Home » Eng Accounting » E » Escalation clause

Escalation clause

A clause often included in a contract which may take some time to complete, e.g. the building of a new factory. It allows the contractor to increase the price when the incidence of inflation causes costs to rise. The degree to which such increases are permitted is usually defined in the clause. It should be distinguished from a cost-plus contract, which involves a different concept.

Reference: The Penguin Business Dictionary, 3rd edt.