Opinion ID: 2275124
Heading Depth: 1
Heading Rank: 8

Heading: nature of escalation

Text: It is literally impossible to understand PX-4 and PX-1 without a knowledge of escalation and the nature of an escalation clause, one of the most critical provisions of a ship construction contract (Ad-26). Expert testimony on this complex subject consumed 23 trial days and nearly 3,000 pages of transcript. The trial judge, having become fully familiar with the intricacies and complexities of this highly technical discipline, recognized the critical importance of escalation in long-term multi-million dollar ship construction during a period of double digit inflation and found that a court cannot fashion an escalation clause for parties who are unable to do so for themselves. (See Findings of Fact 18-22, Ad-6-7; Ad-13-14, Ad-20, Ad-25-31.) The difference in the amount of escalation by varying just some of the elements of hypothetical escalation clauses which Bethlehem created for purposes of trial was shown to amount to millions of dollars per vessel. (Ad-26, 27). In the words of the trial judge: All of the expert testimony indicated that an escalation clause could not be materialized from the air by the Court. Because of the nature of negotiations in shipbuilding and the extreme complexity of the undertaking, an escalation clause requires careful negotiations between the parties and must be custom tailored to fit the project. (Ad-30) Returning now to relevant portions of the adjudication of Judge Louik dated June 6, 1979, our review of the record supports the correctness of the court's conclusions, as follows: