And that`s where things get out of the way. The lender asks you to enter into a new agreement with the buyer to provide the following terms, the buyer will pay $x/month to the seller and take the product or, if not taken, pay the amount to the buyer`s lender. 7. Confidentiality agreement: This part of the correspondence agreement is binding because you may not want your out-of-taker to reveal your plans or even the presence of a POTA. Therefore, be sure to include a section that requires each party to obtain the agreement of the other party for any disclosure of the terms of the letter – or even the existence of the letter. It turns out that you are in a very bad position because you sold what you did not have and you did not enter into a promised delivery contract. Everything you created was a responsibility and, most likely, a lawsuit. Believe me, if I say, no contacts engaged — just non-binding agreements. 9. Signatures: Make sure all parties sign the agreement. Many years ago, I discovered that my future producers were using the drawings of my POTA without my signature – of course, when investors or lenders called me for a due diligence audit, I had to tell them that there was no agreement, because the manufacturer never returned a signed document. Well, let`s think about that.
Your lender asks the buyer to pay a minimum amount each month to complete the monthly payment of the loan. It makes sense, doesn`t it? It doesn`t make sense to the buyer. Whether you know it or not, the lender has just exchanged your credit for your buyer`s. This means that if your project has problems, then your off-take is responsible for monthly payments, even if you don`t make products. That sounds ridiculous, and you may think no one would, but I see this scenario in about 20% of the risk loss agreements I sign. Once you have signed pota, you can use the agreement to prove that you have buyers who have reported their willingness to buy your product. You can show it to investors and lenders to answer their questions about who will buy the production of your facility. Your counterpart will take it from there and let you know if they have an interest or not. Don`t try to talk to them when buying your product, but if they`re negative, ask them what it would take for them to have an interest.
Maybe you are at an early stage or you may have an agreement that would prohibit them from contracting with your project. Offtake agreements are carefully developed, long-term agreements between buyers and sellers, which are negotiated and concluded even before the thematic project is developed, take effect when the development of the project is completed and production is put online and continues for a long time, at least several years. These agreements help the project owner finance the project and, indeed, are most likely necessary, as the offtake agreements are a promise of future revenue and proof of the existence of a market for the product. Pota is a legally known letter-to-letter contract known as a non-binding letter of intent. Many would prefer a binding agreement for the other party to buy their production, but let me explain why this is not possible. A taketake contract is an agreement between a buyer and the seller of a resource to buy or sell products that still need to be produced.