Definition of "Escalation clause"
This is one of the Clauses in an agreement of Contract. This clause is entered for mutual benefit of Contractor and Contractee. As per this clause Contractee will compensate Contractor for unexpected increase in cost during the Contract period. This escalation in cost will be claimed by the Contractor either separately or the Contract price may be revised. The period of escalation may be decided mutually. This clause is entered so that Contractor does not sustain loss on Contract and Contract will be completed on time.