A Receivables Purchase Agreement is really a contract for the acquisition and sale of your company’s accounts receivable. Accounts receivables is usually a collection with the accounts that your company reasonably believes, by performance with a contract or good reputation for past performance, will earn cash. A company purchasing those accounts receivables is thus acquiring the right to get the expected payments from those accounts.

A typical Receivables Purchase Agreement will contain six articles since the following areas: Definitions (of terms utilized in the Agreement), Conveyance from the Receivables, Representations and Warranties, Covenants from the Seller, Repurchases, and Miscellaneous.

Definitions. This section covers general definitions, specific terms, other definitional provisions, and certain references in the agreement. In order to create reading the agreement more understandable, terms including “conveyance”, “cutoff date”, “purchase date”, “receivables”, “repurchase event,” and “schedule of receivables” ought to be specifically defined with this section.

Conveyance on the Receivables. This section covers the details in the receivables involved in purchasing and the price being taken care of them. Usually it will make reference to an exhibit which will list all accounts receivables which might be being purchased, information including yet not limited towards the name and address with the payee as well as the amount of payment owed. If you’ll find any security interests in terms of any with the accounts, these really should be listed too. All rights from the purchaser resistant to the account holders could possibly be addressed, too as any proceeds and the directly to receive proceeds. The purchaser from the accounts receivable should also be considering the physical files concerning the accounts and all of property that secures each account.

The price should also be listed in this particular section, maybe it’s a certain dollar amount or maybe a percentage on the principal balance on the receivables. Sometimes receivables are ordered for 100% from the principal balance for the accounts, with all the idea that the interest within the accounts provides as the profit for your purchaser. The agreement should recite that both sides intend that many conveyance shall constitute a sale on the seller’s right, title and curiosity about and on the related Receivables, conveying good title free and clear of a typical liens, claims, encumbrances, or rights of others.

Representations and Warranties. This section covers the representations and warranties of the two seller along with the buyer. Here their buyer along with the seller must ensure representations with respect to the accounts and also to their status as corporations duly organized and validly existing current. Seller must promise that it must be authorized to consummate the sale in the accounts, and buyer must promise it can be authorized to make purchasing.