Cession and Pledge of Goods Template - South Africa

Cession and Pledge of Goods Template - South Africa

Why do I need a Cession of Goods? A Cession & Pledge of Goods contract affords you as the creditor additional security. If the debtor defaults in payment, you may use an agreement of cession to claim the goods that the debtor has ceded / pledged. A contract for the Cession & Pledge of Goods is often used as an additional security requirement when a customer applies for a credit facility, before any goods or services are delivered. It can also be used to obtain additional security before lending someone money or goods and equipment.

Also view: Cession of Book Debts

What type of business should use contracts of cession? If your business has debtors that owe money, or there is a high likelihood that they will in the future owe money, then a Cession and Pledge may be considered to reduce your risk should the debtor default.

What does the contract look like? The Cession contract template can be printed onto two pages.

What do you need to do to use the Cession?

• Read the template cession agreement document to ensure that it suits your requirements. Make changes as required.


• Complete the relevant details, and get the debtor to sign.


• The Cession & Pledge contract is usually obtained at the beginning of the business relationship, or during the application stage, and before any goods / services / loan is delivered. But it can also be used to obtain additional security from a debtor who owes money.

Cession and Pledge of Goods Agreement Template South Africa [Microsoft Word Doc]

The Use and benefit of a Cession and Pledge of Goods Contract:

Under this agreement, the cedent pledges the collateral to the secured party as security for the loan (Such as capital stock, equity interests, security interests etc). The security interest in the collateral is created by the cedent ceding (assigning) all of its rights and interests in the collateral to the secured party. The cedent retains possession of the collateral unless otherwise agreed upon in the agreement.

The cession pledge of goods agreement includes various clauses and provisions that are important to understand, such as the rights and remedies of the secured party in the event of default by the cedent, the process for selling the collateral in the event of default, and the procedures for giving notice to the cedent.

One important clause in the agreement is the provision allowing for the public or private sale of the collateral in the event of default. The agreement will specify the manner in which such sale is to be conducted and will require the secured party to give reasonable advance notice to the cedent of the proposed sale.

Another important clause is the provision stating that the agreement creates a security interest in the collateral. This clause establishes the priority of the secured party's security interest in the collateral over the cedent's other creditors.

The agreement may also contain provisions specifying the applicable law, the powers of the secured party, and the requirement for the cedent to execute financing statements and continuation statements as necessary.

In the event of default by the cedent, the secured party may exercise such rights and remedies as are available under the agreement and under applicable law, including the right to take possession of the collateral and sell it in accordance with the agreement.

Some Highlights of this agreement:

• Attachment and Perfection: The cession pledge agreement establishes the attachment and perfection of the security interest in the collateral. Attachment occurs when the cedent, as the legal and beneficial owner of the collateral, grants a security interest to the secured party. Perfection occurs when the secured party takes the necessary steps to give notice of the security interest to third parties, such as filing financing statements under applicable law.


• Remedies for Default: The agreement outlines the secured party's remedies in the event of default by the cedent to the fullest extent permitted by law; under both internal laws and external laws. Remedies hereunder may include the right to take possession of the collateral ( The pledger's respective property), to sell the collateral (either privately or at a public sale), and to apply the proceeds of any sale to the outstanding debt.


• Notice Requirements: The agreement may include various notice requirements, such as providing written notice to the cedent before exercising certain remedies or selling the collateral. The notice may need to be sent to a specific address or in a certain manner to be effective. Foregoing provisions such as these, or any other such provision set out in the security agreement (security cession agreement) may lead to breach of contractual obligations and thus terminate the ceded rights with respect thereto. (Rights relating to the ceded rights). However, if the pledgor fails in such clauses of the pledge agreement relating to any such terms under the pledge agreement the pledge agreement provides further remedies to the person upon whom the pledgor ceded rights such as the cedent's personal rights.


• Continuation Statements: The agreement may require the secured party to file continuation statements to maintain the perfection of the security interest over time.


• Expenses and Fees: The agreement may specify which party is responsible for paying certain expenses, such as the cost of storing or selling the collateral, and may provide for the recovery of reasonable attorneys' fees in the event of a dispute.


• Governing Law and Jurisdiction: The agreement may specify which law governs the agreement and which jurisdiction will have exclusive jurisdiction over any disputes.


• Representations and Warranties: The agreement may include various representations and warranties by both the cedent and the secured party, such as that the cedent is the legal and beneficial owner of the collateral and that the secured party has duly authorized the execution of the agreement.


• Assignability: The agreement may address the assignability of the cession pledge, including whether the secured party can assign its rights under the agreement and whether the cedent can assign its obligations.


• Indemnification: The agreement may provide for indemnification by one party in favor of the other in certain circumstances, such as if the cedent breaches a representation or warranty or if the secured party breaches a mandatory provision of the agreement.


• Miscellaneous Provisions: The agreement may include various miscellaneous provisions, such as defining certain terms used in the agreement, requiring the parties to execute other documents or take other actions necessary to carry out the agreement, and setting forth the parties' rights and obligations with respect to any other property or distributions related to the collateral.

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