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An indenture is a legal
contract A contract is a legally binding agreement that defines and governs the rights and duties between or among its parties Image:'Hip, Hip, Hurrah! Artist Festival at Skagen', by Peder Severin Krøyer (1888) Demisted with DXO PhotoLab Clearview ...

contract
that reflects or covers a debt or purchase obligation. It specifically refers to two types of practices: in historical usage, an
indentured servant Indentured servitude is a form of labor in which a person is contracted to work without salary for a specific number of years. The contract, called an "indenture", may be entered voluntarily for eventual compensation or debt repayment, or it may b ...
status, and in modern usage, it is an instrument used for commercial debt or real estate transaction.


Historical usage

An indenture is a legal
contract A contract is a legally binding agreement that defines and governs the rights and duties between or among its parties Image:'Hip, Hip, Hurrah! Artist Festival at Skagen', by Peder Severin Krøyer (1888) Demisted with DXO PhotoLab Clearview ...

contract
between two parties, particularly for
indentured labour Indentured servitude is a form of forced labor in which a person (an indenture) is forced to work without salary for a specific number of years for eventual compensation or debt repayment. Historically, it has been used to punish and relocate cap ...
or a term of
apprenticeship An apprenticeship is a system for training a new generation of practitioners of a trade Trade involves the transfer of goods from one person or entity to another, often in exchange for money. Economists refer to a system A system is a ...

apprenticeship
but also for certain
land Land is the solid surface of Earth that is not permanently submerged in water. Most but not all land is situated at elevations above sea level (variable over geologic time frames) and consists mainly of Earth's crust, crustal components such a ...

land
transactions. The term comes from the medieval English "indenture of retainer" — a legal contract written in duplicate on the same sheet, with the copies separated by cutting along a jagged (toothed, hence the term "indenture") line so that the teeth of the two parts could later be refitted to confirm authenticity ( chirograph). Each party to the deed would then retain a part. When the agreement was made before a court of law a ''tripartite'' indenture was made, with the third piece kept at the court. The term is used for any kind of
deed In common law In law, common law (also known as judicial precedent or judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions. ''Black's Law Dictiona ...

deed
executed by more than one party, in contrast to a
deed poll#REDIRECT Deed poll A deed poll (plural: deeds poll or deed polls) is a legal document binding only to a single person or several persons acting jointly to express an active intention. It is, strictly speaking, not a contract A contract is a leg ...
which is made by one individual. In the case of bonds, the indenture shows the pledge, promises, representations and covenants of the issuing party. Although other evidence indicates that the method has been in use from around the year 1000, the earliest surviving examples in
England England is a Countries of the United Kingdom, country that is part of the United Kingdom. It shares land borders with Wales to its west and Scotland to its north. The Irish Sea lies northwest of England and the Celtic Sea to the southwest. E ...

England
are from the thirteenth century. These are agreements for military service, proving that a paid contract army was then in existence.
Exchequer In the civil service The civil service is a collective term for a sector of government composed mainly of career civil servants hired on professional merit rather than appointed or elected, whose institutional tenure typically survives transi ...
records of
Henry VHenry V may refer to: People * Henry V, Holy Roman Emperor (1081–1125) * Henry V, Count Palatine of the Rhine (1173–1227) * Henry V, Count of Luxembourg (1216–1281) * Henry V, Duke of Legnica (c.  1248 – 1296) * Henry V of Iron (c. 1319 ...

Henry V
's French campaign of 1415, which culminated in the Battle of Agincourt on 25 October 1415, including the indentures of all the captains of the army agreeing to provide specified numbers of men and at what cost, may still be read. An indenture was commonly used as a form of sealed contract or agreement for land and buildings. An example of such a use can be found in the National Archives, where an indenture, from about 1401, recording the transfer of the
manor Manor may refer to: Land tenure *Manor, the land belonging to the Lord of the manor under manorialism in parts of medieval Europe, notably England *Manor house, the main residence of the lord of the manor *Lord of the manor, the landholder of a ma ...
of Pinley,
Warwickshire Warwickshire (; abbreviated Warks) is a county A county is a geographical region of a country used for administrative or other purposesChambers Dictionary The ''Chambers Dictionary'' (''TCD'') was first published by William Chambers ( ...

Warwickshire
, is held. In the early history of the United States, many European immigrants served a period of indentured labour in order to pay the cost of their transportation. This practice was common during the 17th and 18th centuries, where over half of immigrants worked off an average of three years' servitude.


