Hire-Purchase Agreement and Hypothecation Deed: Hirer's Obligations and Bank's Security, Exercises of Banking and Finance

Download Hire-Purchase Agreement and Hypothecation Deed: Hirer's Obligations and Bank's Security and more Exercises Banking and Finance in PDF only on Docsity! LESSON 37 DESIGNING LEGAL DOCUMENTS Hire-Purchase Agreement Hire-Purchase agreement is the basis of facility/ finance provided by the bank to the hirer. In these cases, the party availing the facility or the borrower is the hirer and the party providing the facility/ credit is the purchase. In this arrangement, the bank in the capacity of purchaser purchases the articles from the supplier and the borrower/ hirer agrees to hire the said articles from the bank and bank agrees to let out said articles to the hirer. The hirer is required to pay monthly/ or periodic rent under hire- purchase agreement. The specimen of hire-purchase agreement is appended below: Specimen of Hire-Purchase agreement This agreement made at-------- this the 2nd day of March, 2008 between ABC bank hereinafter called “The Bank” and M/S XYZ--------- called “The Hirer” Whereas the hirer has agreed to acquire the Articles as per agreement and also agreed to hire from the Bank the said articles and the bank at the request and for the use of the Hirer has agreed to purchase the said Articles from its supplier after paying the cost, charges etc. and has entered into Hire- Purchase agreement. Hirer has agreed to pay monthly rent of Rs.---- It is agreed between the parties as mentioned in forthcoming Articles. The Bank at the request of and after having received an initial deposit of Rs........... from the hirer(s) shall purchase the said articles from its supplier by making payment of the price of Rs………and/or entering into an agreement with the supplier in this regard .and .shall acquire all the ownership, proprietary rights, title and interest in the 'said articles and every part thereof in its own favor. The Bank shall procure the documents evidencing its title to ‘the said articles' and shall get all the formalities completed in this regard. That the hirer(s), against a delivery order of the Bank, shall obtain/procure the physical delivery and possession of 'the said articles directly from the supplier after holding thorough inspection/examination (hereof and having been fully satisfied that (the said articles are in accordance with the specification approved by (he hirers) The Bank shall not be liable for any shortfall, defect or lacuna whatsoever which may be subsequently discovered by me hirer in (the said articles and the hirer shall solely be responsible for (the same and shall indemnify the Bank against any losses or damage that the Bank may incur as a consequence of any shortfall, defect or lacuna that may be found in the said articles. The hirer(s) confirm that the said articles shall continue to be the sole and exclusive property of me Bank and the hirer(s) shall have no right, interest and claim therein by reason of the original contract arrangement having been entered into by them with the supplier or due to any reason whatsoever and until 'the said articles' are specifically conveyed by the Bank unto the hirer(s) and the same during the subsistence of this agreement shall be held by the hirer merely as bailee with no authority whatsoever to mortgage, pledge, sub let or otherwise use the same for any purpose other than for which it was hired by and delivered to the hirer(s). ARTICLE - II Security for Intermediate Period That until the acquisition of "the said articles' in favor of the Bank is completed in all respect, the Bank's commitment shall amount to an accommodation or a facility or an investment for the purposes and use of the hirer(s) and the hirers undertake to indemnify the Bank from all risks and losses due to any default or by reason of any omissions and commissions leading to any such risks and losses to the Bank directly or indirectly. That the hirers in order to assure the better performance of the hirer's obligations hereunder shall execute and furnish such securities and guarantees in favor of the Bank as may deem fit within the sole discretion of the Bank from time to time. docsity.com ARTICLE-III Hire-Purchase Covenant 1. The hirer has agreed to take and the Bank has agreed to let on hire 'the said articles' on payment of monthly rent/hire installment of Rs.15, 000/ .......................for a period of...48...;......................months each payable by (the hirer(s) to (he Bank on and before 10th day of each month without default or delay commencing from the month of...............................2008. That the hirer.(s) shall obtain the delivery of 'the said articles' directly from the supplier or their agent against a delivery order issued by (the Bank and shall manage for installation, fixation, storage and transportation thereof and shall hold and enjoy the peaceful and quite possession thereof as a bailee and shall be entitled to use '(the said articles) or the purpose it was hired without any let and hindrance whatsoever until (the Bank terminates (the arrange-ment with prior notice or otherwise re- lakes (the possession/custody thereof. In the event of regular payment of the hire money in monthly installments for the full and entire hire period as stipulated herein and compliance of the term and conditions hereto during (the agreed period by (the hirer the said articles shall at (the hirer's option become the absolute property of the hirer on payment of a token amount of Rs. 100/ to the Bank and the Bank shall transfer the ownership unto the hirer. 