collateral assignment construction

Collateral Assignment of Construction Contract definition

Examples of collateral assignment of construction contract in a sentence.

Collateral Assignment of Construction Contract , dated June 1, 2014, between the Company and the Trustee; and11.

Borrower previously signed, and caused the Architect to sign, and delivered to Lender a Collateral Assignment of Architectural Agreement in the form prescribed by Lender; and Borrower signed, and caused the Contractor to sign, and delivered to Lender a Collateral Assignment of Construction Contract in the form prescribed by Lender (collectively, the “Collateral Assignments”).

The accurate and complete copy of the Construction Contract is attached to the Collateral Assignment of Construction Contract as Exhibit B.

Developer shall have delivered to Landlord executed originals of the Consent of Contractor to the Collateral Assignment of Construction Contract , the Consent of Architect to the Collateral Assignment of Architect's Contract, and the Consent of Manager to the Collateral Assignment of Management Agreement.

Collateral Assignment of Construction Contract , dated 3/28/13, by and between Borrower, Lender and Clyde Riggs Construction, L.L.C.

EXHIBIT B CONSTRUCTION CONTRACT EXHIBIT C FORM OF CONSENT The undersigned hereby consents to the foregoing Collateral Assignment of Construction Contract (the “Assignment”), and agrees to perform pursuant to the terms and conditions of the Construction Contract.

Borrower shall sign, and shall cause the Architect to sign, and deliver to Lender, with respect to the Architectural Agreements, a Collateral Assignment of Architectural Agreement(s) in the form prescribed by Lender and Borrower shall sign, and cause the Contractor to sign and deliver to Lender, with respect to the Construction Contracts, a Collateral Assignment of Construction Contract in the form prescribed by Lender (collectively, the “Collateral Assignments”).

A survey regarding the practical implementation of the Principles in the Department’s network of local offices formed part of this review and the main findings of this survey were outlined in the update.

Borrower and Borrower’s general contractor shall sign and deliver to Lender a Collateral Assignment of Construction Contract in the form required by Lender (“Collateral Assignment of Contract”).

Lender may use the Plans for any purpose relating to the Improvements, subject to the terms of this Agreement, Collateral Assignment of Construction Contract and the Consent of Contractor to Collateral Assignment of Construction Contract attached thereto and Collateral Assignment of Architect's Contract and Consent of Architect to Collateral Assignment of Architect's Contract attached thereto.

More Definitions of Collateral Assignment of Construction Contract

Related to collateral assignment of construction contract.

Collateral Assignment means, with respect to any Contracts, the original instrument of collateral assignment of such Contracts by the Company, as Seller, to the Collateral Agent, substantially in the form included in Exhibit A hereto.

Collateral Assignment Agreement has the meaning set forth in Section 10.05.

Collateral Assignments means, collectively, the Assignment of the Development Agreement, and the Assignment of Management Agreement, the Assignment of the Right to Receive Tax Credits, Capital Contributions and Partnership Interests, each in form and substance satisfactory to the Significant Bondholder and the Financial Monitor and as each may be amended or supplemented from time to time with the prior written consent of the Significant Bondholder.

Assignment of Contracts shall have the meaning assigned thereto in Section 6.1(b)(iv).

Assignment of Leases With respect to any Mortgaged Property, any assignment of leases, rents and profits or similar agreement executed by the Mortgagor, assigning to the mortgagee all of the income, rents and profits derived from the ownership, operation, leasing or disposition of all or a portion of such Mortgaged Property, in the form which was duly executed, acknowledged and delivered, as amended, modified, renewed or extended through the date hereof and from time to time hereafter.

Construction Contract means a written or oral agreement relating to the construction, alteration, repair, maintenance, moving or demolition of any building, structure or improvement or relating to the excavation of or other development or improvement to land.

