Legal Term
Automatic Price Escalation Clause
Legal Definition
A contractual provision in a service agreement, such as for bottled water delivery, that permits the vendor to unilaterally increase the price for goods or services at predetermined intervals or upon the occurrence of specific conditions (e.g., inflation, cost increases) without requiring separate negotiation or explicit consent from the customer for each increase.
In Plain English
A hidden clause in a contract that lets the other side raise their prices automatically on a set schedule, often linked to inflation, without asking you first.
Example in a Contract
PRICE ADJUSTMENT: The pricing set forth in Exhibit A shall be subject to an annual adjustment on each anniversary of the Effective Date. Such adjustment shall be calculated by multiplying the then-current price by the percentage increase, if any, in the U.S. Department of Labor's Consumer Price Index for All Urban Consumers (CPI-U) for the preceding twelve-month period. Customer shall be notified of any adjusted price thirty (30) days prior to its effective date. Continued receipt of Deliveries after the effective date of any adjusted price shall constitute Customer's acceptance of such new price.
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