Escalator clauses are specifications found in a union contract. They stipulate whether wages will be increased or decreased based on various factors, for example, on the daily expenditures. Escalator clauses aid in making sure that there are no financial constraints met as a result of irrepressible augment in the price of raw materials that are required to make good, also an increase in taxes or utilities. The terms in the contract are expected to be honored at any given time or even when situations are beyond control come to be (Rees 1989).
The distinctiveness and requirements of the cost of living escalator clauses and income reopener depends much on the type of contract signed and the terms in it. In employment contracts there are escalator clauses. The major function of the escalator clause in the employment contract is to make sure that an employee gets some type of rate raise if the common cost of living within that area rises. This provision allows an employee to deal with daily expenditures that have to be catered for by the salary. The daily expenditures on an employee’s payment or salary may include an increase in taxes, price rise of basic needs i.e. food, clothes and housing or cover. This outlay of living augmentation specified in the escalator clause is always well thought-out beyond and more than wage or salary increments that an employer may opt to execute according to the performance of an employee (McFadden, 2001).
The main characteristic of escalator clauses is to ensure that a contract is not bleached, that it continues even when uncontrollable factors alter the aptitude to provide goods or services. Another provision is that the uncontrollable factors affecting the deliverance of goods and services is that they must be beyond any control of either party in the contract. This is because one party may choose to influence these uncontrollable factors in order to reap from the benefits arising from that (McFadden, 2001).
In conclusion, I have mentioned that one of the characteristics of the escalator clause on the cost of living is to ensure that the contract continues. The main provision is that no party in a contract controls the uncontrollable factors in the escalator clause.