Can I use a template for a vendor take-back agreement?

A vendor take-back is the part of the price the seller lends the buyer. It can be documented with a promissory note and, if the seller takes security, a security document and registration. Each is governed by its own law, which a template cannot settle for your province and collateral. This page sets out what the statutes say, so you know what a template must be checked against. The note itself is covered in what goes into a vendor take-back promissory note.

The note and its interest clause

Under section 176(1) of the Bills of Exchange Act, a promissory note is an unconditional promise in writing made by one person to another, signed by the maker, to pay on demand or at a fixed or determinable future time a sum certain in money to, or to the order of, a specified person or to bearer. Where interest is charged, section 4 of the Interest Act applies. Except as to mortgages on real property or hypothecs on immovables, if a written or printed contract, whether under seal or not, makes interest payable at a rate for a period of less than a year, interest above the cap that section sets is not chargeable, payable or recoverable on any part of the principal unless the contract contains an express statement of the yearly rate or percentage of interest to which the other rate is equivalent.

Registering security in Ontario

Under Ontario’s Personal Property Security Act, section 23 says registration perfects a security interest in any type of collateral, section 19 says a security interest is perfected when it has attached and all steps required for perfection under the Act have been completed, and section 45(1) says a financing statement must be registered to do so. Regulation 912 says that where the Act requires a financing statement in the prescribed form or format, it must be the form or format provided or approved by the registrar. Other provinces have their own rules; ask your lawyer which apply to your deal.

Security in Québec

The Civil Code of Québec uses hypothecs. Article 2696 says a movable hypothec without delivery must, on pain of absolute nullity, be granted in writing. Article 2693 says an immovable hypothec must, on pain of absolute nullity, be granted by notarial act en minute. Under article 2970, rights concerning a movable are published in the register of personal and movable real rights, and those concerning an immovable in the land register; if a movable real right also pertains to an immovable, it must also be registered in the land register.

Guarantees and the senior lender

Alberta’s Guarantees Acknowledgment Act, section 3, says no guarantee has any effect unless the person entering into the obligation appears before a lawyer, acknowledges to the lawyer that they executed it, and signs the certificate in front of the lawyer; section 3.1 allows the same steps by two-way video conference. Section 1 defines a guarantee as one given by a person who is not a corporation, and excludes, among other things, promissory notes and guarantees given on the sale of an interest in land or in goods or chattels; ask your lawyer whether it applies to yours. See the Alberta guarantee page. If the buyer has a bank loan, ask the lender whether it requires its own postponement agreement. Ontario’s section 38 lets a secured party subordinate its security interest in the security agreement or otherwise, effective according to its terms.