Assignment of Lease means the Assignment of Lease, Rents and ------------------- Guarantee dated as of the Release Date from the Lessor to the Collateral Agent for the benefit of the Securityholders and the Certificate Holders, as amended, supplemented or otherwise modified from time to time in accordance with the terms thereof or of any other Operative Agreement.

General Assignment means, in respect of each Vessel, the deed of assignment of its earnings, insurances and requisition compensation executed or to be executed by the relevant Owner in favour of the Security Trustee in such form as the Agent and the Majority Lenders may require in their sole discretion and in the plural means both of them;

Commencement of Construction means the initial disturbance of soils associated with clearing, grading, or excavating activities or other construction activities.

Construction Agreement means the proposed building agreement between the Company and a proposed builder substantially in the form of the draft agreement a copy of which has been signed on behalf of the Authority and the Company for the purposes of identification;

Construction Agreements means agreements to which Tenant is a party for Construction Work, rehabilitation, alteration, repair, replacement or demolition performed pursuant to this Lease.

Collateral Assignment of Interest Rate Cap Agreement means that certain Collateral Assignment of Interest Rate Cap Agreement, dated as of the date hereof, executed by Borrower in connection with the Loan for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

Construction Contracts means the contracts between Lessee and Contractors for the furnishing of labor, services or materials to the Leased Premises in connection with the construction of the Improvements.

Assignment of Leases and Rents With respect to any Mortgaged Property, any assignment of leases, rents and profits or similar instrument executed by the Obligor, assigning to the mortgagee all of the income, rents and profits derived from the ownership, operation, leasing or disposition of all or a portion of such Mortgaged Property, whether contained in the Mortgage or in a document separate from the Mortgage, in the form that was duly executed, acknowledged and delivered, as amended, modified, renewed or extended through the date hereof and from time to time hereafter in accordance with the Credit and Collection Policy.

IP Assignment Agreement means the Intellectual Property Assignment agreement set forth as Exhibit D hereto.

CONSTRUCTION GUARANTEE means a guarantee at call obtained by the contractor from an institution approved by the employer in terms of the employer's construction guarantee form as selected in the schedule

Contract Assignment means, with respect to the Mortgaged Property, the Assignment of Contracts, Licenses, Permits, Agreements, Warranties and Approvals, dated as of the Closing Date and executed by the Borrower.

Proceeds Account Pledge Agreement means the pledge agreement entered into between the Issuer and the Agent on or prior to the First Issue Date in respect of a first priority pledge over the Proceeds Account and all funds held on the Proceeds Account from time to time, granted in favour of the Agent and the Bondholders (represented by the Agent).

Environmental Agreement means the Environmental Indemnification and Release Agreement of even date herewith by and between Borrower and Lender pertaining to the Property, as the same may from time to time be extended, amended, restated or otherwise modified.

GENERAL AND SPECIAL CONDITIONS OF CONTRACT means the instructions to Tenderer and General and special conditions of contract pertaining to the work for which above tenders have been called for.

Assignment of Management Agreement means that certain Assignment of Management Agreement and Subordination of Management Fees, dated as of the date hereof, among Lender, Borrower and Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

Assignment of Rents and Leases means, with respect to the Mortgaged Property, an Assignment of Rents and Leases (and, if there are more than one, each and every one of them), dated as of the Closing Date, granted by the Borrower to Lender with respect to the Leases, as same may thereafter from time to time be supplemented, amended, modified or extended.

Completion of Construction means the date, as determined by the Division after consultation with the Recipient, that the work of building and erection of the Project is substantially complete.

Construction Loan Agreement means an agreement by and between Owner, as borrower thereunder, and Hydro-Québec Lender, pursuant to which Hydro-Québec Lender shall finance a portion of the Project Costs with loans to Owner on a senior secured basis. Loans under the Construction Loan Agreement, together with contributions to the equity capital of Owner, shall fund all Project Costs in a manner consistent with Owner’s obligations under Section 5.6 and Section 8.3(a).

