De-Escalation Clause


De-Escalation Clause

An article in a contract that calls for a price decrease if there is a decrease in certain costs. For example, a de-escalation clause may stipulate that maintenance fees will be reduced if the item being maintained depreciates in value. A de-escalation clause is the opposite of an escalation clause.

A de-escalation clause can protect consumers from paying inordinately high prices over the life of a contract that was signed during a time of unusual circumstances. For instance, shipping costs may be higher than normal when a contract is signed due to atypical prices on gasoline. A de-escalation clause will correct for that by lowering the contracted shipping rate as gasoline prices drop.


Investment dictionary. . 2012.


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