A Commitment is a financial obligation by one party (payor, typically the Client) to pay a sum of money to another party (payee, typically the Supplier), in relation to an Order, and according to the Payment Terms of the related Tranche.

The commitments also serves as the basis for generating the Accounting Documents (invoices, proforma, receipts).

In the FlexUp system, all Commitments are either Firm or Flexible; this distinction is at the heart of the FlexUp Economic Model:

• Firm Commitments: unconditional obligations with a fixed due date and amount (equivalent to classic, conventional payment terms).
• Flexible Commitments: conditional obligations whose payment depends on the Project's available cash (including Preferred, Flex, Superflex, Credit, and Token priorities).

Commitment levels

Each Commitment may also be:

• Primary Commitments: represent the principal amount of the **tranche;** the actual amount owed (think as the cake).
• Secondary Commitments: represent the reward for taking on risk by the payee on the payment of the principal by the payor, which can be in the form of tokens, interest or distributions (think as the icing of the cake).

Commitment natures

There are four commitments natures:

• Main: primary commitments whose outstanding amount is fixed over time and is equal to their principal amount.
• Tokens: primary or secondary commitments whose outstanding amount is equal to the number of token units multiplied by the token index, which varies over time.
  • Primary tokens are issued instead of the main commitment, so their principal amount is equal to that of the tranche.
  • Secondary tokens are issued in addition to the main commitment, and their principal amount is equal to the tranche principal amount multiplied by the tranche risk factor.
• Interests: secondary commitments whose outstanding amount is equal to its principal amount multiplied by the interest rate over the applicable time period.
• Distributions: secondary commitments created during the projects’s (token issuer) annual resolution cycle, and whose outstanding amount represents a share of the total distribution allocation, proportional to the number of token units held by the associate (token holder).

Properties

Here are the key properties of commitment, which are common to all commitment types:

• Payor and Payee: the accounts involved in the payment, same as the related tranche.
• Priority: determines the order in which payments are made:
  • Firm priority commitments must be paid first on the due date, as per the conventional economic system,
  • Flexible priority commitments are conditional, as per the FlexUp economic model.
    • Flexible priorities are only available if the payee has signed the FlexUp Charter.
    • Their payment is subject to the available cash of the “Project” (the account whose Charter this order is subject to).