3. Notwithstanding the above the hirer shall have the option of purchasing ‘the said article’ at any time during the subsistence of the agreement by paying tile; hire installments for the remaining hire period in lump sum together with other expenses as may have been incurred by the Bank. That during the subsistence hereof the aforementioned monthly rent/hire installments shall not be subject to suspension or delay due to any reason including any force major circumstances nor shall be withheld or delayed due to 'the said articles' being out of operation and/or becoming non-productive and/or breakage and/or mechanical fault and/or non-receipt of "Insurance claim(s) for non-installation and/or due to any other cause whatsoever. The hirer shall, during the subsistence of the arrangement evidenced by these presents keep the said articles in its sole custody and control in good working condition at the specific address of die hirer and at no other place unless otherwise permitted by the Bank if writing and shall not allow the said articles to be used by any body else nor shall without written consent of the Bank employ the same for the purposes other than the purpose for which the said articles were originally acquired by the hirer The hirer shall be obliged to allow the Bank's Officers aid nominees to inspect, survey and examine the said articles at any time without prior notice to the hirer and shall also furnish periodical reports to the Bank in such form as may be required by the Bank. The hirer(s) shall not during (he subsistence of these pre-sents and until final conveyance of the said articles by the Bank to me hirer, mortgage, transfer, hypothecate, pledge, gift, lease or sublet the said articles or part thereof to any one nor shall the hirer create any charge, encumbrances or burdens in any manner against the said articles or part thereof. .The hirer shall keep the said articles in good repairable condition and working order and shall take all appropriate measures to save the same from any sort of defect, loss, injury and damage and depreciation" to the said article and accessories thereto. And such defect, loss, damage and injury and whenever so occurred and caused thereto during the currency of the arrangement shall be forthwith removed by the hirer at his own cost and risk The hirer shall always keep (he said articles duly insured in the name of the Bank with such Insurance Company (ies) as may be approved by the Bank against loss due to fire/storm, theft, accident, natural calamities and other risks and shall pay the premium there against prior to the expiry of the existing insurance and/or before the taking of the delivery of the said articles. 9. In case the hirer fails to purchase such Insurance Policy the Bank shall be entitled but shall not be bound, to get the said articles duly insured at the cost of the hirer. The hirer shall pay all the rates, taxes, tolls, license fee, charges, fine, cuss and other imposition which may be payable to any Government and Semi-Government Agency, authority, body and/or private person whosoever. docsity.com Schedule –II All the piece and parcel of plot of land Measuring 20 Marlas bearing # 241-Z Johar Town, Lahore, together with building, Walls, structures, Fixtures, Attachments, Walls and bounded as under: On or towards north by: Street-named Kashmir Road On or towards south by : House No 140 On or towards east by: House No 240 On or towards west by: House No 242 Deed of Mortgage In witness whereof the Mortgagor has set and subscribed his hands on the day, month and year, first herein above written. Signed and delivered Signature By the Mortgagor in the Mortgagor presence of following Witnesses: Witness 1_____________ Witness 2_____________ Letter of Hypothecation Specimen of Letter of Hypothecation: In consideration of The XYZ Bank Ltd. ---- . (hereinafter called the “Bank” which expression shall include its Successors and Assigns) granting/agreeing to grant/continue granting loans/advances/credit banking facilities (hereinafter called the “Facilities”) amounting to Rs.--- to me/ us to such extent and for so long as the Bank may think fit, I/We the undersigned __-------_____________P.O.Box No -------- (hereinafter called the “Borrower” which expression shall include me/us and my/our legal heirs, Successors and Assigns ) hereby hypothecate, in favour of the Bank by way of first charge , as security, for full repayment of the facilities to the Bank together with all charges, all things and stocks as described in general terms in the schedule hereto, (hereinafter called the “Goods”), which expression shall include all products and stocks and moveable property, of any kind and whether raw or in process of manufacture and all things or articles manufactured there from which now or thereafter from time to time during the process shall be brought into store(s) or be in or about the Borrower’s godown(s) or premises at different places including in course of transit or delivery . The Borrower hereby undertakes and covenants the following with the Bank: a. The Borrower shall not at any time so long as there shall be any amount due by the Borrower to the Bank remove or cause or permit to the removed from the premises and /or godowns where the goods are stored nor divert or otherwise dispose of or encumber, charge or pledge or mortgage the Goods or any part thereof to any other party nor do any act whereby the Bank’s security shall in any way be prejudiced or affected. The Borrower hereby undertakes and covenants the following with the Bank: b. The Borrower shall deposit with the Bank all sale proceeds of the Goods and insurance proceeds and recoveries thereof, which shall always constitute an integral part of the security. The Borrower hereby undertakes and covenants the following with the Bank: c. In the event of committing any default of any of the provisions of this Hypothecation Deed, the Borrower shall pledge the Goods to the Bank by way of a floating charge and all goods and moveable property of any kind and nature belonging to the Borrower which now or thereafter or from time to time during the continuance of this security be brought in, stored in the premises or go downs as mentioned in the schedule hereto and/or elsewhere on in the course of transit as a security for the Borrower’s indebtedness to the Bank. docsity.com The expression Borrower’s “indebtedness” to the Bank shall include the principal amounts from time to time due on Borrower’s facilities together with all interest and all other charges which the Bank may pay or incur in connection with the Goods, or the sale or disposal thereof and all other moneys whether hereof or by law payable by the Borrower to the Bank in connection with or relation to the Goods. 3. The Borrower shall make and provide to the Bank statement periodical reports and returns in respect of the cost and market value of the goods and a detailed description thereof and produce such evidence in support thereof as the Bank may from time to time require. That the amount of Borrower’s total indebtedness to the Bank for the time being together with mark up /interest and other charges shall all time during the period of this hypothecation have a margin not less than __________ % of the market value of the hypothecated goods. Such market value shall be decided from time to time by the bank which decision shall be final and binding on the Borrower. The difference between the Borrower’s indebtedness to the Bank and the market value of the goods shall be maintained either by providing further security as may be approved by the Bank or by cash payment. The Bank at its sole discretion may employ the services of any independent Survey the value of hypothecated goods and the cost of such evaluation shall be borne by the Borrower. The Borrower shall insure and keep insured the hypothecated goods for their full market value against fire, pilferage, theft, damage, loss and all other risks with an Insurance Company approved by the Bank with the Banks as First Beneficiary, in the name and the sole benefit of the Bank, and the Borrower will assign and deliver to the Bank, all the insurance policies and deliver the premium receipts paid for such insurance. The Bank may at any time at its sole discretion, affect such insurance at the sole expense of the Borrower, if the Borrower fails to insure the Goods as aforementioned within 12 (twelve) hours after notice of demand served on the Borrower. All sums received under insurance (s) as aforesaid, shall be applied towards the liquidation of the Borrower’s indebtedness to the Bank. The goods hypothecated to the Bank shall be kept at the sole risk and responsibility of the Borrower wherever and in whatever godowns, premises, sheds or places they maybe stored. The Borrower shall pay all rents, rates, taxes and other outgoings, of the godowns and premises wherein the goods are stored and shall keep the goods and marketable condition. The Bank or their representatives or nominees shall be entitled at any time without notice to enter any place where the goods are located or stored for inspection and examination. Event of Default Without prejudice to the generality of the foregoing, the Bank shall have the absolute right at anytime without notice to take charge and possession of the Goods upon occurrence of any of the following events: - a. If the borrower fails to maintain the margin (s) as aforementioned. b. If the borrower fails to pay the balance (s) due to the bank on demand. c. If the borrower commits breach of any of the terms and conditions herein contained. d. If the borrower suffers distress or execution to be levied or enforced upon or against all or any of the borrower’s property. e. If the borrower fails to effect any payment of the indebtedness on its/their due dates. The Bank upon taking charge and possession of the goods in terms of clause 7 shall have exclusive right and discretion to sell the goods and to appropriate the sale proceeds towards satisfaction of the Borrower’s indebtedness to the Bank. The Bank shall have the right to claim from the Borrower any shortfall if the sale proceeds do not fully satisfy the Borrower’s indebtedness to the Bank. The Bank records and statements made by the Bank showing the indebtedness of the Borrower shall be and continue to be final and conclusive evidence as to the correctness of such indebtedness. The Borrower hereby declares that all the goods are free from any prior lien, charge or encumbrance, whether legal or equitable and that the Borrower holds lawful authority to hypothecate the Goods. The Borrower agrees and undertakes to repay to the Bank the entire indebtedness on receipt of first demand shall be a conclusive and final evidence that the repayment of the indebtedness of the Borrower to the bank is due. The Borrower hereby agrees and undertakes to carry out and his/their obligations hereof. This hypothecation shall operate as a continuing security for all the indebtedness or liabilities owing by the docsity.com Borrower to the Bank notwithstanding any partial or intermediate repayment(s) or adjustment(s) made at any time, without prejudice to the other rights and remedies open to the Bank under the Law. Any violation of the terms and conditions hereof shall render the credit facilities liable to be cancelled. Every demand or notice served or communicated by the Bank to the Borrower shall be considered to have been duly served and communicated to the Borrowers if sent to the recorded address of the Borrower either by hand delivery, ordinary or registered mail, telex and/or any other usual and practiced means of transmission / delivery. Every demand or notice sent in this manner by the Bank to the Borrower or any of the persons constituting the Borrower shall be deemed to have been sent to each and all of such persons. Should this Deed be signed by more than one person, all signatories hereto shall be jointly and severally liable to Bank for all the liabilities herewith. Should the Borrower be a company or a firm, the liability of such company or firm towards the Bank shall remain effective despite any change in the constitution, memorandum and/or articles of association of the said company or firm. Without prejudice to the Bank’s absolute right to submit to any other law or jurisdiction, this document shall be governed construed and interpreted in accordance with the law of the country. Signatures of Witnesses Signature of the borrower. Witness—1 Witness---2 docsity.com