Price Escalation Clause
Also called: Price Increase Clause · Fee Adjustment Clause
A price escalation clause sets out if, when, and by how much a supplier can raise prices during the term of a contract — whether tied to inflation, a fixed annual percentage, or entirely at the supplier's discretion. It decides how predictable your costs actually are.
In more detail
Contracts range from fully fixed pricing for the term, to pricing that can change with notice, to pricing entirely at the supplier's discretion. The difference matters enormously for budgeting — a "fixed price" that actually allows unlimited increases with 30 days' notice isn't fixed at all.
Where escalation is permitted, it should be tied to something objective — a published inflation index, a capped annual percentage — rather than left open-ended. An uncapped discretionary increase right effectively lets the supplier renegotiate the deal unilaterally at any time.
Notice period matters as much as the cap. A price increase with 90 days' notice gives a customer time to budget or seek alternatives; one with 7 days' notice does not.
A SaaS contract states pricing is "fixed for the initial term" but includes a clause allowing annual increases of up to 15% with 30 days' notice. The customer's actual cost exposure over three years could be significantly higher than the headline price suggests.
What our lawyers check
- Whether the contract is genuinely fixed-price, or contains an escalation mechanism
- Whether any increase is capped, and against what benchmark
- The notice period required before an increase takes effect
- Whether a price increase gives the customer a right to terminate without penalty
Contracts where this clause matters
Related terms
This definition is general information about commercial contracting practice, not legal advice. How a clause operates depends on the specific wording of your agreement and the law that governs it. For advice on your contract, have it reviewed by a lawyer.
All glossary terms