Locally-Capped Contract

You need to kill the leader of a rival drug cartel. However, he's hiding out in Manitoba, where your hit men can't reach him. So you hire a local to do the job. Locally-capped contract.

Another (far more common) version has to do with investment products.

You buy into a structured financial product. It provides a guaranteed payout, along with a bonus tied to some measure of market performance, like the S&P 500. So, every quarter, you receive $10,000, plus a certain extra, based on how well the stock market did during the previous three months.

However, the bonus is capped. Any move about a 5% gain in the S&P doesn't count. If the stock market goes crazy and rises 15% in a quarter, you don't get a massive bonus. You only get the bonus tied to 5%.

"Locally-capped" means that this cap only applies on a quarter-by-quarter basis (or whatever time period is in focus). It stands in contrast to "globally-capped," which places an all-time cap, but not a cap on any particular time period.

To put it another way, locally-capped investments have a cap that applies to a shorter time period. However, the cap is constantly resetting. Once a quarter (or whatever time period) is over, everything gets a clean slate.

For a globally-capped investment, once it reaches its maximum amount, you only ever receive that amount. It doesn't reset for the next time period.