A contractual default may not always affect performance of the project activities therefore the action taken under the default plan needs to be determined in light of the overall relationship with the private party.
In some instances, it may be appropriate to take no direct action in response to a particular default, such as a private party not getting consent for a change of control. However, in doing so, the government party should be careful not to give up its right to act freely in respect of future defaults of the same kind or of any other kind, or in respect of other existing defaults. It should avoid informal waivers. The government party should seek legal assistance in preparing a written waiver letter. If the government party wants to be able to act freely in respect of future defaults, the waiver letter should clearly communicate to the private party that:
• the private party was in default under the project deed;
• in this particular instance, the government party has chosen not to take action;
• the private party will be expected to fully comply with the project deed (and associated project contracts) in future; and
• future defaults may result in the government party taking any action available to it under the project deed.
If the government party is willing to give up the right to take any action relating to similar future defaults, this should be documented as a variation to the contract or waiver of the right to act in that instance.