Your Tripartite Agreement Doesn’t Have To Be Complicated—Learn All You Need To Know Here

At first glance, a tripartite agreement may sound confusing—especially since it is used in a variety of different contexts.

The only aspect that makes this legal document unique is that it involves three parties entering into an agreement rather than two.

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What Are Tripartite Agreements—A Breakdown

A tripartite agreement is a legally-binding document signed by three parties. The word ‘tripartite’ literally means ‘tri-party,’ which is where the name of the agreement comes from and why the contract is also sometimes called a tri-party agreement.

Regardless of the purpose for which you use a tripartite agreement, the document needs to:

Define the exchange or the reason the parties are using it
Present the interests and the perspectives of all parties involved
State the terms, obligations, and legal consequences in case of breach for all parties
Be signed by all three parties

The parties involved need to sign the document in the country they are doing business in for the contract to be legally enforceable.

In What Contexts Are Tripartite Agreements Used?

You can use a tripartite agreement in any given context if you are dealing with legal matters involving two parties besides yourself. Tripartite agreements are most commonly used when dealing with:

Business—particularly by human resources departments in international companies
Real estate—especially when a loan is placed on a property that’s still under construction

Check out the table below to see a further explanation of tripartite agreements in the two contexts in which they are most often used:

Context	Why a Tripartite Agreement Is Used
Business	Multinational companies usually use a tripartite agreement when they need to transfer an employee from one subsidiary to another. Another instance in which businesses protect the interests of all parties involved by signing a tripartite agreement is when they want to outsource an employee. Outsourcing involves changing the position of an employee
Real estate purchase	When a buyer wants to get a loan to purchase property that is still in the construction phase, a tripartite agreement serves to protect the rights of the lender, the buyer, and the construction company, i.e., the developer

Do You Need a Tripartite Agreement?

If you are doing business with two other parties—whether you need a home loan for a house that’s under construction or want to transfer your employee from one subsidiary to another—you should consider drawing up a tripartite agreement.

Tripartite agreements protect your interests, regardless of the role you play in the transaction.

For example, construction companies often rely on their individual construction contracts they sign to do their part of the work. They can’t risk building property if there is a chance that the buyer won’t pay them. Tripartite agreements protect the construction workers if it comes to that.

When it comes to human resources that transfer employees between subsidiaries, tripartite agreements help establish which employer has what obligations with regards to the transferred employees.

Key Sections in a Tripartite Agreement

Your document’s content will vary depending on the context for which you’re using it.

If you need a tripartite agreement for a house loan when the house is still under construction, the document needs to contain the following information:

The loan’s interest rate
Construction progression details, including the property’s purchase price and date of possession
Exact consequences of an agreement breach, i.e., what penalties a party will face in the case of a booking cancellation
The developer’s statement that they claim the legal title of the property

When companies use tripartite agreements to transfer employees from a subsidiary in one country to a subsidiary in another, the original employment contract is terminated without either party enjoying the benefits or incurring responsibilities of the usual breach of the agreement. In that case, a tripartite agreement includes the:

New length-of-service clause
Employee’s consent to be transferred
Continuation of the terms that the original contract had
Indemnification clause that lists the legal ramifications of an agreement breach

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