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Legal Pass Through Agreement

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LEGAL PASS THROUGH AGREEMENT

This Legal Pass Through Agreement (the "Agreement") is made and entered into as of the day of , , by and between Provider Name: , a Corporation LLC Other, organized under the laws of , with principal place of business at , and Recipient Name: , a Corporation LLC Other, organized under the laws of , with principal place of business at .

RECITALS

WHEREAS, Provider has been requested to provide certain legal notices, claims processing, invoicing, payments, or related legal deliverables to third parties on behalf of Recipient (collectively, the "Pass-Through Items"); and

WHEREAS, the parties desire to set forth the terms under which Provider will receive, process, and pass through such Pass-Through Items to Recipient and to allocate responsibility for costs, documentation, recordkeeping, indemnity, and dispute resolution in connection with such pass-through services.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows:

1. DEFINITIONS

1.1 "Pass-Through Items" means notices, invoices, claims, payments, legal documents, settlements, demands, and other third-party communications or charges that Provider receives and forwards to Recipient under this Agreement.

1.2 "Costs" means direct amounts charged by third parties and reasonable administrative fees set forth in Section 3 that are associated with the receipt, processing, or transmission of Pass-Through Items.

2. PASS-THROUGH OBLIGATIONS

2.1 Provider shall accept Pass-Through Items from third parties and shall use reasonable care to record, retain, and forward copies of such items to Recipient promptly in accordance with the transmission protocol set out in this Agreement.

2.2 Provider's forwarding of Pass-Through Items to Recipient constitutes delivery for all purposes under this Agreement, provided Provider uses the Notice method described in Section 8 unless Provider is expressly required by law to deliver directly to another party.

2.3 Recipient acknowledges that Provider acts as an intermediary for the limited purpose of receiving and transmitting Pass-Through Items and not as counsel for Recipient or as a guarantor of third-party obligations. Provider does not assume any duty to contest, negotiate, or resolve third-party claims unless separately engaged to do so in writing.

3. BILLING, PAYMENT AND COST ALLOCATION

3.1 Recipient shall be responsible for all Costs associated with Pass-Through Items unless otherwise agreed in writing. Provider may invoice Recipient for Costs and a processing fee as set forth in an invoice or schedule attached to this Agreement.

3.2 Provider shall render itemized invoices to Recipient documenting Costs and any processing fees. Unless otherwise stated on the invoice, Recipient shall pay undisputed invoices within days of receipt.

4. RECORDS, AUDIT AND CONFIRMATION

4.1 Provider shall keep complete and accurate records of all Pass-Through Items received and forwarded for a period of years following the date of receipt.

4.2 Upon reasonable prior written notice, Recipient may audit Provider's records related to Pass-Through Items to verify charges and compliance. Audits shall be conducted during normal business hours and in a manner designed to avoid disruption.

5. CONFIDENTIALITY

5.1 Each party shall hold in confidence and not disclose to any third party any nonpublic information received from the other party in connection with Pass-Through Items, except to the extent disclosure is necessary to perform obligations under this Agreement or is required by law, provided the disclosing party gives prompt written notice to the other party and cooperates to limit the scope of disclosure.

6. INDEMNIFICATION; LIMITATION OF LIABILITY

6.1 Recipient shall indemnify, defend and hold harmless Provider and its officers, directors, employees and agents from and against all third-party claims, liabilities, losses and expenses (including reasonable attorneys' fees) arising out of or related to Pass-Through Items, except to the extent caused by Provider's gross negligence or willful misconduct.

6.2 EXCEPT FOR A PARTY'S INDEMNIFICATION OBLIGATIONS SPECIFIED IN THIS SECTION OR LIABILITY ARISING FROM WILLFUL MISCONDUCT OR FRAUD, NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES, AND EACH PARTY'S AGGREGATE LIABILITY UNDER THIS AGREEMENT SHALL NOT EXCEED THE AMOUNTS ACTUALLY PAID OR PAYABLE TO PROVIDER FOR PASS-THROUGH SERVICES DURING THE PRECEDING TWELVE (12) MONTHS.

7. TERM AND TERMINATION

7.1 This Agreement shall commence on the Effective Date and shall continue in effect for a term of months, unless earlier terminated in accordance with this Section.

7.2 Either party may terminate this Agreement upon days' prior written notice to the other party. Termination shall not relieve Recipient of its obligation to pay for Costs properly incurred prior to termination.

