CHAPTER 9Project Contracts and AgreementsCritical to Project Finance
The contracts and agreements part of project finance is a highly specialized field of legal expertise and this chapter aims only to introduce the basics of the types and nature of project documentation created by the sponsor's legal team. The intent of this chapter is to show the multitude and complexity of project contracts necessary to create the framework for project financing. To make the point, Figure 9.1 shows the signatories to and the commonly negotiated project finance contacts.
Figure 9.1 Signatories and Common Project Finance Contracts
Source: Adapted from Merna, Chu, and Al‐Thani (2010).
Having identified project risks and issues, the purpose of project contracts and security packages is to bring some certainty by addressing mitigation of potential future risks to the satisfaction of affected project stakeholders. Hence, familiarity with project contracts and their negotiations is a requirement of PFO and project team members. It is also a prerequisite for striving to obtain competitive advantage through project finance.
An agreement is one's commitment to deliver on an obligation that is accepted by another party. It is like a contract but it is not enforceable by law. A contract is a written and usually registered agreement supported by consideration and enforceable by law. Legally, an agreement ...
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