Concessions: Overview, definition, and example
What are concessions?
Concessions refer to agreements or allowances made by one party to another, often involving the relaxation of certain terms or conditions. In business, a concession may involve a reduction in price, the granting of special privileges, or the provision of services or resources in return for something of value. Concessions can also refer to the right to operate in a particular area or industry, such as granting a business the right to operate a food stall in a specific location or to extract natural resources from a piece of land.
For example, a company may offer a concession on its products by lowering prices or offering additional services in exchange for a longer contract or a bulk purchase agreement.
Why are concessions important?
Concessions are important because they are a way to reach an agreement or compromise between parties, often to facilitate a deal, resolve a dispute, or incentivize further engagement. They can help make a transaction more attractive, encourage business relationships, and address concerns or needs that might otherwise prevent a deal from going forward. In competitive environments, such as in negotiations or tenders, concessions can be key to securing a contract or deal.
In the context of business, concessions may be used as a tool to gain a competitive advantage, improve customer satisfaction, or meet specific client demands. In public or government contracts, concessions might involve the granting of operational rights or privileges to private companies, such as in the case of concession contracts for managing public utilities, transportation systems, or other services.
Understanding concessions through an example
Imagine a restaurant that offers a concession to a corporate client by providing a discount on meals in exchange for the company agreeing to hold its annual conference at the restaurant's event space. In this case, the restaurant is granting a price reduction (the concession) in exchange for the business provided by the corporate client.
In another example, a government agency may grant a company the concession to operate a kiosk in a public park. The company may be allowed to sell goods or services at the location in return for a percentage of the revenue or a fixed fee paid to the government. The concession benefits both parties by providing a business opportunity for the company and generating revenue for the government.
An example of a concessions clause
Here’s how a clause about concessions might appear in a contract or agreement:
“The Seller agrees to grant the Buyer a concession of [specific percentage] off the listed price for bulk orders exceeding [specified amount]. In exchange, the Buyer agrees to place an order for a minimum of [quantity] units within [specified time frame].”
Conclusion
Concessions play a vital role in negotiations, business transactions, and contracts by providing flexibility and mutual benefits to the parties involved. Whether through price reductions, service enhancements, or the granting of operational rights, concessions help businesses and organizations reach agreements that may not be possible under standard terms. By offering concessions, parties can create value, resolve conflicts, and build stronger, more cooperative relationships in various contexts, from customer dealings to large-scale governmental agreements.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.