Section V Commercial security

(1)

A contract for commercial pledge which secures rights ensuing from a commercial transaction shall be considered concluded in the event of:

1.

pledge of movable items and bearer securities - upon their delivery to the creditor or to another person on his account;

2.

pledge of securities to order - by endorsement for security and delivery to the creditor.

(2)

Entitled to a pledge by operation of law shall be creditors in the cases provided for in this Law.

(3)

In the event of transfer of a secured receivable the pledge shall be considered transferred upon delivery of the pledged object, unless the transferor has agreed to hold it as another person within the meaning of paragraph 1, item 1.

(1)

Where the pledge contract has been concluded in writing with a valid date and the parties have agreed that, should the debtor be in delay, the satisfaction from the pledge may be effected without court intervention, the creditor shall be entitled to sell on his own the pledged item or securities, if they have a market or stock exchange price. The creditor shall be bound to immediately notify the pledgor of the sale and to pay him the remainder of the price obtained.

(2)

Creditors under Article 310, paragraph 2, shall also be entitled to the rights under paragraph 1.

The pledgor may keep the pledged item in his possession in the cases and in compliance with the procedure specified by a law.

If the pledged item is perishable, the creditor may sell it, provided the item has a market or commodity exchange price, and deposit the amount with a bank as his security. The creditor must notify the pledgor immediately of the sale.

Where the pledged item produces yield, the pledge contract may provide for the right of the creditor to collect such yield on account of the debt.

(1)

A merchant shall be entitled to a lien for his due claim from another merchant, under a transaction concluded between them, on the movables and securities of the debtor received by that merchant in a lawful manner. Such right shall exist as long as the merchant has in his possession the movables and the securities.

(2)

The lien shall also exist where:

1.

the ownership of the items has passed to the creditor, but he must transfer it back;

2.

the ownership of the items has been transferred to a third party with regard to the debtor to the creditor, but he should transfer it back to the debtor.

(3)

The lien shall also have effect against the third parties to the extent objections the creditor may have against the claim of the debtor for delivery of the item may be raised against them.

(4)

The lien shall cease to exist if the debtor has ordered otherwise prior to the delivery of the item, or if the creditor has undertaken to act in respect of the item in a specific manner.

(5)

The lien may also be exercised for sums receivable which have not become due:

1.

if the debtor has entered bankruptcy proceedings;

2.

if a compulsory execution undertaken against the debtor has failed.

(6)

The lien shall be retained, if the debtor has ordered otherwise prior to the delivery of the item or if the creditor has undertaken to act in respect of the item in a specified manner, provided the circumstances under paragraph 5 have come to the knowledge of the creditor after the delivery of the item.

---

Next: Section VI Transfer of Rights
Up: GENERAL
Previous: Section IV Non-performance