A contract of sale is a legal document that outlines the terms of a sale between a buyer and a seller. In the context of securitisation, a contract of sale is used to transfer the ownership of the underlying assets from the originator to the special purpose vehicle (SPV).
The contract of sale typically includes the following information:
- The identity of the buyer and seller
- The description of the assets being sold
- The purchase price
- The terms of payment
- The representations and warranties of the seller
- The remedies available to the buyer in the event of a breach by the seller
The contract of sale is an important document in the securitisation process, as it ensures that the ownership of the underlying assets is transferred to the SPV in a legally binding manner.
Here are some examples of contracts of sale in securitisation:
- A bank might sell a pool of mortgages to a special purpose vehicle.
- A company might sell a pool of receivables to a special purpose vehicle.
The contract of sale is typically drafted by the originator's lawyers and reviewed by the SPV's lawyers. It is important for investors to carefully review the contract of sale to understand the terms of the sale and the risks associated with the underlying assets.