Commercial close
In the UK construction industry, commercial close refers to the stage in the procurement process when all commercial and financial terms of the contract have been agreed by the parties involved, but before the financial close. It signifies that the parties have finalised the negotiation of the commercial aspects of the deal, and the contract is ready to be executed, though the project may still await final financing arrangements.
This requires that all parties have reached an agreement on the pricing, scope of work, risk allocation, schedules, performance standards, and other commercial terms adn that the contract documents, including detailed specifications, payment schedules, and penalty clauses, are finalised and ready for signing.
The contracts, agreements, and any necessary collateral warranties or side agreements are fully drafted and agreed upon by all parties and legal due diligence is completed, ensuring that all contractual documents comply with relevant laws and regulations.
The parties are prepared to sign the contracts, subject to finalising the financial aspects of the project, and any conditions precedent to contract execution, such as obtaining certain approvals or permits, are either satisfied or on track to be satisfied.
The project is poised for financial close, which involves securing the necessary financing, finalising arrangements with lenders, investors, and other financial stakeholders.
Financial close occurs after commercial close, when all funding agreements are signed, and financial conditions are met. It marks the point at which the project can proceed with funding in place, allowing construction to commence or continue.
For more information see: Financial close.
Reaching commercial close ensures that all commercial risks and responsibilities are clearly defined and agreed upon, reducing the potential for disputes later in the project. It demonstrates that the project is commercially sound, which can facilitate securing financing and provides clarity on all commercial aspects of the project, allowing stakeholders to proceed with confidence towards financial close and subsequent construction phases.
[edit] Related articles on Designing Buildings
- Contract award.
- Contracts under seal v under hand.
- Construction contract.
- Construing a contract.
- Contract conditions.
- Contract documents.
- Contract execution.
- Contract negotiation.
- Engrossment.
- Essentials of a contract.
- Financial close.
- Form of tender.
- Glossary of property law terms.
- Privity of contract.
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