Devaluation clause

A devaluation clause adjusts charter hire or freight when the currency of payment loses value against a reference currency, protecting the owner whose costs are largely dollar-denominated. If hire is fixed in a weaker currency, the clause raises the nominal amount to hold the owner’s real receipts constant after a stated devaluation. It is one of several monetary-protection provisions, sitting next to the exchange-rate clause and escalation clause in long charters and contracts of affreightment. Use has narrowed as most international shipping fixtures price in US dollars, removing the cross-currency exposure the clause was written to manage.