The pledge is a real guarantee contract to ensure that an obligation is fulfilled and encumbers movable property. The creditor will retain the movable property until the obligation contracted by the borrower is paid.
That is, through the pledge, the lender keeps an object of the debtor in his possession until he cancels his debt, and only then will he return it.
In this way, the pledge ensures through personal property the fulfillment of an obligation or benefit. It is also known as pledge credit and is made up of two parts, as we will see below.
Parts of the pledge contract
The parties to the pledge contract are:
- Pledged creditor: It is the person who lends the money and who keeps the guarantee until it is returned. It has three faculties:
- Retention of the movable property: Retaining the movable property does not mean that the use of the thing is allowed. For example, if a piece of jewelry has been pledged, the pledgee will not be able to use it.
- Defend the movable property: The pledgee is entitled to file a claim if necessary. That is, claim ownership if it is owned by a third party without legitimate right.
- Realization and preferential collection: In the event that the pledged debtor does not comply with his obligation, the creditor can realize the asset. This can be done judicially or extrajudicially. Extrajudicially, it refers to the public auction of the property. If the object is sold for the same amount for which the debtor had agreed, the debt will be satisfied. In the event that the amount is less than the debt, the pledgee will still be obliged to comply with the obligation.
- Pledging debtor: It is the owner of the movable property and the one who is obliged to comply with the payment.
The main characteristics of this guarantee are:
- Its function is to guarantee the fulfillment of an obligation (return of money) through the delivery of a movable asset as collateral. For example, a person requests an amount of money and as collateral, so that the creditor sees his compliance assured, he delivers his car. This is known as collateral, lowering the lender’s risk.
- You can only encumber movable property. Real estate is taxed through other guarantees such as the mortgage.
- In order for the real right to be constituted, it is not enough for the possession of the movable property to be transferred. It is necessary to register in a public registry.
- In order for a movable asset to be pledged, the debtor must be its owner. It will not cease to be, even if he loses possession of the property, as long as the payment is not fulfilled.
- The pledgee will have possession of the property while the obligation is not fulfilled. Thus, in the event that, after the term, the respective payment is not met, the lender will keep the property of the movable property.
- The pledge is extinguished when the obligation is paid.
Pledge of credits
We must highlight a specific garment, the credit pledge. How does it work?
Like an object, such as a car or a painting, the debtor can pledge his right to demand an amount of money.
That is, if the debtor has the right over a third party to claim a certain amount of money, this right can be pledged to ensure the fulfillment of its own obligation to the pledgee.
mounts of mercy
The origin of this pledge contract is in the pawnshops, which still exist today. They are usually small loans. The pawnbroker delivers an amount of money to the debtor who comes with a movable object in order to guarantee the return of the money.