8. NOTICES

All notices, invoices and other communications required or permitted under this Agreement shall be in writing and delivered by personal delivery, overnight courier, certified mail (return receipt requested) or email with confirmation to the addresses set forth below or to such other address as either party may specify by notice in accordance with this Section.

9. AMENDMENT; WAIVER; COUNTERPARTS

9.1 No amendment or modification of this Agreement shall be effective unless made in a writing signed by authorized representatives of both parties.

9.2 No waiver of any term or breach of this Agreement shall be effective unless in writing and signed by the waiving party. A failure or delay to exercise any right shall not operate as a waiver.

9.3 This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. Signatures delivered by electronic means shall be valid and binding.

10. GOVERNING LAW; ENTIRE AGREEMENT; SEVERABILITY

10.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of , without regard to choice of law principles.

10.2 Entire Agreement. This Agreement, together with any exhibits or schedules expressly incorporated herein, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, proposals, understandings and communications, whether written or oral.

10.3 Severability. If any provision of this Agreement is held to be invalid or unenforceable for any reason, the remainder of the Agreement shall continue in full force and effect and the invalid provision shall be reformed only to the extent necessary to make it valid and enforceable.

MISCELLANEOUS PROVISIONS

Provider:

By:

Date:

Recipient:

By:

Date:

Enter text✕

What a Legal Pass Through Agreement Is and When It's Used

A Legal Pass Through Agreement documents the transfer of rights, obligations, or payments from one party to another while preserving the original contract terms. It formalizes that a specified obligation or benefit will 'pass through' an intermediary to a third party, and establishes how notices, payments, and liabilities flow. Typical uses include assignment of payments, subcontractor pass-throughs, and third-party beneficiary arrangements. The agreement clarifies responsibilities, limits liability exposure, and sets administrative procedures for notices, accounting, and dispute handling to reduce ambiguity between the primary obligor, intermediary, and ultimate recipient.

Why a Pass Through Agreement Matters for Legal Clarity

A well-drafted Legal Pass Through Agreement reduces disputes over who receives funds or performs obligations, allocates risk, and documents notice and accounting procedures. It preserves original contract intent while specifying administrative mechanics and limits exposure for intermediaries and recipients.

Why a Pass Through Agreement Matters for Legal Clarity

Who typically prepares and signs a Pass Through Agreement

The agreement is useful across industries where funds, tax reporting, or contractual duties flow through an intermediary rather than directly between the original parties and final recipient.

  • General counsel and commercial contracts teams managing assignment and delegation clauses for corporate obligations.
  • Accounts payable/accounts receivable teams documenting how payments are redirected or split among vendors.
  • Prime contractors and subcontractors formalizing pass-through payments, obligations, or indemnities on a project.

Core elements to include in a professional Pass Through Agreement

A complete agreement balances operational detail with clear legal terms: identify parties, define the pass-through mechanism, set payment and reporting procedures, allocate liabilities, and provide termination and notice provisions. Include dispute resolution and governing law clauses to reduce post-execution uncertainty.

Parties

Full legal names and roles (originator, intermediary, beneficiary); include entity type and state of formation.

Pass-Through Terms

Exact description of what passes through (payments, credits, notices) and timing, frequency, and conditions for transfer.

Payment Directions

Routing instructions, invoicing requirements, tax reporting responsibilities, and any withholding obligations.

Indemnity & Liability

Allocation of risk, limits on intermediary liability, and procedures for claims and reimbursement.

Notices & Records

How notices are delivered, required supporting records, and audit or reconciliation rights.

Termination & Remedies

Events permitting termination, cure periods, and remedies including setoff and recovery mechanisms.

Step-by-step: completing a Legal Pass Through Agreement

Follow these sequential steps to prepare, review, and execute the agreement cleanly and with minimal risk.

  • 01
    Assemble parties: Identify originator, intermediary, beneficiary with legal names and contact details.
  • 02
    Define pass-through items: Specify payments, obligations, records, and timing for transfers.
  • 03
    Assign responsibilities: Clarify tax reporting, withholding, notice, and reconciliation duties.
  • 04
    Execute and retain: Sign by authorized representatives and store copies per retention rules.

Configuring the online workflow for execution and tracking

Set up roles, authentication, and automated routing before inviting signers to reduce errors and speed completion.

