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Global Insight

India - Can an Arbitrator Award Escalation Charges in the Absence of Any Clause for Escalation in the Contract?

In a commercial contract, a tender is procured upon estimation of prices of material and labor to be incurred in future. However, these prices are susceptible to change due to reasons beyond the control of either party. Such unforeseen change in prices, which may shake the very foundation of the bargain, which parties entered into, may lead to frustration of contract, which in turn leads to termination of contract. To avoid such a situation, an escalation clause is added into the contract, which takes into account any future changes in prices of labor and material.

But what if the contract does not provide for an escalation clause and the contract is extended beyond the completion period - because of no fault of contractor - resulting in losses for the contractor?

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