Concession Agreement – Definition

Cite this article as:"Concession Agreement – Definition," in The Business Professor, updated December 15, 2019, last accessed June 2, 2020, https://thebusinessprofessor.com/lesson/concession-agreement-definition/.

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Concession Agreement Definition

A concession agreement is a contract between two parties where one party grants the other the rights to operate a particular business in a facility under certain conditions. In a concession agreement, land, property and other rights are negotiated between the two partied involved in the contract.

Concession agreements can occur between governments and companies, where such companies are allowed to carry out business operations within the state jurisdiction upon meeting certain criteria. Concession agreements can also occur between two business owners where one party gives the other rights to operate in a facility, given certain conditions. Concession agreements are often used in Purchase Power Parity (PPP).

A Little More on What is a Concession Agreement

Concession agreements can be used in different industries. Negotiation is key in this type of agreement. A party can negotiate to be granted rights, lands, and properties for business use under specific conditions. In a concession agreement, a government, local authority, legal entity or corporate establishment can grant a right, land or property that the other party can operate under certain conditions.

For instance, a mining company can reach a concession with the government to carry out mining activities within a certain jurisdiction under specific conditions. Concession agreements can also occur between service providers in the same industry, for instance, a movie producer can reach a negotiation with the owner of a cinema or movie theater for his played to be aired in it.

Concession Agreements and Railroad Track Usage

Concession agreements occur mostly between governments of countries and private businesses or corporations. The common concessions between governments and private individuals include the following;

  • The right to use a particular region for mining activities by a private mining company.
  • Rights given to a private business to use government infrastructures such as water supply, railway, seaports and others for private business.
  • A tunnel constructed by the government can also be granted to a private organization under a concession agreement.

Usually, in concession agreements, some of the conditions given when a private business received exclusive rights to use a property include maintenance of the utility, repair when necessary and other remuneration.

Common Retail Concessionaires

Concession agreements are also popular among retail businesses, whereby these businesses use the facility or business location of the other party under certain conditions. Retailers can also reach a concession agreement with local authorities whereby they are given the right to sell their products at federal parks, amusement parks and other open spaces owned by the government.

The conditions in a concession agreement can include payment of fees, percentage of revenue made or being liable for the cost of maintaining the facility.

References for “Concession Agreement”

https://www.investopedia.com/terms/c/concessionagreement.asp

https://en.wikipedia.org/wiki/Concession_(contract)

https://www.designingbuildings.co.uk/wiki/Concession_agreement

https://financial-dictionary.thefreedictionary.com/Concession+agreement

https://www.pandadoc.com/concession-agreement-template/

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