Cost-of-living Clause Law and Legal Definition

Cost-of-living clause is a provision in a contract or lease. The cost-of-living provision provides an automatic wage, rent, or benefit increase tied in some way to cost-of-living rises in the economy. A cost-of-living clause may also cover a decrease, even though this is uncommon. In a long term contract, the cost-of-living provision adjusts the price paid for the goods or services received in an amount equal to the change in the cost of living.