Lender Assignment Agreement means a Lender Assignment Agreement substantially in the form of Exhibit D hereto.

Residential construction means construction on single-family or two-family dwellings occupied or used, or intended to be occupied or used, primarily for residential purposes, and includes real property pursuant to chapter 499B.

Collateral Assignment of Contracts, Licenses, Permits, and Plans (Construction Loan) | Practical Law

Collateral Assignment of Contracts, Licenses, Permits, and Plans (Construction Loan)

Practical law standard document w-008-0125  (approx. 20 pages).

Collateral Assignment of Contracts, Licenses, Permits, and Plans (Construction Loan)

Practical law standard document w-008-0125  (approx. 20 pages), get full access to this document with practical law.

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The Contractor’s Consent – A Trap for the Unwary

On private construction projects, the lender often requires that the owner/borrower obtain the written consent of the contractor to the collateral assignment of the construction contract by the owner to the lender. This permits the lender to step into the owner’s shoes with respect to the construction contract in the event of the owner’s default under the project loan documents. Unfortunately, the Consent forms developed by most lenders these days have many more serious implications for contractors.

Although the general form of the Consent is similar among lenders, the forms are becoming increasingly customized and include many terms other than just the consent to assignment. Whenever faced with such a document, a contractor must be alert and should watch for the following:

Notice of Default/Termination The Consent may require that the contractor provide written notice to the lender if there has been any default by the owner under the construction contract or if the contractor wishes to terminate the construction contract. If the contractor forgets (in the heat of the battle) to provide notice to the lender, it may render the declaration of default or termination ineffective. Failure to provide notice would also certainly impair any rights the contractor may wish to assert against the lender.

Change Order Approval Most lenders’ Consent forms require the contractor to obtain prior written approval of the lender to any change orders between the contractor and the owner. Given the lender’s responsiveness, at the very least this is an administrative annoyance, but at its worst, this is a detail that could impact the Project schedule or disrupt the contractor’s negotiations with the owner. Contractors should seek to eliminate this requirement in its entirety, but failing that, should limit its applicability to only change orders over a stated dollar amount.

Assignment Once a lender takes over a project from a defaulting owner, it may seek to assign the lender’s rights in the construction contract to a new entity. It will want to make that assignment without the contractor’s consent and will typically include a provision in the Consent form allowing it to do so. Contractors should be wary of these clauses and insist that no assignment can be made without the contractor’s prior written consent.

Mechanics’ Lien Rights Most lenders include in their Consent forms a provision in which the contractor either waives its mechanics’ lien rights on the Project or subordinates its mechanics’ lien rights to the lender’s mortgage rights. In Minnesota, we have a statute (Minn. Stat. § 337.10, Subd. 2) that may make a prepayment lien waiver unenforceable, but it is not settled whether it makes a lien subordination unenforceable. Although such subordination clauses seem unfair, especially considering that the lender likely has a title insurer insuring its priority, lenders will resist the well-advised efforts by contractors to remove the subordination provision.

Payment Upon Takeover One of the primary purposes of the Contractor’s Consent is to ensure that, if there is a default and the lender must take over an uncompleted Project, the contractor will complete the Project for the lender according to the terms of the construction contract. The typical form logically requires the lender to pay the contractor going forward from the time of lender takeover. Most forms, however, do not obligate the lender to pay the contractor any amounts unpaid at the time of takeover. This should not be acceptable to any contractor – especially one that has been required to subordinate its mechanics’ lien rights to the lender’s mortgage.

Lenders have lately been more sensitive to contractors’ concerns and have been willing to agree to cure pre-takeover defaults (including payment defaults) in addition to paying post-takeover costs. This is certainly something to be negotiated by the contractor at the time it is being asked to sign a consent form.

Conclusion Do not take the Contractor’s Consent lightly. Rarely should you accept the standard form you receive from the lender. Make it fair and protect your rights.

