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Security Cheque Agreement

Security Cheque Agreement Template for Pakistan

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Key Requirements PROMPT example:

Security Cheque Agreement

"I need a Security Cheque Agreement for my company (ABC Manufacturing Ltd) to accept a post-dated cheque from XYZ Trading Company as security for a 6-month supply contract starting January 2025, with monthly deliveries worth PKR 500,000."

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Document background
Security Cheque Agreements are widely used in Pakistani business practices as a risk mitigation tool in various commercial and financial transactions. The agreement serves as a formal documentation of the arrangement where a cheque is provided as security for an underlying obligation. This type of agreement is particularly important in Pakistan where post-dated or security cheques are commonly used in business transactions, leases, and loan arrangements. The Security Cheque Agreement must comply with local banking regulations, the Negotiable Instruments Act, 1881, and related laws, providing clear terms for holding and presenting the cheque, along with remedies in case of default. It helps protect the interests of both parties by clearly defining their rights and obligations, while ensuring legal enforceability under Pakistani jurisdiction.
Suggested Sections

1. Parties: Identification of the cheque issuer and beneficiary with complete details including name, address, and legal status

2. Background: Context of the underlying transaction and purpose of the security cheque

3. Definitions: Definitions of key terms used in the agreement including 'Security Cheque', 'Underlying Transaction', 'Event of Default'

4. Security Cheque Details: Specific details of the security cheque including cheque number, amount, date, and issuing bank

5. Terms of Holding: Conditions under which the beneficiary holds the security cheque and obligations of both parties

6. Events of Default: Specific circumstances that would trigger the right to present the cheque for payment

7. Representations and Warranties: Declarations by the cheque issuer regarding authority, validity of cheque, and sufficiency of funds

8. Rights and Obligations: Detailed responsibilities of both parties regarding the security cheque

9. Enforcement: Process and conditions for presenting the cheque for payment

10. Governing Law and Jurisdiction: Specification of Pakistani law as governing law and jurisdiction for disputes

Optional Sections

1. Multiple Cheque Provisions: Required when multiple security cheques are being provided, detailing the handling and conditions for each

2. Guarantor Provisions: Needed when a third-party guarantor is involved in guaranteeing the security cheque

3. Bank Account Maintenance: Special provisions regarding maintenance of sufficient funds in the account

4. Return of Security Cheque: Conditions and process for returning the security cheque upon fulfillment of obligations

5. Cross Default: Required when the agreement is linked to other agreements or facilities

6. Power of Attorney: Optional authorization for specific actions related to the security cheque

Suggested Schedules

1. Schedule A - Cheque Details: Detailed information about the security cheque(s) including cheque number, amount, date, and bank details

2. Schedule B - Underlying Transaction: Details of the primary transaction or agreement for which the security cheque is provided

3. Schedule C - Authorized Signatories: List of authorized signatories with specimen signatures if applicable

4. Appendix 1 - Form of Notice: Standard format for notices to be issued before cheque presentation

5. Appendix 2 - Acknowledgment Receipt: Format for acknowledging receipt of the security cheque by the beneficiary

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant Industries

Banking

Financial Services

Real Estate

Retail

Manufacturing

Trading

Construction

Automotive

Logistics

Professional Services

Relevant Teams

Legal

Finance

Compliance

Risk Management

Treasury

Credit Control

Collections

Corporate Affairs

Company Secretariat

Banking Operations

Relevant Roles

Legal Counsel

Finance Manager

Credit Manager

Risk Officer

Compliance Officer

Contract Administrator

Treasury Manager

Collections Manager

Account Manager

Business Development Manager

Company Secretary

Chief Financial Officer

Legal Director

Banking Relations Manager

Industries
Negotiable Instruments Act, 1881: Primary legislation governing cheques, including definitions, rights, obligations, and procedures related to negotiable instruments in Pakistan
Contract Act, 1872: Governs the basic principles of contract formation, validity, and enforcement, which are essential for the security cheque agreement
Banking Companies Ordinance, 1962: Regulates banking operations and security instruments, including provisions related to bank guarantees and security deposits
Pakistan Penal Code, 1860 (Section 489): Deals with criminal aspects of dishonored cheques and fraudulent practices related to negotiable instruments
Financial Institutions (Recovery of Finances) Ordinance, 2001: Provides framework for recovery procedures and enforcement of security instruments by financial institutions
State Bank of Pakistan Act, 1956: Contains regulations regarding banking practices and security instruments, including guidelines for cheque transactions
Registration Act, 1908: Governs the registration of security documents and agreements, which may be applicable depending on the nature and value of the security cheque agreement
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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