Ratchet clause

Ratchet clause,

Definition of Ratchet clause:

  1. 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).

  2. 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.

Meaning of Ratchet clause & Ratchet clause Definition