Pitfalls of Contractor’s Consents

by Michael Lilly

October 23, 2020

You’ve negotiated your Agreement with the Owner and you’ve started to mobilize.  The Owner is still trying to close on its construction financing – but they are “close.”  You receive a call from the Owner’s representative, the representative says “closing is scheduled for tomorrow, the lender just needs you to sign a document before they will fund, it’s no big deal, I’ll send it over to you right now – just sign it and get it to me as soon as possible.”  Finally!  The project is about to start!  You receive the document, a Contractor’s Consent, and you are inclined to just sign it and get to work. Should you?

What Is It Really?

In virtually every construction loan transaction with a commercial lender, the lender will require the borrower (owner) to assign the borrower’s interest in its construction contract with the general contractor, to the lender as additional collateral. This document is generally referred to simply as an Assignment of Construction Contract or Collateral Assignment of Construction Contract.  In connection with the borrower’s delivery of the Assignment of the Construction Contract, the lender will generally require that the borrower’s general contractor consent in writing to such assignment.  Thus, a Contractor’s Consent is first and foremost the general contractor’s written consent to the borrower’s collateral assignment of the construction contract.  However, lenders will ordinarily include multiple additional terms and concepts that the contractor should consider.

THE MAJOR ISSUES

If the Lender elects to assume the Construction Contract, when will it happen?

In the event of a borrower default under the loan documents, nearly every Contractor’s Consent sets forth a procedure allowing for the lender to either (i) terminate the project, or (ii) to assume the construction contract and take-over the project. Often, however, the consent will not require that the lender makes its choice, to either terminate or assume the construction contract, within a specific period of time.  Thus, should the lender declare the borrower in default, what is the general contractor to do?  The short answer is – the general contractor must stop work and wait on the lender to make a decision.  This will, in the very least, result in additional de-mobilization costs and potentially significant re-mobilization costs (should the lender elect to proceed with the contract).

What can the general contractor do?  Negotiate a specific time frame for the lender to make its election to terminate or assume the construction contract.

Lender consent to Change Orders.

Often Contractor’s Consents will include a specific obligation that the borrower and contractor obtain the Lender’s prior consent to any Change Orders.  The result – an already time consuming and often difficult change order process become infinitely more time consuming and difficult, as lenders are typically reluctant to agree to changes in cost and scope for a project.

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A Further Look at Consent to Assignment Agreements

Consent to Assignment for engineers, also referred to as an Acknowledgement and Consent or a “will-serve letter,” is usually drafted by the bank providing construction financing for a project. A typical consent requires the engineer to agree that the bank can exercise the rights it has acquired through an assignment from the owner; among these rights will be the right to assume the design agreement if the owner defaults on the construction loan. Prior articles (June and July 2017, STRUCTURE magazine) looked at key concerns with respect to consent agreements, specifically whether the lender is required to pay outstanding amounts due to the engineer, whether the lender has the right to use the plans and specifications if it does not assume the design agreement, and what information or certifications the lender is entitled to. This article looks at some of the other provisions commonly found in these agreements.

The Assignment

When the owner is a public or quasi-public entity such as a city or a water district, the document that the engineer is asked to sign may include the actual assignment. In such cases, the form may start with an introductory paragraph such as:

THIS ASSIGNMENT OF ENGINEER’S CONTRACT AND ENGINEER’S AGREEMENT AND CONSENT TO ASSIGNMENT (this “Assignment”) is made as of _____ by and between _____ (“Borrower”) and _____ (“Engineer”) for the benefit of _____ (“Lender”).

