pledge

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Pledge

A Bailment or delivery of Personal Property to a creditor as security for a debt or for the performance of an act.

Sometimes called bailment, pledges are a form of security to assure that a person will repay a debt or perform an act under contract. In a pledge one person temporarily gives possession of property to another party. Pledges are typically used in securing loans, pawning property for cash, and guaranteeing that contracted work will be done. Every pledge has three parts: two separate parties, a debt or obligation, and a contract of pledge. The law of pledges is quite old, but in contemporary U.S. law it is governed in most states by the provisions for Secured Transactions in article 9 of the Uniform Commercial Code.

Pledges are different from sales. In a sale both possession and ownership of property are permanently transferred to the buyer. In a pledge only possession passes to a second party. The first party retains ownership of the property in question, while the second party takes possession of the property until the terms of the contract are satisfied. The second party must also have a lien—or legal claim—upon the property in question. If the terms are not met, the second party can sell the property to satisfy the debt. Any excess profit from the sale must be paid to the debtor, or first party. But if the sale does not meet the amount of the debt, legal action may be necessary.

A contract of pledge specifies what is owed, the property that shall be used as a pledge, and conditions for satisfying the debt or obligation. In a simple example, John asks to borrow $500 from Mary. Mary decides first that John will have to pledge his stereo as security that he will repay the debt by a specific time. In law John is called the pledgor, and Mary the pledgee. The stereo is referred to as pledged property. As in any common pledge contract, possession of the pledged property is transferred to the pledgee. At the same time, however, ownership (or title) of the pledged property remains with the pledgor. John gives the stereo to Mary, but he still legally owns it. If John repays the debt under the contractual agreement, Mary must return the stereo. But if he fails to pay, she can sell it to satisfy his debt.

Pledged property must be in the possession of a pledgee. This can be accomplished in one of two ways. The property can be in the pledgee's actual possession, meaning physical possession (for example, Mary keeps John's stereo at her house). Otherwise, it can be in the constructive possession of the pledgee, meaning that the pledgee has some control over the property, which typically occurs when actual possession is impossible. For example, a pledgee has constructive possession of the contents of a pledgor's safety deposit box at a bank when the pledgor gives the pledgee the only keys to the box.

In pledges both parties have certain rights and liabilities. The contract of pledge represents only one set of these: the terms under which the debt or obligation will be fulfilled and the pledged property returned. On the one hand, the pledgor's rights extend to the safekeeping and protection of his property while it is in possession of the pledgee. The property cannot be used without permission unless use is necessary for its preservation, such as exercising a live animal. Unauthorized use of the property is called conversion and may make the pledgee liable for damages; thus, Mary should not use John's stereo while in possession of it.

For the pledgee, on the other hand, there is more than the duty to care for the pledgor's property. The pledgee has the right to the possession and control of any income accruing during the period of the pledge, unless an agreement to the contrary exists. This income reduces the amount of the debt, and the pledgor must account for it to the pledgee. Additionally, the pledgee is entitled to be reimbursed for expenses incurred in retaining, caring for, and protecting the property. Finally, the pledgee need not remain a party to the contract of pledge indefinitely. She can sell or assign her interest under the contract of the pledge to a third party. However, the pledgee must notify the pledgor that the contract of pledge has been sold or reassigned; otherwise, she is guilty of conversion.

pledge

v. to deposit personal property as security for a personal loan of money. If the loan is not repaid when due, the personal property pledged shall be forfeit to the lender. The property is known as collateral. To pledge is the same as to pawn. 2) to promise to do something. (See: pawn)

pledge

(Binding promise), noun act of giving one's word, agreement, assurance, attestation, avowal, avowance, commitment, compact, contract, covenant, guarantee, oath, obligation, promise, promissory oath, promissum, solemn declaration, solemn word, statement on oath, undertaking, vow, warranty, word, word of honor

pledge

(Security), noun collateral, deposit, earnest, earnest payment, guarantee, installment, personal secuuity, pignus, real security, security, stake, stake money, token payment
Associated concepts: assignment, collateral security, pledge of securities, pledged personalty, pledged property, seeured transactions

