Easy guide to tripartite agreements

A tripartite agreement can be interpreted rather literally as a tri (three) party agreement. However, because these agreements account for multiple parties’ interests, they can be a bit tricky to navigate. This Business Kitz’s blog will walk you through the basics of what a tripartite agreement is, and what they involve. 

What is a tripartite agreement? 

A tripartite agreement is a legal document which contractually binds three parties to a set of negotiated terms, outlining their relationship, rights and obligations to one another. The most common dynamic that these agreements depict can be seen in property development, in which terms are established between a developer/buyer, finance lender and builder. The clauses of the agreement serve to secure the terms of the loan and outline any necessary obligations. However, as there are more parties to consider then usual two-way contracts, it can be difficult to navigate terms due to varying interests. Points of contention are commonly associated with loan repayment schedules if applicable, and varying interest rates. 

What are some examples of when a tripartite agreement is actioned?

As aforementioned, property development and building projects are the most common use of tripartite agreements. Another example of when tripartite deeds are used is for the client transition from one solicitor to another. This provides clarity in terms of how the former solicitor can claim the unpaid amount of their work from the client who found a new solicitor. 

Why include details of the loan?

In major property development projects, the entire process and success of the construction is usually contingent on a financial loan, in order to secure resources. These loans usually involve extremely large sums of money, thus thorough clauses must be established to protect the rights of the loaning party. It is important to explicitly outline the details of the loan, including a repayment schedule, interest rates and the amount loaned. Defaults and consequences for failing to comply with these details are also essential to outline. These clauses bring security to the lender and the borrower. 

What is included in a tripartite agreement? 

Most tripartite deeds include:

  • Name and details of the involved parties;
  • The objective of the agreement ;
  • Relevant details of the loan (amount, interest rate, repayment schedule); and
  • Forms of default (failure to make payment) and the consequences of these breaches.

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Legal advice

Tripartite agreements are complex contracts due to the multiple parties concerned. If you require assistance drafting or navigating tripartite agreements, our sister company Legal Kitz is here to help! Our business law specialists can assist with ensuring that your concerns are addressed by providing tailored advice. You can book a free 30-minute consultation with our experienced and highly qualified team via our website now.

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