Meaning
A three-way contract between a borrower, a lender, and a warehouse operator establishes the rights of each party regarding stored collateral. This tripartite access agreement ensures that the lender can enter the third-party facility to inspect or remove inventory if the borrower defaults. It also contains a waiver of the warehouseman’s lien to protect the lender’s priority.
Collateral Control
Verification of the asset location is the primary goal for the bank. The warehouse operator agrees to hold the goods for the benefit of the lender and to ignore instructions from the borrower that contradict the lender’s rights. This tripartite access agreement provides the legal framework for “field warehousing” where a third party manages the stock on behalf of the creditor.
Access Right
Physical entry must be guaranteed even if the borrower is no longer paying rent to the warehouse. The operator agrees to allow the lender a certain number of days to remove the inventory after a default. This tripartite access agreement often specifies the per diem fees the lender must pay for this extra time on the site.
Facility Obligation
Maintenance of the storage environment remains the duty of the warehouse operator. They must keep the facility secure and ensure that the goods do not spoil or sustain damage. The agreement clearly states who is responsible for insurance coverage while the inventory is in the warehouse’s possession.
