Direct agreements in project finance transactions
Published by a LexisNexis Banking & Finance expert
Practice notesDirect agreements in project finance transactions
Published by a LexisNexis Banking & Finance expert
Practice notes
What is a Direct Agreement?
Direct agreements are very common in project finance transactions.
A direct agreement is an agreement which gives the lenders to the project direct rights in respect of a key project document (for the meaning of ‘project document’, see: Project documents—issues for lenders—overview). Those rights are explained in Direct agreements—key provisions below. For an example of a direct agreement, see Precedent: Form of Contractor Direct Agreement in favour of a lender (for use on infrastructure and energy projects).
The relevance of project documents
The project documents are the contracts which set out each party's responsibilities in relation to a project and the success or failure of most projects often depends heavily on them.
For a project which is not yet built, one of the Project company’s (for the meaning of ‘project company’, see Practice Note: Project finance—key project parties) most valuable assets will be its rights under the construction contract. Once the project is fully constructed, project documents with significant value tend to include the operation and Maintenance
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Jurisdiction(s):
United Kingdom
Key definition:
Direct Agreement definition
What does Direct Agreement mean?
An agreement which is usually executed as a deed which is provided by the construction contractor, a construction sub-contractor or consultant (the promisor) as well as other parties in the PFI structure. The agreement provides a party (the beneficiary) who has an interest in the project but who is not a party to the original contract (for example the Authority or the Funder) with rights and remedies against the promisor if there is a problem with the services or works that have been provided by the promisor.
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