In such cases, the document creates obligations for both the owner (the borrower) and the engineer, so both parties must sign it. Typically, however, if the owner is a private entity, the engineer will not be provided with the assignment; it is simply asked to acknowledge that the assignment must occur before the loan is closed. In most cases, the lender will require that the contractor, the architect, and other key consultants also agree that their contracts can be assigned and may list all of the contracts to be assigned in a single document. The consent may then include wording such as:

The undersigned, as Engineer under the agreement dated _____ (the “Agreement”) between _____ (“Borrower”) and the undersigned, which is one of the contracts referred to in the Assignment of Agreements, Licenses, Permits and Contracts (the “Assignment”) between Borrower and _____ (“Lender”), hereby acknowledges and consents to the terms of the Assignment.

If, as is usual, the engineer does not know the terms of the Assignment, it is not reasonable to expect the engineer to sign a document stating that it agrees to the terms. The engineer is agreeing to the assignment of the design agreement; the above provision should be edited as follows:

hereby acknowledges and consents to assignment of the design agreement.

Collateral Assignment

Often, the consent will state that the design agreement is being used as collateral for the loan. There may, for example, be a provision stating:

As a condition to Lender making the Loan to Borrower, Lender has required that Borrower collaterally assign the Contract to Lender pursuant to the Assignment of Contracts made by Borrower for the benefit of Lender (the “Assignment”).

The assignment may, in fact, be called a “Collateral Assignment.” This does not create an obligation on the engineer or affect the engineer’s rights, however. Even when the assignment is not specifically referred to as a Collateral Assignment, it is likely that the lender is considering the design agreement as collateral. Lenders generally want a security interest in all of the project assets as collateral for the financing; this includes not just the physical assets of the project but also the design agreements, construction contracts, supply agreements, and easements. The Assignment itself will generally contain wording such as:

FOR VALUE RECEIVED, and as additional security for the Loan, Borrower hereby transfers, assigns and grants a security interest in favor of Lender, in all of the rights of Borrower in its contract with _____ (Engineer) dated _____.

Design Agreement

Since each lender has its own form, an engineer is typically not asked to sign a Consent to Assignment until the owner is arranging the construction loan; this may be weeks or even months after the design agreement was signed. However, some design agreements contain a simple, one-paragraph statement of consent, using language such as:

Engineer agrees that if Developer defaults under the provisions of this Agreement, Engineer shall, if requested, continue to perform its obligations under this Agreement for Lender. Lender shall agree in writing to perform all obligations of Developer after the date Lender succeeds to Developer’s rights and obligations.

As written, the above provision only requires the lender to pay the engineer for services provided after the lender assumes the agreement; the lender has no obligation to pay any outstanding amounts owed to the engineer. At a minimum, the above provision should be edited as follows:

…Lender shall agree in writing to perform all obligations of Developer including payment of all outstanding amounts due to Engineer.

The language in AIA B101 can also be used as a guide. Before 1987, the AIA owner-architect agreements prohibited assignment of the agreement without the consent of the other party.  However, the 1987 and subsequent versions of these agreements have included an exception for assignments to the lender, in recognition of the fact that such assignments are common.

Section 10.3 of AIA B101-2017 states:

…Neither the Owner nor the Architect shall assign this Agreement without the written consent of the other, except that the Owner may assign this Agreement to a lender providing financing for the Project if the lender agrees to assume the Owner’s rights and obligations under this Agreement, including any payments due to the Architect by the Owner prior to the assignment.

Thus, the owner can assign the agreement to its lender without obtaining the A/E’s consent, provided the lender assumes all of the owner’s obligations, including outstanding payments. If the lender requires the A/E to execute (sign) a consent agreement, §10.4 of B101 includes the further provision:

If the Owner requests the Architect to execute consents reasonably required to facilitate assignment to a lender, the Architect shall execute all such consents that are consistent with this Agreement, provided the proposed consent is submitted to the Architect for review at least 14 days prior to execution.

Section 10.4 makes it clear that the A/E is not required to execute a consent that would require the A/E to do more than what is required under the design agreement.

A Consent to Assignment will often state that the engineer’s consent is a condition to the loan. The typical wording is:

Engineer acknowledges that Lender is relying on this Consent as a condition of extending the Loan.

