Escalator Clause

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Related to Escalator Clause: Graduated lease, index lease

Escalator Clause

A stipulation contained in a union contract stating that wages will be raised or lowered, based upon an external standard such as the cost of living index. A term, ordinarily in a contract or lease, that provides for an increase in the money to be paid under certain conditions.

Escalator clauses frequently appear in business contracts to raise prices if the individual providing a particular service or type of merchandise is forced to pay more for labor or materials.

Such clauses are also often part of contracts or leases executed subject to price-control regulations. When this type of provision is in a lease, a landlord has the power to collect the maximum amount of rent allowed under rent regulations that are in effect at the time of the lease. The escalator clause provides that if the rent regulations are altered during the time of the lease, the tenant must pay the new rental fee computed pursuant to the revised regulations.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

escalator clause

n. a provision in a lease or other agreement in which rent, installment payments or alimony, for example, will increase from time to time when the cost of living index (or a similar gauge) goes up. Often there is a maximum amount of increase ("cap") and seldom is there a provision for reduction if the cost of living goes down or for deflation instead of inflation. (See: cap)

Copyright © 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.
References in periodicals archive ?
This time, the federal government and the Band had their own lawyers involved, and they agreed on a draft for the lease and an escalator clause in the lease which said that when the major review came up after the first 20 year period that the annual rent was to be based on "6 percent of the current land value".
The presence of an escalator clause in the contract at least partially insulates the union from losses in real wages due to inflation and should, therefore, make the union more willing to consent to a contract of greater duration.
These actions included increasing retainer fees or a la carte activity fees, hiking minimum annual fees on clients with smaller accounts and adding automatic fee escalator clauses to client agreements.
Some contract assemblers could provide a working number within a few days, but it would come with a list of caveats and unknowns and escalator clauses. Do you really want to commit to the program manager, the CEO, or worse, the market, with a number that guarantees a loss of profit (bid too low) or a loss of sales (bid too high)?
The strategy continues to work, particularly as the sport's key contracts contain escalator clauses which increase the amount paid by sponsors by up to 10% each year.
What it says about the cost of things helps regulate what things cost -- from union contracts, to escalator clauses in child-support settlements, to Social Security checks, to brackets on the personal-income tax, not to mention payouts on bonds known as TIPS (Treasury Inflation-Protected Securities).
One option for sharing commodity price risk with customers and/or suppliers is to insert escalator clauses in the contract that distribute the price risk between the two firms.
The Rangers were the first to hit the ground running through a 20-year deal with Fox Sports Southwest valued at $3 billion that includes equity in the network, escalator clauses and profit participation.
PCA estimates that since 2006, escalator clauses have cost states $1.1 billion.
Along with inflation for other materials, such as steel, these costs are being passed along by private construction companies to ODOT, as is permitted by "escalator clauses" built into their contracts.
Smaller contractors will take the disproportionate hit, because they are less able to absorb these costs and have less bargaining power to insist that escalator clauses be inserted into deal language.
After the last set of fuel increases three years ago, some carriers built in escalator clauses into their contracts, but Switzer says, other reluctant operators do not always pass their costs on to the shippers and pursue the proper compensation because of the competitive nature of the industry.