What Is A Direct Agreement Project Finance

Consortia of entrepreneurs may be involved in larger projects. As regards liability, such contractors may be liable either jointly and severally or jointly and severally. Multiple liability means that each contractor is only liable for its own contribution to the project, while under joint and several liability, each contractor can be sued for the entire obligation and it is then the responsibility of the consortium to clarify the scope of each contractor`s obligations. Lenders prefer joint and several liability, as the risk of loss of performance is then the overall liability of each consortium member. If necessary, a direct agreement may contain clauses in which the counterparty to the project document consents to the collection or assignment as security of the project company`s rights under the project document. Although it has become market practice to design installation agreements in such a way that the breach of a project document constitutes a default event under the facility agreement, counterparties to project documents are not parties to the installation agreement and, therefore, installation agreements do not have a mechanism that prevents the counterparty from terminating or interrupting performance in relation to the relevant project document. Direct agreements and assignments of security give lenders a direct relationship with counterparties, allowing them to facilitate project continuity. Government guarantee agreements: They have proven to be an extension of the concept underlying the direct agreement between lenders. Government security agreements are entered into between the organization and contractors who enter into a contract with Projectco. . .


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