ratchet clause definition

ratchet clause

Contracts: Provision under which the contract-associated rights of the involved parties are adjusted according to an agreed upon formula upon completion of a part or stage of the contract.

Utility billing: Provision under which the demand charge for each month (or other period) is based on the highest measured demand (or its percentage) over the previous year (or other period).

ratchet clause is in the Accounting & Auditing and Agreements & Contracts subjects.

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