In this article you will find all the necessary information to carry out a pledge contract. Starting with what this legal tool means, the types of agreements that exist and the formalities to be fulfilled for the purposes of this agreement. In addition, you will also find the protocols followed within an ordinary commercial pledge contract and finally you will find an example of this document that you can download in word format.
pledge contract
El pledge contract Ecuador It is a legal tool or agreement in which you deliver real estate as collateral for an obligation. In other words, if you are part of this type of contract and place your car as collateral, it must be delivered to the other party as an object that represents the fulfillment of the commitment.
However, this car or the guarantee remains yours and the other natural or legal person in the contract will not have any right to sell or exchange it while it is in your possession. You can only sell it and obtain the money from the transaction for yourself, when you do not comply with the commitment established in the contract.
In this article, you will find a practical and simple guide on everything that constitutes a pledge contract in the country and the characteristics that your document must follow to be considered an agreement of this style.
In addition, in order to make the information about the agreement clearer, a pledge contract example that you can download and adapt to your needs.
Garment Classes
Although they all maintain the same principle, there are several types of pledge contracts that you must take into account when forming part of one. This will help you know what to expect regarding the agreed agreement and what the possible consequences are in case of non-compliance.
Below are the types of garments that may exist in Ecuador:
- Ordinary commercial. This is the most common type and is simply the one by which the debtor or a third person on his behalf, delivers real estate to the other party as protection or security that the debtor will comply with a certain commercial operation.
- Trade special. In this case, the contract is established only in favor of a registered merchant and on the items that he sells to be paid by granting credit to the buyer. For example, through an agreement of this type, you deliver your car to the owner of the butcher shop and in exchange he extends a credit for your products. In this sense, the creditor will not have the right to sell your car as long as you comply with the credit payment.
- Agricultural and Industrial. In the latter, you deliver to the creditor one or more goods determined according to the laws, as security or support in obtaining a credit for agricultural or industrial purposes.
However, the most commonly used form is the ordinary commercial pledge, so its principles and characteristics will be described in detail within the section.
Protocols of the Ordinary Commercial Pledge
Entering into such a contract requires a certain amount of ceremony, so establishing agreements and shaking hands is not enough. In other words, in addition to this first phase, which is certainly necessary, both you and the other party must leave the commitments on paper. Otherwise, your agreement will not be valid before the law or any third party.
Therefore, the first step is to prepare a document that explains in detail the agreements and actions to be taken under the pledge contract. Also, keep in mind that this type of agreement generally includes commercial or commercial activities, as was stated in the previous section.
Ways to Formalize the Pledge Contract
Before explaining the different ways to do it, it is necessary to clarify that the contract is formal when the garment is delivered. Therefore, this may vary depending on the characteristics of the thing that is going to be delivered as guarantee of the commitment. For example, if you want to leave a house as collateral for your credit, it will be difficult for you to deliver the property in your hands to the creditor. However, this is not the case when the garment is a car or a piece of jewelry.
In this sense, there are three ways to constitute the pledge, namely, which are shown below:
- Bearer titles.
- Documents to order.
- Name titles.
When is the Creditor in Possession of the Pledge?
Normally we consider that the creditor is in possession of the guarantee, when the thing or property is in his deposits, or in those of his intermediaries. In addition, we can also consider it in your possession when the pledge is in customs, in public warehouses or in private warehouses that are available to the creditor.
However, in the event that the thing given as collateral cannot be transferred, it is weighed in the power of the creditor when he has the documents that grant rights to the property.
Finally, if the pledge is being transferred, we can take it from the other party as long as the creditor has the papers that prove responsibility for it.
The Creditor Within the Pledge Agreement
You may wonder why we only talk about the creditor to define obligation and rights? The answer is that the pledge contract is characterized by being unilateral. In other words, it only reflects the creditor's commitment to take care of and return the guarantee as long as the statutes of the agreement are complied with. However, many times we turn this legal tool into an imperfect bilateral contract to generate responsibilities in both directions.
Even so, in this section we will talk about the commitments and rights that the creditor acquires when accepting this type of agreement, since he is the one who originally has the weighty responsibility.
