DIY Legal Forms

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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 bailment duties.

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 pledge.

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]