Rec Purchase Agreement Template for England and Wales

A Rec Purchase Agreement is a specialised commercial contract that governs the sale and assignment of receivables from one party to another under English and Welsh law. You use this document when your business needs to convert outstanding invoices or future receivables into immediate cash by selling them to financial institutions, factoring companies, or other qualified buyers. The agreement creates a legal framework for transferring ownership of receivables while establishing the rights and obligations of all parties involved in the transaction.

When do you need this document?

You need a Rec Purchase Agreement when your business requires immediate working capital and has outstanding receivables that can be monetised. This document is essential in factoring arrangements where you sell your invoices to a factor for immediate payment, typically receiving 70-90% of the invoice value upfront. You also need this agreement in securitisation transactions where receivables are packaged and sold to special purpose vehicles. Trade finance operations frequently use this document to enable suppliers to receive early payment on their receivables. Asset-based lending facilities often incorporate receivables purchase elements, requiring this type of agreement to structure the transaction properly.

Key legal considerations

The agreement must clearly identify the receivables being sold and establish valid legal title transfer to avoid disputes over ownership. You need comprehensive representations and warranties from the seller about the quality, enforceability, and collectibility of the receivables. The purchase price mechanism requires careful drafting, including any reserve accounts, adjustment provisions, and payment triggers. Recourse provisions determine whether the seller remains liable if receivables prove uncollectible, significantly affecting the transaction's risk allocation. The agreement should address servicing arrangements, specifying who collects the receivables and how collections are handled. Termination clauses must outline circumstances for ending the relationship and procedures for final settlements.

Legal requirements in England and Wales

Under the Law of Property Act 1925, legal assignments of receivables must be absolute, in writing, and include written notice to the debtor to be enforceable against third parties. The agreement must comply with the Consumer Credit Act 1974 if underlying receivables involve consumer credit arrangements, requiring specific consumer protection provisions. If either party is FCA-regulated, the transaction must comply with Financial Conduct Authority regulations and reporting requirements. The Contracts (Rights of Third Parties) Act 1999 affects how third-party rights are structured, particularly relevant when servicers or security trustees are involved. For receivables relating to goods sales, the Sale of Goods Act 1979 governs underlying contractual rights being assigned. The agreement should include proper governing law and jurisdiction clauses specifying English courts, and consider insolvency law implications under the Insolvency Act 1986 for both buyer and seller protection.