Our free promissory note forms provide two alternative templates to use when compiling your Security Agreement.
It is conceivable that the actual value of the collateral may exceed that of the loan amount. We've therefore specifically added a reference to the replacement value of the collateral in our sample agreement below in order to safeguard the lender in the event of loss of the collateral. See paragraph 5.
In your Promissory Note (refer to our sample documents) you need to specify that it is a secured note and reference this Security Agreement as an attachment.
Upon full and final settlement of the promissory note and upon return of the goods to the Borrower, a release of the Security Agreement can be issued, where the Borrower also acknowledges receipt of the goods held as collateral.
Note: Please refer to our page on Secured Promissory Notes first for guidelines and to select the blank promissory note best suitable for your requirements.
You may also want to consider a Promissory Note Guaranty to guarantee payment performance.
NB: Our Promissory Note Main Page has additional information and links to these free legal forms.
The parties to this agreement are identified as:
Full Names ________________________________
Full Names ________________________________
1. Whereas the Borrower executed a Promissory Note in favor of the Lender on the ______ day of _________________20____ in the principal amount of $________(____________________________). In consideration of this Note and as inducement to the Lender to extend a loan to the Borrower, the Borrower grants the Lender a security interest in the following goods:
(hereinafter referred to as "the Collateral")
2. The Lender acknowledges receipt of the Collateral and shall retain possession of the Collateral for the duration of the Note and until all monies due under the Note have been paid in full.
3. Upon full and final settlement of all monies due under the Note, the Lender shall release the Collateral to the Borrower.
4. The Borrower warrants that he/she is the lawful owner of the Collateral, that it is free of any and all encumbrances and that no other party has any right to the Collateral.
5. The Parties agree that the replacement value of the Collateral shall not be deemed to exceed the loan amount of $___ (________________) and that the Lender shall only be liable for this amount in the event of loss of or damage to the Collateral, but shall also be liable for any costs incurred to insure the Collateral to this value against all risks with an insurance company.
6. The Borrower agrees that upon default under the terms as set out in the Note, the Lender shall have the right to sell the Collateral in any manner which he/she may deem fit and to apply the proceeds to the repayment of monies due under the Note. Any surplus money shall be transferred to the Borrower within 7 (seven) business days.
7. The Lender further agrees that where the proceeds from the sale of the Collateral are not sufficient to repay all monies due under the Note, such shortfall shall be for the Lender's account and the Borrower shall have no further obligations under the Note.
7. If the proceeds from the sale of the Collateral are not sufficient to repay all monies due under the Note, provided the sale was executed by the Borrower, then the Borrower shall remain indebted to the Lender for the outstanding amount and shall execute a new Note and Security Agreement to the satisfaction of the Lender.
8. No relaxation, indulgence, waiver, release or concession extended to the Borrower by the Lender and no delay or omission in the enforcement or exercising of the Lender's right under the Note shall affect the rights of the Lender under this security agreement and no variation shall be binding unless agreed to in writing by both parties.
9. This agreement shall be binding upon and accrue to the benefit of the parties, their successors, legal representatives and assigns.
10. This agreement shall be construed, interpreted and governed in accordance with the laws of the State of _______________ and should any provision of this agreement be judged by an appropriate court of law as invalid, it shall not affect any of the remaining provisions whatsoever.
Signed at ________________ on this _______ day of _____________________20___.
By signing below the parties warrant their full authority to enter into this agreement.
Lender's Signature: _________________________________
Borrower's Signature: _________________________________
Signed in the presence of:
(1) Witness Name _____________________________
(1) Witness Signature __________________________________
(2) Witness Name _____________________________
(2) Witness Signature __________________________________
Our free promissory note forms are provided as templates only and legal counsel must be consulted before entering into any agreement to ensure compliance with the law in your jurisdiction.