A de-escalation clause is a provision in a contract that allows for a reduction in price if certain costs decrease. This clause is often included in contracts to protect parties from unexpected price fluctuations. For instance, in a public paving contract, if the contractor receives a lower price from their asphalt supplier, the city may benefit from that price reduction through the de-escalation clause.
De-escalation clauses are commonly used in various types of contracts, particularly in construction and procurement agreements. They are relevant in legal areas such as contract law and public bidding processes. Users can manage these clauses using legal templates from US Legal Forms, which are drafted by experienced attorneys to ensure compliance with applicable laws.
Here are a couple of examples of abatement:
Example 1: A city awards a contract for road construction that includes a de-escalation clause. If the price of asphalt drops due to market changes, the contractor must lower the overall contract price accordingly, benefiting the city.
Example 2: A company enters into a supply agreement that includes a de-escalation clause for raw materials. If the supplier's costs decrease, the company can negotiate a lower price for the goods (hypothetical example).
Examples of state differences (not exhaustive):
| State | Variation |
|---|---|
| California | Commonly used in public contracts, with specific guidelines for implementation. |
| Texas | De-escalation clauses are less common and may require additional documentation. |
| New York | Often included in large construction contracts but must comply with state procurement laws. |
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
| Term | Definition | Difference |
|---|---|---|
| Escalation Clause | A provision that allows for price increases based on rising costs. | De-escalation clauses reduce prices, while escalation clauses increase them. |
| Price Adjustment Clause | A general term for clauses that allow for price changes based on specific conditions. | De-escalation clauses specifically address price decreases, while price adjustment clauses can include both increases and decreases. |
If you are entering into a contract that may include a de-escalation clause, consider the following steps:
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| Attribute | Details |
|---|---|
| Typical Use | Construction and procurement contracts |
| Benefits | Protects against cost increases, ensures fair pricing |
| Legal Complexity | Moderate, depending on the contract terms |
Its purpose is to ensure that if costs decrease, the contract price can also be adjusted downward, benefiting the contracting party.