If the owner defaults on the loan, this statement could theoretically allow the lender to argue that it has relied on the consent to its detriment, thus giving it rights against the engineer that it would not otherwise have. However, the language is standard in consent agreements and is generally considered to be just an acknowledgment that the engineer’s consent is a condition of the loan. In contrast, the engineer should not agree to provisions that suggest the consent is being signed as an inducement to the lender, as the word “induce” provides the lender a much stronger basis to argue that it has relied on the consent to its detriment.   Provisions such as the following should be deleted:

Engineer is executing this Consent of Engineer to induce Lender to advance funds under the Loan Agreement.

The consent is being signed as a courtesy to the engineer’s client, not as an inducement to the lender.▪

Disclaimer: The information in this article is for educational purposes only and is not legal advice. Readers should not act or refrain from acting based on this article without seeking appropriate legal or other professional advice as to their particular circumstances.

About the author  ⁄  Gail S. Kelley, P.E., Esq.

Gail S. Kelley is licensed attorney in Massachusetts, Maryland and D.C. She is the author of “Construction Law: An Introduction for Engineers, Architects, and Contractors” ([email protected]).

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How to Balance Lender and Contractor Interests on Alternative Energy Construction Projects

Lenders who finance wind and solar farms often require the EPC contractor to consent to the developer’s assignment of the EPC Contract to the lender to secure the developer’s obligations under the loan documents. Such consents are typically included in a “Consent and Assignment” or “Consent and Agreement” that also includes other promises and representations by the contractor. Because lenders usually depend on the value of the project as collateral for the loan, if the project is not completed, the value of that collateral is severely limited. The Consent and Assignment ensures that the lender can step in for the developer to have the contractor complete the project if the developer defaults on its loan obligations. Contractors, on the other hand, want to ensure that they get paid for the labor, materials and equipment provided to the project. Careful drafting of a Consent and Assignment can protect both lenders and contractors.

Consent to Assignment

The first substantive section in most Consent and Assignments is the contractor’s express consent to the collateral assignment of the EPC Contract to the lender. It requires the contractor to acknowledge that the lender has the right to take over the developer’s role in the EPC Contract, exercising the developer’s rights as the “Owner” under the EPC Contract. This provision gives the lender the assurance that it will be able to have the contractor complete the project even if the developer defaults.

Contractors want to make sure they get paid for their work. Lenders will often agree to pay only for the work of the contractor after the lender steps in, but not for work performed before the takeover. However, the contractor will have difficulty paying its subcontractors and suppliers if the contractor does not receive payment for the previous work. If they are not paid, subcontractors and suppliers may walk off the project or become uncooperative. Then the contractor could have difficulty completing the project, subjecting the contractor to potential liability under the Consent and Assignment. Thus, contractors will want language requiring the lender to cure all payment defaults by the developer under the EPC Contract before the contractor agrees to complete performance. 

Beyond payment, a contractor might depend upon numerous other contractual promises by the developer, such as:

• Access to the site
• Developer permits
• Developer furnished equipment
• Indemnity protection for claims caused by the developer
• Additional compensation for differing site conditions
• Protection from hazardous materials discovered on site
• Information about the project and the site
• Property insurance protection

It may be impossible or much more costly for a contractor to complete the work if such developer duties are not being performed. As a result, it is important for contractors to have language requiring the lender to cure all defaults by the developer under the EPC Contract and to perform all duties of the developer in the event the contractor continues performance for the lender. 

Continued Performance by Contractor

If a lender elects to take over the developer’s role in an EPC Contract, the lender usually wants to make sure that the contractor will continue performance so that the project can be completed as expeditiously as possible. If the contractor terminates before the lender is able to cure a developer default, completion of the project could be delayed significantly, if it is completed at all. Accordingly, most Consent and Assignments require the contractor to give the lender notice of a developer default and to provide the lender a cure period before the contractor is entitled to terminate the EPC Contract.