Field Configuration
Signer Roles Assign originator, intermediary, beneficiary roles to signed fields for role-based routing.
Authentication Choose email-only, SMS code, or stronger verification for high-risk transfers.
Conditional Fields Use conditional fields to show payment details only when applicable.
Audit Trail Enable full audit logging to capture timestamps, IPs, and signing events.

How a pass-through execution typically flows

A clear flow reduces reconciliation issues and ensures each party has the records needed to fulfill obligations.

  • Prepare Document: Draft agreement and attach exhibits with payment instructions.
  • Assign Signers: Place signature and initial fields with signer order if needed.
  • Sign and Authenticate: Signers authenticate and sign; platform records evidence of intent.
  • Distribute & Archive: Send executed copies to all parties and retain per retention rules.

Digital signing and technical requirements for e-execution

Verify that the chosen platform provides an immutable audit trail, secure storage, and any industry-specific compliance (for example HIPAA) required for your use case.

  • File formats: PDF, DOCX supported
  • Integrations: CRM and storage connectors available
  • Authentication: Email, SMS, or advanced options

Security and compliance features to require for electronic execution

Encryption: TLS 1.2/1.3 in transit; AES-256 at rest
Audit Trail: Tamper-evident, timestamped activity logs
HIPAA Capability: BAA available for protected health information
21 CFR Part 11: Support for FDA-regulated electronic records
SOC 2: SOC 2 Type II certified
ISO: ISO 27001 certification

Common preparation errors that cause delays or disputes

  • Unclear party identification leading to ambiguity about who has rights or obligations.
  • Missing payment instructions or incorrect account details that delay or misroute funds.
  • Failure to assign tax reporting responsibilities causing unexpected withholding or penalties.
  • Not specifying notice procedures, producing missed cure periods and avoidable defaults.

Key legal and financial risks from improper pass-through documentation

Contract Unenforceability: Risk of invalid assignment
Tax Penalties: Incorrect reporting triggers IRC penalties
Withholding Liability: Unexpected withholding obligations
Notary Issues: Invalid notarization affects enforceability
Data Privacy Fines: HIPAA/CCPA exposure for mishandled PII
Late Filing Fees: Administrative fines and interest

Comparison: eSignature plan basics relevant to Pass Through processing

Platform feature availability and price models affect transaction cost, volume handling, and compliance—compare starting prices and caps when selecting a vendor.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day free trial Varies by plan Varies by plan Varies by plan Varies by plan
Bulk Send Yes (Business Premium) Varies by plan Varies by plan Varies by plan Varies by plan
Audit Trail Yes Yes Yes Yes Yes
Envelope Cap No cap 100 env/user/yr limit Depends on plan Depends on plan Depends on plan

Typical timelines and processing expectations

Set realistic internal deadlines for review, signature, and fund transfer to ensure obligations are met and reporting obligations satisfied.

Drafting & Internal Review:

Allow 3–5 business days for legal and accounting review

Signer Turnaround:

Target 24–72 hours for electronic signature routing

Payment Transfer:

ACH transfers typically 1–3 business days after execution

Tax Reporting Cutoffs:

Coordinate with calendar-year filing deadlines for 1099 issuance

Record Retention Start:

Retention begins on effective date or payment date as specified

Real-world examples of pass-through agreements in action

Two concise examples illustrate common patterns and outcomes when agreements are structured clearly.

Optica Ventures — Payment Routing

Optica used a pass-through agreement to route investor distributions through a manager for administration

  • Reduced manual reconciliation time by centralizing remittances
  • The agreement defined payment timing, recordkeeping, and audit rights so investors received timely statements and the manager met tax reporting obligations.

Martin Properties — Subcontractor Pass-Through

A real estate developer passed subcontractor retainage through a construction manager

  • Clarified lien waiver and payment schedule responsibilities
  • By specifying documentation and approval steps, the parties minimized payment disputes and improved project cash flow transparency.

Typical signatories and their responsibilities

General Counsel

Reviews legal effects of assignment and indemnity clauses, ensures the agreement complies with governing law, and confirms signatory authority to bind parties.

Controller / CFO

Verifies payment routing, tax reporting allocation, and accounting treatment; confirms banking information and internal controls for fund transfers.

Frequently asked questions about Legal Pass Through Agreements

Answers to common practical and legal questions encountered when preparing or executing pass-through agreements.


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