Mortgage, Pledge and Cession In Security Flashcards
Define real security
A limited right which one person (the creditor) has in respect of thing or things ( property) of another (the debtor), in the order to secure the performance of an obligation.
Discuss the advantage of real security
- creditor (upon default of debtor) may obtain an attachment order & satisfy his debt from the proceeds of the sale. (property can be sold to cover debt)
- if debtor is sequestrated, the proceeds of the relevant property are applied to satisfy the debt of the secured creditor
- Creditor thus has priority over other creditors (unsecured) up to the amount of the secured debt
Where does real security orginate?
From an agreement between the creditor and debtor, followed by delivery to the creditor of the object serving as security in case of pledge, and registration of a mortgage bond in the Deeds Office in the event of a mortgage.
Distinguish the difference between mortgage and a pledge
Pledge
- Agreement between creditor and debtor
- Followed by physical delivery of moveable object by debtor
- the limited real right of the creditor arises on delivery
Mortgage
- Agreement between creditor and debtor
- Followed by registration of mortgage in the Deeds office
- the limited real right is established upon registration of the bond in the Deeds office
Explain accessory nature
In suretyship, there must be a valid principal obligation, which may originate from contract, delict or from any other cause recognized by law.
The obligation between the pledgor or mortgagor (debtor) on the one and the pledgee or mortgagee (creditor) on the other hand. Is therefore accessory by nature. Meaning the real security is inextricably bound to the existence of the principal debt.
Discuss dual relationship
The agreement gives rise to the creditor having a mere personal right to demand that real security by given. In the event of pledge, the real right arises upon physical delivery of the thing pledge to the pledgee, and in case of a mortgage the real rights is established upon registration of the bond in the Deeds Office
Discuss Pledgor and mortgagor
Only the owner of a thing, or his representatives, may in general pledge or mortgage the thing to a creditor. Therefore, if the owner of a thing has not given permission that the object may be pledged or mortgage, he will only be bound if he ratifies the transaction.
What happens when real security emanates from a mortgage bond?
It is customary in practice that the owner gives power of attorney to a conveyancer to register the mortgage in the Deeds Office
What occurs when the owner of a thing does not have the capacity to look after his own affairs?
He may not subject his property to real security, he should, depending on the circumstances be assisted by curator or guardian
Explain subject matter of mortgage and pledge
Anything, which can be alienated which therefore has economic value, may serve as real security. It could be a movable, immovable even incorporeal thing
Discuss indivisibility of mortgage and pledge
As long as the debt has not been satisfied in full, the whole of the subject matter remains subject to the real right of security
Discuss the consequences of mortgage and pledge
- In the event of non- payment- creditor may item sold in execution
- Insolvency of debtor- creditor has preferent right (secured)
- By separating a thing as the object of the security, the rights of the owner are restricted by granting to another a limited real right to his property.
Eg: the owner will not be entitled to evade his obligations by selling the burdened object and depriving the creditor of his security.
= Pledge object, he will not be able to transfer ownership as long as the object is under the physical control of the pledgee.
= Mortgage, the mortgage bond will first have to be cancelled in the Deeds Office. The consent of the bondholder is necessary for such cancellation prior to the transfer of ownership of the object to another person.
= Should ownership be registered in the name of a person while the bond has accidentally not been cancelled, the security of the mortgagee will last until valid cancellation of the bond.
Which ways can mortgage and pledge be terminated?
A) by Performance / satisfaction of secured obligation
B) total destruction of object/ mortgage the buildings on the land might be destroyed, bond will remain over the land on which the buildings were situated
C) Loss of possession of pledged object
D) where the pledge or mortgage agreement is terminated by order of court
E) where the object is sold in execution following upon an order of court, or by the trustee in the event of the insolvency of the debtor
F) period expires for which security was granted
G) if the mortgagor has for a period of 30 years neither expressly nor tacitly admitted his debt, the mortgage prescribes.
Discuss agreement to pledge
The pledgor and pledgee conclude an agreement in order to bring about the security. In the terms of this agreement the pledgor has the duty to deliver the pledged object to the pledgee.
Are formalities need for agreement to pledge?
No, unless parties states otherwise