Modern usage

''Bond indenture'' (also ''trust indenture'' or ''deed of trust'') is a
legal document ''Legal instrument'' is a law, legal term of art that is used for any formally executed written document that can be formally attributed to its author, records and formally expresses a legally enforceable act, process, or contractual duty, obligat ...
issued to lenders and describes key terms such as the
interest rate An interest rate is the amount of interest In and , interest is payment from a or deposit-taking financial institution to a or depositor of an amount above repayment of the (that is, the amount borrowed), at a particular rate. It is disti ...
,
maturity date Maturity or immaturity may refer to: * Adulthood Biologically, an adult is an organism In biology, an organism (from Ancient Greek, Greek: ὀργανισμός, ''organismos'') is any individual contiguous system that embodies the L ...
,
convertibility Convertibility is the quality that allows money or other financial instruments to be converted into other liquid A liquid is a nearly incompressible fluid In physics, a fluid is a substance that continually Deformation (mechanics), defor ...
, pledge, promises, representations, covenants, and other terms of the bond offering. When the
offering memorandum An offering memorandum (OM) or offering circular (OC) is a type of prospectus (finance) {{unreferenced, date=October 2015 250px, A prospectus from the US A prospectus, in finance Finance is the study of financial institutions, financial market ...
is prepared in advance of marketing a bond, the indenture will typically be summarised in the "description of notes" section. In the United States, public debt offerings in excess of $10 million require the use of an indenture of trust under the
Trust Indenture Act of 1939 The Trust Indenture Act of 1939 (TIA), codified at , supplements the Securities Act of 1933 in the case of the distribution of Security (finance)#Debt, debt securities in the United States. Generally speaking, the TIA requires the appointment of a ...
. The rationale for this is that it is necessary to establish a collective action mechanism under which creditors can collect in a fair, orderly manner if
default Default may refer to: Law * Default (law), the failure to do something required by law ** Default (finance) In finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It ...
takes place (like that which occurs during
bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditor A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' par ...

bankruptcy
).William J. Carney. ''Corporate Finance: Principles and Practice (University Casebook Series)''. Thomson-West. 2004. . No trust relationship exists between the bondholder and the issuing corporation. These two are in a regular contractual, arm's length, non-
fiduciary A fiduciary is a person who holds a legal Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by ...
, non-
equity Equity may refer to: Finance, accounting and ownership *Equity (finance), ownership of assets that have liabilities attached to them ** Stock, equity based on original contributions of cash or other value to a business ** Home equity, the differe ...
relationship. Rather, the trustee in a "trust indenture" is a third party, usually a specialist company, who is appointed by the issuer to handle and safeguard the interests of the numerous public bondholders, in events ranging from the usual distribution of
coupon In marketing, a coupon is a ticket or document that can be redeemed for a financial discount or rebate when purchasing a product. Customarily, coupons are issued by manufacturers of consumer packaged goods or by retailers, to be used in ...
s and
principal Principal may refer to: Title or rank * Principal (academia) The principal is the chief executive and the chief academic officer of a university A university ( la, universitas, 'a whole') is an educational institution, institution of higher ...
payments to dealing with the issuer's default, if any occurs.


See also

*
Coolitude __NOTOC__ Coolitude is a term coined by Mauritian poet Khal Torabully to describe the cultural interaction of the Indian or Chinese "coolie" diaspora, and by extension also similar migrations. It refers to a Transculturation, transcultural process ...
*
Corporate finance Corporate finance is the area of finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers a ...
*
Debt security A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any form ...
*
Debt bondage Debt bondage, also known as debt slavery, bonded labour, or peonage, is the pledge of a person's services as security for the repayment for a debt or other obligation, where the terms of the repayment are not clearly or reasonably stated, and the ...
*
Debenture In corporate finance Corporate finance is the area of finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and ...
*
Indentured servant Indentured servitude is a form of labor in which a person is contracted to work without salary for a specific number of years. The contract, called an "indenture", may be entered voluntarily for eventual compensation or debt repayment, or it may b ...
*
Indian indenture system The Indian indenture system was a system of indentured servitude Indentured servitude is a form of forced labor in which a person (an indenture) is forced to work without salary for a specific number of years for eventual compensation or debt ...
* Irish slaves myth *
Prospectus Prospectus may refer to: * Prospectus (finance), also called a ''concept note'' * Prospectus (university) * Prospectus (book) * Prospectus (album), ''Prospectus'' (album), a 1983 album by saxophonist Steve Lacy * Parkland College's newspaper {{dis ...
*
Securities law Securities regulation in the United States is the field of U.S. law that covers transactions and other dealings with securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument Finance ...
*
Slavery Slavery and enslavement are both the state and the condition of being a slave, who is someone forbidden to quit their service for an enslaver, and who is treated by the enslaver as their property Property is a system of rights that give ...
*
Blackbirding Blackbirding involves the coercion of people through deception or kidnapping to work as slaves or poorly paid labourers in countries distant to their native land. The term has been most commonly applied to the large-scale taking of people indig ...


References


External links


English property indenture from 1804

Wisconsin Health and Educational Facilities Authorities Revenue bonds
* First international Festival of indenture : http://www.potomitan.info/ki_nov/coolitude_2018.php {{Authority control Contract law Legal documents Bond market