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Tripartite agreement

  According to section 2(e) of Indian Contract Act,1872, "every promise and every set ofpromises forming consideration for each other is an agreement. For example 'A'promises to 'B' to sell his land for Rs 75,00,000/- and 'B' accepts to purchase for the said amount. Here 'A' and 'B' entered into an agreement.

Generally in all agreements there are two parties but there are certain occasions wherein it becomes necessary to make tripartite agreement. A tripartite agreement is an agreement in which there are three parties. Generally speaking the agreement between buyer and seller is sufficient and there is no need of any third party. But sometimes though the third party has no concern with that transaction, yet the circumstances are such that the third party indirectly becomes related to it and in such circumstances it is always advantageous to make him as a party to the agreement.

In the following circumstances tripartite agreement is useful.
1) At the time of selling a flat and the society is a registered society, then a tripartite agreement between buyer, seller and society becomes necessary.

2) If a flat is purchased from a builder and till the time of resale society is not formed, that time a tripartite agreement is required to be made between buyer, seller and builder.

3) If there is any encumbrance such as mortage, charge etc on any property such as house, land , farm etc. then a tripartite agreement becomes necessary.

However it is not compulsory to make a tripartite agreement at the above mentioned circumstances. The law does not mandate it. If no tripartite agreement is made, it is valid. In order to avoid future conflict these types of agreement are entered into. The only purpose the tripartite agreement serves is that the third party, in such agreement, acts as a confirming party.
Thus when a registered society is made a third party to the agreement for buying and selling of flat, it confirms the transaction and implies that the society has no objection to transfer the flat in the name of buyer.

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

Advantages of making a third party as a party to the agreement
1) The third party who is indirectly related to the agreement can not take the stand that he is unaware of any such transaction.
2) It also implies that there is no due payable by the seller to the third party.
3) The banks and other financial institutes are always ready to advance loan when they are assured about the genuineness of the transaction.
4) The legal heirs and successors etc. of the third party also can not challenge the said transaction.

If under an unavoidable circumstances the third party can not be made as a party to the agreement, the transaction should be completed by taking that third party's No Objection Certificate. When a No Objection Certificate is obtained it must include name and particulars of seller, name and particulars of buyer, designation of the person giving NOC. etc.

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