Question

What is Escalation Clause?

Hint:

Escalation Clause = price adjustment for increased costs.

Answer 1

An Escalation Clause is a special provision in a contract agreement that allows the contractor to claim extra payment if the cost of materials, labour, or other inputs increases beyond a certain limit during the contract period.
It protects the contractor from unexpected cost rises that may occur due to inflation, price hikes, or changes in market conditions.
This clause ensures that the contractor does not suffer a loss due to factors beyond their control and that the contract remains fair to both parties.
Escalation clauses are commonly used in long-term construction or supply contracts.