pledge

(Deposit), verb bond, give as a guarantee, give as security for a debt, give as security for an obligation, give as surety, give one's signature, give security, guarantee, hypothecate, impignorate, indorse, insure, offer collateral, post, put in pawn, put up, stake

pledge

(Promise the performance of), verb assert solemnly, assure, avow, be answerable for, become bound to, bind, bind oneself, commit oneself, contract an obligaaion, covenant, engage solemnly, engage to give, give a guarantee, give assurance, give one's word, guarantee, make a promise, obligare, oppignerare, promise solemnly, take upon oneself, undertake, warrant, vow
See also: accountability, adduce, adjuration, agree, agreement, allegiance, assurance, assure, avouch, avow, bail, bear, bind, binder, bond, charge, cloud, commitment, compact, contract, covenant, coverage, deal, debenture, declaration, deposit, due, duty, guarantee, guaranty, hostage, hypothecation, incumbrance, insurance, lien, loan, mortgage, oath, obligate, obligation, pact, pawn, profess, profession, promise, responsibility, specialty, stipulate, subscribe, undertake, undertaking, underwrite, vouch, vow, warrant, warranty

pledge

a security transaction applicable to chattels under which the borrower (pledgor) gives possession of the chattel to the lender (the pledgee) as security for the payment of a debt or performance of an obligation. The pledgee is entitled to hold the chattel until payment or performance and, upon failure duly to pay or perform at the proper time, to sell it. Until any such sale, however, the pledgor remains entitled to redeem it by payment or performance. The same arrangement applies in Scots law in relation to moveables. It is known to the public through the pawn shop where the public may go to obtain a loan by depositing their personal possessions which may be sold if not redeemed.

PLEDGE, contracts. He who becomes security for another, and, in this sense, every one who becomes bail for another is a pledge. 4 Inst. 180 Com. Dig. B. See Pledges.

References in periodicals archive ?
The pledgor, the pledgee or the execution officer can review the information registered with the Registry.
* pledgor's breach of his or her obligations under the collateral agreement, breach of representations related to his or her financial condition or that of the collateral (i.e., no liens or judgments on the collateral and that the collateral account is true, correct and complete);
* an act of anticipatory breach by pledgor or customer;
As a consequence, the trader derived "unconscionable windfalls from those Navajos who are financially unable to reclaim their pledges." To address this issue, the FTC recommended that traders be required to return to the original owner all surplus income gained through the sale of dead pawn, allowing traders to retain only a 10 percent "administrative fee." Furthermore, the surplus amount had to be returned to the pledgor in US currency and not other items of "equal value" from the store.
Whereas previously customers had to present their pawn ticket in order to redeem an item, this was no longer the case: "Redemption may not be denied on the sole ground that the pledgor is unable to produce a receipt or pawn ticket, provided the pledgor gives a reasonable description of the pawned item or makes an actual identification of the item." The law further stipulated that traders could not impose additional charges for lost pawn tickets.
Article 744 In the event of a pledge of the original pledge being made by the pledgor to some third person with the permission of the pledgee, the second pledge stands in the place of the first pledge, which becomes null and void.
Article 756 Neither the pledgor nor the pledgee may sell the pledge without the consent of the other.
The designation of an "Execution Agent" (he/she cannot be one of the parties involved in the pledge) is given to an individual licensed by the Ministry of Commerce and Investment ("MOCI") for practicing the act of enforcing pledged properties if the pledgor defaults and there are multiple pledgees.
The Security Rules also provide for a close out mechanism which permits enforcement of the pledge by way of sale of the Warrants by the DMCC (and the goods it represents) without recourse to the pledgor or a court order on receipt of a Close Out Settlement Instruction (as defined in the Security Rules) as prescribed in Rule 3 of the Security Rules.
9-207(c)(3) places a burden on pledgors to negotiate a
The ALTA Form 16 Endorsement also includes a "non-imputation" provision whereby the title insurance company agrees that it will not refuse to pay a claim to the mezzanine lender because of any fact previously known to any of the pledgors of the Equity Interests.
were the sponsors and pledgors. BDO Capital and Investment Corp.