A concession agreement is a legal contract between a company and the government where the company is given the rights to operate a business within the government’s jurisdiction provided certain terms and conditions are fulfilled. The party receiving the concession is known as the concessionaire, and for receiving the concession, the company has to pay a fee to the government.
The concession provided varies from industry to industry. It could range from millions of dollars for setting up a mining industry in an economically backward area to minor concessions for food in a professional sports stadium. The social benefits which accrue as a result of the concession is a yardstick for the amount of concession being provided.
When do you need Concession Agreement
A concession agreement is required when a private business owner wants to set up an industry in a particular area and seeks a concession in the form of tax breaks or lower royalty rate. The concession is provided by the government to the private company. The purpose of a concession agreement is to provide mutual benefits to both parties to the agreement.
The concessionaire gains in terms of lower taxes or royalty rates and the government is able to fulfill its social obligations by providing employment to the residents of an impoverished area. The concessionaire has to pay a fee to the government for getting the exclusive rights for operating a specific business within the jurisdiction of the government under a concession agreement.
Inclusions in Concession Agreement
As this agreement is a bipartite agreement, therefore the names of the concession provider and the receiver or the concessionaire must be included in the agreement. The agreement must also include the
- Effective date of the agreement,
- The details of the property being rented
- Clause with regard to sublease
- Events which lead to breach of contract
- The rights and liabilities of the vendor
- Disclaimer with regard to the property owner
- Approval of any advertising material being used by the vendor
- Compliance with the laws of the state under whose jurisdiction this contract is being made.
The responsibility of the vendor with regard to insurance and providing proof of insurance. The concession agreement should also include the basis of pricing for the area being leased.
How to Draft Concession Agreement
While drafting a concession agreement, it is important to keep the following points in mind:
- First and foremost, the names of the parties to the agreement and their relationship need to be clearly mentioned.
- The property or location in question where the proposed business is to be started needs to be stated in the agreement
- The purpose of the business in terms of benefits being provided should be stated clearly
- The concession being provided to the business owner for the benefit provided by them should be mentioned in detail, including the type of industry, the duration of the concession and so on.
- The fee is paid by the concessionaire or business owner to the government who is providing the concession should be mentioned
- The events which lead to revocation of the agreement should also be stated
Benefits of Concession Agreement
There are certain benefits of having this agreement which are as under:
- Defining the concession being provided: The agreement clearly defines the kind of concession being provided which is in accordance to the industry in which the concessionaire operates. This ensures that there is no dispute with regard to the concession being provided to the business owner
- No scope for misuse of concession: As the reason for providing the concession is clearly defined in the agreement as well as penalties for breach of the contract, the concessionaire cannot misuse the concession for operating a different type of business
- Exclusive operating rights: The business owners or concessionaire is given exclusive rights for operating the business in the particular area and hence is protected from any kind of competition. The concessionaire has to pay a fee to the government for availing of this incentive.
Types of Concession Agreement
The different types of the agreement are given below:
- Public service concession: In such agreements, the government provides exclusive rights to the concessionaire to operate, carry out investment or maintain a public utility such as water privatization. The private company who gets the concession has to pay a fee to the government for the duration of the contract.
- Lease contract: These agreements too are between private and public entities. The lease contract gives the right to the company to maintain and operate a public utility, but the investment has to be made by the public.
- Management contract: Under a management contract, it is the responsibility of the private operator to collect the revenue on behalf of the government for a fee.
Key terms in Concession Agreement
The key terms are:
- Concessionaire: The private company who decides to operate a business for which they get a concession from the government
- Concession: Incentives offered by the government in terms of lower taxes or royalties provided to the private business operator.
- Fees: The fees which the concessionaire pays to the government in return for the incentives provided
- Rights and responsibilities: These refer to the rights and responsibilities of the concessionaire with regard to the business being operated.
- Breach of contract: In case there is a breach of contract by the concessionaire, the contract stands null and void.
Download Concession Agreement Sample
If a business owner is seeking a concession from a government body for setting up a business, then a model concession agreement is recommended. A concession agreement in pdf is available.
You can download an agreement sample here.
Download this USA Attorney made Original Agreement for only $9.99
This agreement is made between County and Concessionaire on the effective date of 18th November, 2011.
County represented by
Mr. Darren Hastings
Address: 95 South Platte Avenue, Fremont NE 68025
Contact number: (402) 727-7731
Concessionaire represented by:
Ms. Elaine Watson
Address: 2333 Phelps Avenue, Fremont NE 68025
Contact number: (402) 753-7404
Terms and Conditions:
- The “County” is authorized according to this Concession Agreement to exercise their power that has been conferred to them by “Nebraska Government Code” to create and implement contracts for issuing concessions to organizations like “JV Holdings” for construction of public parks and recreation or entertainment parks within the city of “Fremont”, Nebraska.
- The “Concessionaire” and the “County” should both agree to the terms and conditions specified in this Concession Agreement and if any amendments are required then the same can be done by providing written consent for the same.
- According to Section 19 of this Concession Agreement, the “Concessionaire” cannot sublease the “premises” provided to them by the “County” as a part of the concession without written permission from the “County”.
- Any change in Ownership of the “Concessionaire” or company will be subject to appropriate approval from the “County” as mentioned in Article 13 of this Concession Agreement.
IN WITNESS WHEREOF, the parties “County” and “Concessionaire” have executed this Concession Agreement as on the date set forth which is 11/18/2011 (MM/DD/YY).
SIGNED FOR AND ON BEHALF OF COUNTY BY:
SIGNED FOR AND ON BEHALF OF CONCESSIONAIRE BY: