What is an indenture agreement? An Indenture Agreement is a legal document that is created between two parties when either of them is indented to provide his or her services to the other party for a stipulated period of time. One of the most interesting facts about this contract is the fact that it came into existence a long time ago when contractors used to hire laborers to work in coal, gold, and diamond mines in distant colonies and locations. Today, this legal document has a more sophisticated use and some of its many forms are the employee arrangement provided these days.
In the most basic sense this legal document outlines the responsibilities and duties of the intended worker or employee, mentions the credentials of the employer or contractor and also states the amount of time period the intended party needs to provide his or her services.
When Do You Need an Indenture Agreement?
The most common application of an Indenture Contract can be found in both long as well as short term real estate projects, where a contractor hires a certain number of individuals or worked under him or her to work on the said real estate project.
In modern times, an Indenture Contract acts as a bond of trust between the bondholder and the issuer and clearly outlines, the responsibilities, duties as well as limitations of both the parties. Bond indenture agreement states the amount of time, the bond will be valid for, along with details and ramifications in the case it ceases to exist.
Inclusions in Indenture Agreement
- Parties Involved: In an Indenture Contract there are usually two parties involved; the first being the issuer who is indenting the second party, who is also known as the bondholder.
- Effective Dates: In this section of the legal document, the important dates of the agreement are clearly mentioned. For example, when will the contract come into effect and until when will be legal binding?
- Where does it Apply: This legal document is legally binding within the boundaries of the state, city or county it was originally issued at.
How to Draft an Indenture Agreement?
Follow the mentioned below steps in order to draw Indenture Contract.
- Organize a meeting between both the parties. Discuss upon the terms of the indenture agreement, the payment that will be made on behalf of the legal document, the dates of significance within the context of the legal agreement, and other finer details.
- Once both the parties have agreed to the terms and conditions, reach out to a legal team and ask them to draft an Indenture Agreement on your organization’s behalf.
- Cross verify and check the details with both the parties and file the contract in the local court of law as advised by your legal team.
Benefits of an Indenture Agreement
The most significant benefits of having an Indenture Contract are as mentioned below.
Pros of Indenture Contract
- This contract is a legal document and thus can be produced in a house of court if there is a need.
- The contract clearly outlines the individual duties, responsibilities and limitations of both the parties and thus makes sure that both parties are well aware of them at all points in time.
Cons of Not Having an Indenture Contract
- In the absence of an Indenture Agreement, if there ever is a lapse in terms and conditions or default in payment, both the parties stand a chance to lose since either of them doesn’t have a legal proof of a transaction ever occurring between both of them.
Key Terms & Clauses in Indenture Agreement
- Notices: Both the parties involved in the legal document need to be issued certain notices before the contract is made, and this section outlines the details of the same.
- Disclaimers: Both the stakeholders in the contract need to offer certain disclaimers to each other before such a legal understanding can be established and this section outlines the details of the same.
- Remedies: In the case of a lapse in payment or default in agreed terms and conditions, certain remedies come into effect from both the parties. This section contains the details of the same.
- Obligations: Both the parties have certain obligations to each other and the following section states the details of the same.
Sample Indenture Agreement
A sample of the indenture agreement template can be downloaded from below.