On the other hand, because the extended cure period can be as long as three to six  months, the contractor could lose millions of dollars while continuing to perform for several months if the lender ultimately decides not to take over the EPC Contract and cure any payment default. To protect themselves from such large potential losses, contractors often negotiate a provision allowing them to suspend performance after a reasonable period if the lender has not yet elected to pay the contractor for continued performance. The contractor may also negotiate the payment of extra costs resulting from such a suspension, as well as an extension in the construction schedule, should the lender take over after the contractor suspends performance.

A contractor will also have potential ongoing costs of standing by, even if the contractor has suspended performance. For example, there may be continuing equipment rental costs or stand-by costs for subcontractors or suppliers. The contractor may also need to keep employees committed to the project in case the lender accepts the assignment. As a result, a contractor may ask the lender to commit to pay the contractor compensation for extending the cure period, even where the contractor is allowed to stop work.

Change Order Approval and Notice of Claims

Lenders do not want to be surprised by material modifications to the EPC Contract. For that reason, some Consents and Assignments provide that all change orders (or change orders over a certain dollar amount) must be approved by the lender to be effective. This can make the change order process more cumbersome. More importantly, if the requirement for lender approval of change orders is not incorporated into the EPC Contract, the requirement could conflict with provisions in the EPC Contract that require the contractor to comply with change order directives from the developer. A contractor may want to provide in the Consent and Assignment that the contractor is not obligated to perform any change order for which there is no lender consent. In addition, there are usually provisions in an EPC Contract entitling a contractor to change orders under proper circumstances, such as force majeure, differing site conditions or changes in law. Because these are not optional change orders, a contractor should clarify in the Consent and Assignment that lender consent is not required for such change orders.

Some Consent and Assignments may require the contractor to provide notice of any “request or demand” to the developer. Such vague language can be difficult for a contractor to comply with, essentially requiring the contractor’s project personnel to copy the lender on all communications with the developer. Contractors may want to limit the types of written notice they are required to provide to lenders.

Representations by Contractor

Almost all lender-required Consent and Assignments also contain a series of representations and warranties by the contractor to give the lender additional comfort that the EPC Contract and Consent and Assignment are valid and binding and that the contractor is capable of performing its obligations under both agreements. Typical required representations include:

• The contractor is duly organized under applicable law and authorized to do business in the place where the project is located.
• All necessary corporate action has been taken by the contractor to enable the contractor to enter into the EPC Contract as well as the Consent and Assignment.
• The EPC Contract and the Consent and Assignment have been properly executed by appropriate officers of the contractor and are in full force and effect.
• There is no pending litigation that could adversely affect the contractor’s performance under, or the enforceability of, the EPC Contract.
• The execution and performance of the EPC Contract and the Consent and Assignment will not violate any applicable law or contractor’s corporate policies.
• The contractor is not aware of any current default under the EPC Contract.

A contractor required to make such representations should perform due diligence to confirm they are completely accurate and should request modifications to representations that are overly broad or speculative. For example, if a contractor is asked to provide a representation regarding the actions of the developer, or regarding possible present or future conditions that could impact the enforceability of the EPC Contract, the contractor may want to limit the representation “to the best of the contractor’s knowledge.”

Parties to Consent and Assignment

Many Consents and Assignments are set up to be signed only by the contractor or only the contractor and developer. However, if a contractor wants to include provisions in the Consent and Assignment as discussed above that are binding on the developer and lender, it is essential that the Consent and Assignment include the lender and developer as parties and be signed by them.

Contractors understand that lender financing is necessary for most solar and wind farm projects, and that such financing cannot happen without adequate safeguards to protect lenders’ interests. For that reason, most contractors will not object to signing a Consent and Assignment, but they may request reasonable modifications to protect their rights under the EPC Contract.

The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.

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