The American Bar Association (ABA) Form of Deposit Account Control Agreement is an important legal document used in banking transactions. It outlines the legal relationship between a bank and its customer in relation to a deposit account. This agreement is particularly significant in commercial lending and is often used in real estate transactions.
The purpose of the ABA Form of Deposit Account Control Agreement is to provide a means for a lender to have control over a borrower`s deposit account. This is achieved by the borrower agreeing to give the lender a security interest in the account and by the bank agreeing to follow the lender`s instructions with regard to that account. The agreement sets out the terms and conditions of this arrangement, which typically includes the right of the lender to require the bank to freeze the account or to release funds to the lender as specified.
One of the key clauses in the ABA Form of Deposit Account Control Agreement is the definition of the deposit account itself. The agreement defines the account as being an account held by the borrower with the bank, which is used for the deposit and withdrawal of funds. It also specifies that the bank is authorized to honor instructions given by the lender with regard to the account.
Another important clause in the agreement is the section that deals with the bank`s obligations. The bank must agree to comply with the instructions of the lender, unless it has reason to suspect that those instructions are fraudulent or otherwise improper. The bank must also agree to notify the lender of any disputes that arise over the account and to refuse to release any funds until such disputes are resolved.
The ABA Form of Deposit Account Control Agreement is an essential tool for lenders and borrowers alike. It provides the lender with the necessary control over the borrower`s deposit account to ensure that the loan is repaid. It also provides the borrower with the necessary protection against unauthorized withdrawals from the account. By using this document, both parties can have peace of mind knowing that their interests are protected.
In conclusion, the ABA Form of Deposit Account Control Agreement is an important document that should be carefully considered in any banking or lending transaction. It provides a legal framework for the relationship between a bank, a lender, and a borrower. With its precise language and clear definitions, this agreement can help to prevent disputes and protect the interests of all parties involved.