All You Need to Know About Tripartite Agreement


Every day we enter into various agreements. Usually, these agreements involve only two parties. However, there is another kind of agreement that includes three parties to it. Tripartite agreements are usually to settle cases in situations of default. This article aims to introduce the concept of tripartite agreements.

What is a Tripartite Agreement?

Under normal circumstances, an agreement involves only two parties. Nevertheless, there are certain situations in which an agreement is made with three parties. Such agreements, which include three parties, are known as tripartite agreements. Suppose you are planning on buying a house that is currently under construction, and you need a loan for the same. Then there will be three parties to the agreement- you, the seller, and the bank. This is an example of a tripartite agreement.

A tripartite agreement becomes essential when buying a property that is under construction. If the buyer defaults on the payment, then the bank comes in and settles the default.

Importance of Tripartite Agreement

A tripartite agreement clarifies all the roles and obligations of the parties involved. In case the buyer fails to carry out the payment, the lender or the bank will own it. The tripartite agreement is important for property under development. All the terms and conditions will be mentioned in the agreement. Before signing a tripartite agreement, the parties should ensure that the terms and information regarding the property are applicable and correct.

How does Tripartite Agreement work?

Usually, tripartite agreements are made when we need finances to buy a property with the help of a bank. The agreement helps buyers obtain loans from banks to buy the home or property from the developer. It details all the rights and remedies of each of the parties involved in the agreement. It also states the stages in the construction process, consent on shared spaces, final sale price, date of possession, details regarding penalty in default, payment schedule of the loans, etc. It also mentions subrogation, which specifies whom, how, and when various agreements in the property are transferred between the parties.

When can we use the agreement? 

Entering into a tripartite agreement, though not compulsory, will help to avoid problems in the future. We can enter into a tripartite agreement in the following situations:

  • If there is any mortgage on the property, then a tripartite agreement becomes necessary
  • If you are buying a flat and it is in a registered society, then a tripartite agreement between you, the buyer, the seller, and the society becomes necessary.
  • If you are purchasing a flat from a builder until the time of resale, the society is not formed, then a tripartite agreement is required to be made between buyer, seller, and builder.

Similarly, if a builder is made a third party, it is the responsibility of the builder to make the new buyer, a member of the society, or an apartment.

Benefits of a Tripartite Agreement

If we are searching for loans or other financial aids, then tripartite agreements can help us in securing them. The agreement helps us to convince the banks about the genuineness of the transactions. Due to the tripartite agreement, third-party heirs cannot challenge the transaction. Another benefit of drawing up a tripartite agreement is that a third party who is indirectly related to the agreement will not be able to claim that it was unaware of such a transaction.


A tripartite agreement sets out the details and obligations of each of the parties to it. This helps in avoiding issues later in the future. It becomes essential in agreements involving encumbrances such as mortgages.



This article is authored by Tania Das K, student at School of Legal Studies, Cochin University of Science and Technology.

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