A concession can be defined as a license given to any private organization working or non-governmental organization working by the official government authorities. The reason for granting this license of concession is due to the implementation of public welfare.
A concession agreement ensures the approval of government authorities to the private working bodies on the government-owned property as per specified conditions.
What Is a Concession Agreement?
There are certain non-governmental organizations planning to initiate a public welfare scheme on the government-owned land. In this scenario, these private companies negotiate with the government authorities to get the required permissions.
Concession Agreement works between the government authorities and non-governmental or private organizations, which provides the private working bodies with definite rights in the form of concessions.
The government offers rights and permissions to the private entity that is primarily under its authority. It is a kind of approval for the private organizations to practice their business plans under the jurisdiction sanctioned.
The conditions of concession agreement are discussed and managed by both parties i.e. the property owner and the one who is being granted the rights called concessionaire.
An individual owns the whole property while the concessionaire operates his/her business on the granted portion of the land. On the other hand, the concession agreement can be applied when a non-governmental owner of any property grants permission to a concessionaire.
In case if the concession agreement ends or gets terminated, the land under observation by the working bodies goes back in the possession of the owner.
What Are the Benefits of Using a Concession Agreement?
A concession agreement is beneficial in many ways. Let us take a look upon the list of benefits of using a concession agreement for your business:
- A concession agreement provides a streamline process to transfer authority and responsibility such as the finances, technicalities, and management to the interested private companies.
- This opens a professional pathway of public welfare between the government bodies and the private sector.
- Through a concession agreement process, private sectors are encouraged to work in an efficient environment provided by the owners.
- The private working bodies gain the required freedom in their sanctioned jurisdiction and perform their best to gain revenue by providing agreed-upon services to the civilians.
- Indulgence of a concession agreement removes hindrances such as the issue of insufficient funds during the projects where construction is required to provide facilities to the public.
- When both parties i.e. municipality and concessionaire sign this agreement, the responsibilities and the obligations regarding the public development project are administered responsibly due to the division of tasks.
- There is a complete scrutiny of the regulations finalized in the concession agreement.
What are the Components of a Concession Agreement?
Now, let’s understand the components of a concession agreement:
- Insurance: The insurance clause is added to the concession agreement. If there is any kind of insurance involved, this clause demands that the proof of the insurance must be presented to the owner of the property and labeled as “additional insured.”
- Pricing: The clause of pricing plays a vital role in defining the quality of the concession agreement. It includes the lease cost for the area granted to the concessionaire and all the minute details of the financial matter.
- Area to Be Leased: The concession agreement must include all details of the areas that are being granted for lease. The property owner reserves the right to know all the intrinsic details of the areas.
- Termination: This is one of the primary clauses as it indicates the proceeding that takes place in the event of the termination of the concession agreement.
- Acceptance: This clause is a proof of peaceful agreement between the owner and concessionaire.
Difference Between Concession Agreement and Other Commercial Agreements
The difference between the concession agreement and other commercial agreements lies at many levels such as the provisions of goods and services.
A major difference is that the signing of a concession agreement is aimed at the public welfare and the development of the facilities for civilians. However, commercial agreements usually involve private interests proving beneficial for the owner and a private working body.
The other big difference is the time span for which the agreement is valid. A concession agreement’s lifespan is completely in the hands of the owner of the property or the government authority that has granted the lease.
In the case of the concession agreement, this document is long-term and of high value as compared to the commercial agreements.
This article explained the concession agreement, the purpose, and components of a concession agreement. A concession agreement serves as a bridge for establishing professional relations between the government bodies and the private sector working together for the public welfare.
The benefits of a concession agreement plays a paramount role in the development of the infrastructure of a country. At CocoSign, you can find professionally templates of the concession agreement and other agreement templates for free.
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