Petrol Pump Lease And Revenue Sharing Agreement

CS Shirish Bhootra
Mar 10, 2023
3 min read

Written by CS, LLB Shirish Bhootra

Aakash, the owner of the land, wants to lease his land to a petroleum company [Hindu Petrochemicals Limited] for a retail petrol station for 29 years. The land is 5 km from Wardha city in Maharashtra state, costing Rs. 1 crore per acre. Regarding this lease, he has a few questions,

The lending of land on the lease agreement as an owner of the land and the dealership is provided to SC/ST candidates.
Whether it is profitable to lease land for the said purpose for long term
How should we negotiate and on which points with the company on the rent agreement, including increments in rentals considering inflation and property valuation in the future?
To have an option for Revenue Sharing between Aakash and Company, how to exercise it, and other related aspects.

He discussed all this with his friend Mahesh, who suggested the execution of the “Petrol Pump Lease And Revenue Sharing Agreement.” Hence, he executed it to have the solution to all the points mentioned above.

Introduction

To understand the petrol pump lease and revenue-sharing agreements, let’s have clarity on key terms contained in this variant of agreements which are as follows :

1. Lease agreements.

2. Revenue Sharing agreements.

Lease Agreement: Contents

The lease agreement highlights and describes the obligations and responsibilities of the landlord (lessor) and the tenant (lessee). It clarifies what the landlord and tenant have consented to in regard to the lease's length, the rent structure [monthly or yearly or any other amount of rent], and who is responsible for the upkeep of the property. A lease agreement may have modifications regarding terms and conditions before the parties' signing. In case of any ambiguity regarding any terms and conditions, it may have an alteration to have clarity and no scope for ambiguity.

Legal Agreements: Binding Nature Document

After signing the lease agreement, it is binding on the parties and provides what the landlord and tenant can and cannot do during the lease term. The lease agreement is a legal, binding contract between the parties to the agreement. It would be considered a piece of evidence in a court of law in case of any initiation of legal proceedings between parties to an agreement.

Revenue Sharing Agreement: Meaning

A revenue sharing agreement is a legal document between two parties where one party agrees to pay a percentage of profits or revenues received to the other as a consideration for the rights to use something. This contract allows business entities to share profits from a product or service directly linked to the entity’s core business.

Revenue Sharing Agreements: Contents

Though a revenue-sharing agreement is drafted as per the requirements of parties to an agreement, however, all revenue agreements comprise of following important clauses which are as follows :

Revenue Sharing Clause
Representations and Warranties Clause.
Governing Law Clause
Arbitration Clause
Amendment Clause

So lease and revenue agreements, when both forms part of one agreement, it is known as lease and revenue sharing agreements. In the petrol pump business, it is known as a Petrol Pump lease and revenue sharing agreement.

Petrol Pump Lease and Revenue Sharing Agreement: Meaning

This Petrol pump lease and revenue sharing agreement is executed among the parties whereby one party is said to be a landowner who has provided his land on lease to the other party who wants to develop and operate a petrol pump on that specific land. In this agreement, the parties consent regarding the share of revenue generated from the operation of the petrol pump. These agreements disclose the parties’ rights and responsibilities, which minimizes the chances of disputes among parties to the agreement and so plays a crucial role in the case of such ventures.

Necessity of PPLRSA

To have clarity among parties regarding their roles, rights, as well as responsibilities, and also clarity regarding aspects that may lead to conflict among parties.
It outlines and highlights the terms and conditions governing the transaction between the parties.

Conclusion

Petrol Pump Lease and Revenue Sharing Agreements are to be drafted with utmost care and caution, as post sign of parties to agreements, it is binding on parties to agreements. It plays a crucial role as it discloses the role of parties to an agreement, and their responsibilities, which minimizes the chances of dispute among parties, and the business operations may be executed effectively and efficiently.

References:

Legal Nature, What is a Lease Agreement? (legalnature)
Contracts Counsel, Revenue Sharing Agreement (contractscounsel)
Lawyered, Petrol Pump lease and Revenue Sharing Agreement (lawyered)