligations: Indexation Clauses in Case of Depreciation of the Value of the Currency

Abstract

In the periods of crisis, money obligations become a continuing issue, mainly in currency depreciation or high inflation. Recently, the money obligations have been defined as an obligation to transfer small ownership of a certain amount of money by jurisdictions. However, these obligations are flawed in terms of the value inequity of one of the two contracting parties. Therefore, the French, German and Anglo-Saxon jurisdictions have proposed to incorporate an indexation clause called the "monetary valuation principle.” This means that the sum of returned money must be reevaluated on the return day accordingly to indices previous stipulated in the contract between the two signatory parties. In this article, we are discussing this issue from the perception of Kuwaiti law.