Deposit Agreement

A Deposit Agreement guarantees the return rate that a bank will apply to an investor's account on the agreement that it will keep the deposit for a certain period.

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When an investor deposits funds to a bank and agrees to do so for a certain period, they'll be eligible to receive a principal return along with interest applied to the deposited amount that might be variable or fixed. 

For the duration of the agreement, the bank will pursue a return on investment using the deposited funds. Once the contract expires, the investor will receive a return that will vary depending on the number of funds deposited and the length of the contract.

What Is a Deposit Agreement?

A Deposit Agreement functions similarly to a Guaranteed Investment Contract issued by an insurance company, with the main difference being that a bank issues the Deposit Agreement.

This document allows you to make investments in several installations rather than one. The contract also defines the minimum and maximum amounts you can deposit.

Other Names for Deposit Agreement

You can find a Deposit Agreement under several different names, including:

  • Bank Deposit Agreement
  • Bank Investment Contract
  • Deposit Account Agreement

Who Needs a Deposit Agreement?

A Deposit Agreement is made between a bank and an investor and issued by the bank. This document ensures that the bank will guarantee a specific rate of return for the funds kept as a deposit over a specified period.

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How to Create a Deposit Agreement With 360 Legal Forms

A Deposit Agreement will include the details of both parties included in the contract, the period they'll keep the deposit, and the number of funds deposited. This document will mandate that the investor receives the principal and the assigned interest once the period expires.

Let 360 Legal Forms help with our extensive library of attorney-vetted legal forms. The process is fast and easy. All you need to do is fill out our easy-to-understand questionnaire. Once complete, simply download your form as a PDF or Word document from your secure online account.

What Information Will I Need to Create My Deposit Agreement?

To create your document, please provide:

  • Investor Information: Details about the party making the deposit.
  • Bank Information: Details of the party accepting the deposit.
  • Details of the Deposit: The total amount of the deposit.
  • Details on Interest: Whether the bank will pay the interest based on a variable or fixed rate.
  • Signatures: Both parties need to sign the agreement.

Deposit Agreement Terms

  • Holding Period: The number of months or years during which they'll keep the deposit.
  • Investor: The party providing the funds held as a deposit.
  • Depositor: Has the same meaning as Investor.
  • Issuer: The party issuing the Deposit Agreement, i.e., the bank.
  • Recipient: Has the same meaning as Issuer if the bank is the recipient.
  • Severability: If a part of the agreement is unenforceable, you view that part separately from the rest of the contract. This means that other parts of the contract will remain valid.

Deposit Agreement Signing Requirements

A Deposit Agreement is a legally binding document. The parties signing the document need to ensure that they've read and understood all the conditions outlined in the agreement. 

What to Do With Your Deposit Agreement?

Before signing a Deposit Agreement, both parties should review everything stated in the document to confirm that the information in the agreement is correct. The Deposit Agreement will become valid and binding once the Depositor and Recipient sign the document.

Both parties should keep a copy of the Deposit Agreement as a record. Follow all the terms outlined in the document and any disputes resolved according to the paragraph that defines dispute resolution.

Frequently Asked Questions

The only difference between these two documents is the institution issuing them. While an insurance company gives a GIC, a Deposit Agreement comes from a bank. 

A Deposit Agreement differs from a Certificate of Deposit in two crucial ways. Firstly, a Deposit Agreement allows multiple deposits to be made over time, while a Certificate of Deposit will require the entire sum invested at once.

The second difference is that, with a Deposit Agreement, you can withdraw funds before the end of the contract in specific circumstances. Reasons for premature withdrawal can include the Depositor retiring, losing a job, or experiencing other forms of hardship. With a Certificate of Deposit, these options are primarily unavailable.

In the case of deposits made to a bank, the bank and the investor will face certain liquidity and interest rate risks. Depending on the interest rates, the bank might become unable to make profitable investments to increase deposits' returns. On the other hand, if rates cause withdrawals to outgrow investments, the bank will fall under increased pressure to keep more funds fluid. 

Finally, a fixed rate Deposit Agreement might be influenced by inflation, which can minimize the returns even for more extended holding periods.

Pension plans are among the most common customers for Deposit Agreements with banks. In most cases, individual investors participate in their pension plans and become indirect investors. Certain institutions offer an alternative to this model by directly forming agreements with individual investors.

A Deposit Agreement is, in most cases, involved in buy-and-hold investing, which means there isn't a secondary market. Deposit Agreements usually provide better returns than options such as treasuries or savings accounts. 

Deposit Agreements perform better than other options because treasuries and savings accounts aren't insured by the FDIC or backed by the U.S. Government with credit and complete faith. Deposit Agreements have a relatively dependable backing because they lean on the bank's creditworthiness. For this reason, a Deposit Agreement is considered to be a safer, albeit low-return, form of investment.

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Applicable to all 50 states
Applicable to all 50 states

Our documents are vetted by lawyers and are applicable to all 50 states.