Escalation Clause in Construction Contract Example

Contract Services Administration Trust Fund
6 April 2022
Sample Software Consulting Agreement
19 April 2022

When it comes to construction contracts, an escalation clause can provide a degree of flexibility and protection for both parties involved. Essentially, an escalation clause is a provision that allows for the adjustment of the contract price in case of unforeseen circumstances that impact the cost of materials, labor, or other factors.

Let`s take a look at a hypothetical example of an escalation clause in a construction contract:

“Price adjustments: The contract price shall be subject to adjustment in the event that the cost of labor, materials, or other factors affecting the cost of the work increase by more than 5% from the date of this agreement. In such cases, the contract price shall be adjusted accordingly and all parties shall execute an amended agreement reflecting the new price and any other relevant modifications.”

In this scenario, the escalation clause allows for adjustments to be made if certain circumstances arise that impact the cost of the project. This could include anything from a sudden increase in the cost of materials due to supply chain disruptions, to unexpected regulatory changes that impact labor costs or timelines.

By including an escalation clause in the contract, both parties can have greater peace of mind knowing that they won`t be left in a difficult situation if unexpected circumstances arise. The clause provides a degree of flexibility that can help mitigate the impact of unforeseen events, while also ensuring that the project can move forward in a timely and efficient manner.

Of course, it`s important to ensure that any escalation clause is crafted carefully and with the input of legal professionals to ensure that it`s fair and reasonable for all parties involved. By doing so, you can help ensure that your construction project is set up for success from the outset.