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Bailment Contract Among Borrower, Bailee, and Bank
(Goods Held as Collateral for Benefit of Bank)
1. Parties. The parties to this Bailment Contract are:
[name] of [address] (Borrower), [name] of [address] (Bailee),
and [name] of [address] (Bank).
2. Nature of Bailment. This Bailment is made to ensure that
the bank loan (the underlying agreement containing the pledge of
collateral) that is being made to Borrower is sufficiently
collateralized, and that the collateral involved is maintained for the
benefit of Bank by Bailee.
3. Possession of Collateral. At all times from the date of
this Agreement, the Collateral described in Schedule A [omitted] shall
remain in the sole possession of Bailee. This Collateral is to be kept
at all times at the [name] (Warehouse) located at [address].
4. Duties of Bailee. Bailee holds this Collateral as agent
for Bank. Bailee will continue to have exclusive control over the
premises where the Collateral is located. Borrower shall not have
control over the Collateral without the written permission of Bank.
Bailee shall act at all times at the direction of Bank in performing his
5. Compensation of Bailee. Bailee shall receive [amount and
method of payment for bailment and warehouse services] to be paid by
Borrower. In the event that Bank finds it necessary to foreclose the
pledge of Borrower against the Collateral, Bank shall be entitled to
continue to store the Collateral with Bailee, provided that Bank
compensates Bailee for such services in the amount agreed to with
Borrower. Bailee shall not be required to deliver the Collateral to any
party until the agreed compensation is paid in full.
6. Warranties of Bailee. Bailee does not warrant the title of
the Collateral. Bailee will not be responsible to Bank for
reimbursement if Borrower's title to the goods that constitute the
Collateral is not good or is not sufficient to support the underlying
7. Liability of Bailee. Delivery by Bailee of the Collateral
represents a complete discharge of any liability of Bailee to Bank or
Borrower for these goods so delivered. Bailee is liable for the goods
bailed to Bailee, and will use the same degree of care as any standard
bailment for hire would require.
8. Insurance. Bailee agrees to accept the Collateral for
warehousing and bailment provided that Borrower keeps the same, insured
in such amounts as Bank may deem necessary for the protection of its
interests in the goods. These insurance policies are to be assigned to
Bank. Should Borrower fail to keep the Collateral insured, Bank may
obtain its own insurance for the goods and add the cost of the insurance
to the indebtedness that Borrower owes to Bank on the underlying debt
instrument. Bailee must [or, need not] carry Bailee's own insurance
on the Collateral.
9. Borrower's Warranties. Borrower warrants that the goods
that are pledged to Bank and delivered to Bailee for warehousing and
bailment are free from any liens or encumbrances. Borrower further
warrants that Borrower is the legal owner of these goods at the time of
their delivery for bailment.
10. Inventory of Goods. Borrower shall furnish to Bailee a
complete inventory of the goods held by Bailee for bailment and
warehousing pursuant to this Agreement. Bailee shall certify the same
to Bank from time to time, and upon its request. Bailee does not
guarantee the accuracy of these prices furnished to him by Borrower.
11. Bank's Responsibilities. Bank shall not be responsible
for the condition of the Collateral while in the possession of Bailee,
nor any damage done to the Collateral while in the possession of Bailee.
The sole recourse of Borrower shall be against Bailee.
IN WITNESS WHEREOF, the parties have set their hands this [date].
This Section for Notary:
STATE OF -------)
) ss: [date]
COUNTY OF ------)
On [Date] before me, [Name of Notary], notary, personally appeared [Name of Person(s) Involved], personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
[Name of Notary Public]
My commission expires: [date]