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Production Payment Agreement for the United Kingdom

Production Payment Agreement Template for England and Wales

A Production Payment Agreement is a financing arrangement governed by English and Welsh law where an investor provides upfront capital in exchange for the right to receive payments based on future production output. The agreement details the calculation methodology, payment terms, security arrangements, and obligations of all parties. It typically includes provisions for monitoring production, reporting requirements, and remedies in case of default. The document is structured to comply with English law requirements while providing clarity on complex payment mechanisms and security arrangements.

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Production Payment Agreement

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What is a Production Payment Agreement?

The Production Payment Agreement serves as a key financing instrument in various industries where production-based financing is required. Under English and Welsh law, this agreement establishes the legal framework for an investor to provide upfront capital in exchange for future payments tied to production output. It is commonly used when traditional debt or equity financing may not be suitable or when parties seek to create a direct link between financing and production performance. The agreement typically includes detailed provisions on payment calculations, security arrangements, monitoring rights, and reporting obligations, while ensuring compliance with relevant regulatory requirements.

What sections should be included in a Production Payment Agreement?

1. Parties: Identifies and defines all parties to the agreement

2. Background: Sets out the context and purpose of the agreement

3. Definitions: Defines key terms used throughout the agreement

4. Production Payment Rights: Details the rights granted regarding production payments, including calculation methods and timing

5. Payment Terms: Specifies payment amounts, schedules, and mechanisms

6. Security Provisions: Details any security arrangements securing the production payments

7. Representations and Warranties: Standard representations and specific production-related warranties

8. Covenants: Ongoing obligations of the parties

9. Events of Default: Circumstances constituting default and consequences

10. Governing Law and Jurisdiction: Specifies applicable law and dispute resolution forum

What sections are optional to include in a Production Payment Agreement?

1. Assignment: Rights to transfer the agreement to third parties - include when parties want to specify transfer rights

2. Force Majeure: Provisions for unforeseeable circumstances - include when production might be affected by external events

3. Hedging Arrangements: Provisions regarding price hedging - include when price volatility protection is needed

4. Insurance: Required insurance coverage - include when specific insurance requirements exist

What schedules should be included in a Production Payment Agreement?

1. Production Asset Details: Details of the assets subject to production payments

2. Calculation Methodology: Detailed methodology for calculating production payments

3. Form of Reports: Templates for required production and payment reports

4. Security Documentation: Forms of security documents if applicable

5. Payment Procedures: Detailed payment mechanisms and processes

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

England and Wales

Publisher

Ƶ

Document Type

Payment Agreement

Sector

Banking

Cost

Free to use
Relevant legal definitions






































Clauses





























Industries

Contracts Act 1999: Primary legislation governing contract formation and enforcement in England and Wales

Sale of Goods Act 1979: Regulates contracts for the sale of goods, including quality standards and implied terms

Supply of Goods and Services Act 1982: Governs contracts for the supply of goods and services, including implied terms about quality and fitness for purpose

Law of Property Act 1925: Fundamental legislation regarding property rights and security interests in England and Wales

Companies Act 2006: Primary legislation governing company operations and corporate transactions in the UK

Late Payment of Commercial Debts (Interest) Act 1998: Regulates interest charges on late commercial payments and provides statutory right to claim interest

Financial Services and Markets Act 2000: Framework for financial services regulation and financial transactions in the UK

Bills of Exchange Act 1882: Governs negotiable instruments and certain payment mechanisms in commercial transactions

Insolvency Act 1986: Regulates corporate and personal insolvency procedures and creditor rights

Enterprise Act 2002: Reformed insolvency law and introduced changes to corporate rescue procedures

Financial Collateral Arrangements (No.2) Regulations 2003: Governs security arrangements in financial transactions and their enforcement

Value Added Tax Act 1994: Primary legislation governing VAT obligations and procedures in the UK

Rome I Regulation: EU regulation determining applicable law in international contracts (retained in UK law post-Brexit)

Brussels I Regulation (Recast): Determines jurisdiction in international disputes (retained in UK law post-Brexit)

Common Law Principles: Body of case law covering contract formation, consideration, breach, remedies, and assignment principles

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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