Obligation
The main and only obligation that the creditor acquires through this contract is to keep the pledged thing, in order to return it in optimal condition when the statutes of the contract are fulfilled by the debtor. However, this general responsibility can give rise to a much more specific one that is established within the legal document.
Rights
In this case, there are several rights that are granted to the creditor depending on the situations that arise during the contract period. The main powers it has within the agreement are shown below:
- Right to retain the thing pledged as long as the payment of the credit given in favor is not fulfilled.
- To terminate the credit term in advance, provided that the pledge has lost its commercial value.
Issue of the document
In this section, we take into account the explicit characteristics that a pledge contract in order to be valid. Starting with the number of copies that must be made, in which case it will be the amount of 2 documents. One of them remains at the disposal of the creditor and the other must remain under the care of the debtor.
In this sense, the document must contain the following information:
- The conditions of the loan.
- amount of money borrowed
- Interest (if any)
- The term to pay.
- The name and characteristics of the pledged thing.
Pledge Contract Example
Lastly, in this section you will find a pledge agreement example, which will serve as a guide to build your own legal document. In addition, you will be able to download the complete file in word format to obtain greater ease when writing your particular agreement.
The following link will allow you to download the document shown below: Pledge-contract-1
PLEDGE CONTRACT
In (town), on………… of (month)…………. of year)…
Together
On the one hand, as The Debtor:
(Insert the name of the person as debtor) ………………………, of legal age, with identity card. nº……………, and domiciled at………………, calle……………., nº………., Cantón. ……….
On the other hand, as The Creditor:
(Insert the name of the person as creditor) ………………………, of legal age, with ID number …………… and with address at ………………, street………… …., no.………., Canton……….
Both contracting parties recognize each other's legal capacity for this act, and intervene in their own name and right.
EXPOSE
I.- That both parties have agreed to formalize the Pledge Contract, where the Debtor undertakes to deliver to the Creditor an asset of his own so that he may safeguard it with all the guarantees of good practice.
II.- That the object of this contract that must be safeguarded is:
(You must describe in detail the property that is transferred as a pledge: Object, vehicle, utensil, home, jewelry, electrical appliances, luggage, premises, attic, garage, exhibition object (Keep in mind that they can only be movable things).
III.- That the assets to be guarded are the property of the Debtor, without the existence of a third party with rights or powers of possession or use over the objects of this contract.
Having stated the foregoing, they agree to enter into this Pledge Agreement of (Insert the name of the object(s) defined above), in accordance with the following:
STIPULATIONS
FIRST.- The Debtor delivers to the Creditor the (insert the name of what is transferred according to the previous description: House, Vehicle, object, etc.) of his property, as Pledge.
The Debtor reserves the property of the thing loaned.
The value of the asset or assets assigned is ( _ _ _ _ _ _ $) and the debt pending completion by the debtor is ( _ _ _ _ _ _ $)
SECOND.- The Pledge begins with the delivery date of the same at the signing of this contract or on the date determined. That is, the day (–/–/—-) in the place (insert address and time) and ends when the Debtor makes the payment of the debt.
Unless it is due to legal issues or Bond of other credits, it is a Pledge of guarantees and the receipt of it will be kept until the pending debt is paid.
At the end of this agreement, the Creditor agrees to return the property that is the object of this contract. In addition, it must be in the same state that it was received, and it must be done within 5 days of the end of the debt, through the same channel that it was received.
THIRD.- The Creditor takes charge of the thing with the promptness of good faith and custody of the good or goods received.
From the moment of delivery, the Creditor is also forced to respond even in a fortuitous event, for damages caused to the goods delivered by third parties. In addition, you will have to return the assets at the end of the Pledge and the remaining obligations of the Creditors in accordance with the legal provisions.
The good or goods pledged in this contract must remain in (insert the complete address of the site).
The Creditor may not change the location of the assets, without prior express notification to the Debtor and without written authorization from the Debtor, unless it is by order of an Authority.
The Creditor expresses knowing the current state of the good that will be delivered.
(The complete document is in the file to download)
Do not leave without first reviewing the following articles:
Write a Contract for Certain Work in Ecuador
Municipality of Cuenca Ecuador: Make Consultation of Property Tax