Wednesday, April 11, 2012

Can I transfer the contract for a renewable energy project to another third party?

There are many reasons why either the landowner or developer may want to transfer or assign their agreement providing for site control for their renewable energy project. For wind projects the agreement between the landowner and developer providing for site control is often an Option to Lease Agreement whereas for solar PV the agreement is often a Lease Agreement.

A properly drafted Option or Lease Agreement will contain an assignment provision outlining if and how the parties can assign the agreement to a third party. A portion of a typical developer-friendly assignment clause in a wind Lease Agreement is noted below:
The Lessor agrees that the Lessee may assign or sublet the whole or any part of this Lease or the Lands at the sole and absolute discretion of the Lessee to any third party provided that the assignment is for the purpose of the business of constructing and operating the Windpower Facility and any use ancillary thereto continuing to be carried on by the assignee or the sublet tenant on similar terms and conditions as are contained within the Lease herein and that accordingly, provided the use is as so set out herein, the assignment or sublet shall be without the leave, consent of, or notice to the Lessor. It is also understood that the Lessee herein may, without the leave, consent of, or notice to the Lessor, assign the within Lease to: 
  1. an affiliate or corporation to be incorporated by the Lessee to carry out the Project on the subject Lands;
  2. one or more of its lenders, mortgagees, beneficiaries of deeds of trust, or other holders of a beneficial interest in a Mortgage.

What if there is no assignment clause in my contract?

The situation becomes complicated where there is no assignment provision in the Option or Lease Agreement which prevents, allows or otherwise contemplates assignment of the contract. Generally speaking, where there is no express provision permitting assignment of a contract, and all parties have not consented to such assignment, the assignment of the contract is not possible where the transfer may be overly burdensome on one of the parties. Simply put, as G.H.L. Fridman noted in his book, The Law of Contract in Canada (Fourth Edition) in such situations “the assignment must not throw uncontemplated burdens on the debtor, to his prejudice.”

Assignment of a contract absent an express provision may be permitted in certain situations, but the rule permitting assignment is “confined to those cases where it can make no difference to the person on whom the obligation lies to which of two persons he is to discharge it.” This principle was stated in the case of Tolhurst v. Associated Portland Cement Manufacturers (1900) Ltd. (1902) 2 K.B. 660 (C.A.), affd (1903) A.C. 414 H.L.

1 comment:

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