| (Approved by the 14th Meeting
of the Standing committee of the 8th National People's Congress
on June 30, 1995 and Effective as of October 1, 1995)
Catalog :
Chapter
1 General Provisions
Chapter
2 Suretyship
Chapter
3 Mortgage
Chapter
4 Pledge
Chapter
5 Lien
Chapter
6 Deposit
Chapter
7 Supplementary Provisions
Chapter 1 General Provisions
Chapter 2 Suretyship
Section 1 Suretyship and Surety
Article 6 Suretyship as used in this Law means an agreement
pursuant to which a surety and a creditor agree that the surety
shall perform the obligation or bear the liability according
to the agreement, when the debtor fails to perform his obligation.
Article 7 A legal person, other organization or a citizen
capable of assuming debts may act as a surety.
Article 8 No state organ may act as a surety, except
in the case of securing loans, for onlending, from a foreign
government or an international economic organization as is
approved by the State Council.
Article 9 Institutions such as schools, kindergartens
and hospitals established for purposes of public welfare,
and public organizations may not act as a surety.
Article 10 Branches and functioning departments of
an enterprise a legal person may not act as a surety.
Article 11 No organization or individual may compel
a bank or another financial institution or an enterprise to
provide a suretyship for another; a bank or another financial
institution or an enterprise shall have the right to refuse
to provide suretyship for another.
Article 12 Where there are two or more sureties for
one obligation, the sureties shall undertake suretyship liability
according to their proportion of suretyship agreed in the
suretyship contract. In the absence of an agreement on the
proportion of suretyship, the sureties shall be jointly and
severally liable. The creditor may demand any one of the sureties
to undertake all suretyship liability, and every surety shall
have the obligation to ensure all of the creditor's rights.
The surety who has undertaken the suretyship liability shall
have the right of recourse against the debtor, or have the
fight to demand other sureties who are jointly and severally
liable to discharge the proportion of obligations which they
should respectively assume.
Section 2 Suretyship Contract and Modes of Suretyship
Article 13 A surety and a creditor shall conclude a
suretyship contract in writing.
Article 14 A surety and a creditor may conclude separate
suretyship contracts for a single principal contract, or may
reach an agreement to conclude, to the extent of the maximum
amount of claim, a single suretyship contract for loan contracts
or for certain commodities transaction contracts which successively
occur in a given period of time.
Article 15 A suretyship contract shall contain the
following particulars:
(1) the kind and amount of the principal claim guaranteed;
(2) the time limit for the debtor to perform the obligation;
(3) the modes of suretyship;
(4) the scope of the suretyship guaranty;
(5) the term of the suretyship; and
(6) other matters the parties deem appropriate.
If a suretyship contract does not contain all the particulars
specified in the preceding paragraph, the particulars omitted
may be added by amendment.
Article 16 The modes of suretyship include:
(1) general suretyship;
(2) suretyship of joint and several liability.
Article 17 A general suretyship refers to a suretyship
contract wherein the parties agree that the surety shall undertake
suretyship liability in case the debtor defaults.
A general suretyship allows the surety to refuse to undertake
suretyship liability towards the creditor before a dispute
over the principal contract is tried or arbitrated and the
obligations are not enforceable even after the debtor's assets
have been seized according to law.
A surety may not exercise the right provided in the preceding
paragraph in any of the following circumstances:
(1) The change of the debtor's domicile makes it extremely
difficult for the creditor to have the debtor's obligation
enforced;
(2) A People's Court suspends the enforcement proceedings
due to its acceptance of the debtor's bankruptcy case; or
(3) The surety waives in writing the right provided in the
preceding paragraph.
Article 18 A suretyship of joint and several liability
refers to a suretyship contract wherein the parties agree
that the surety and the debtor shall be jointly and severally
liable.
Where the debtor of a suretyship of joint and several liability
defaults when the time limit for his performance of the obligation
provided in the principal contract expires, the creditor may
demand that the debtor perform his obligation, or demand that
the surety undertake the suretyship liability within the scope
of the suretyship agreement.
Article 19 In the absence of an agreed or explicitly
agreed mode of suretyship, the parties shall bear the suretyship
liability following the mode of a suretyship of joint and
several liability.
Article 20 The surety of a general suretyship or a
suretyship of joint and several liability shall enjoy the
debtor's right of defense. Where a debtor waives his right
of defense against the obligation, the surety shall still
enjoy a right of defense.
The right of defense means a debtor's right to exercise his
right of claim on legal basis against the creditor when the
creditor seeds to enforce his rights.
Section 3 Suretyship Liability
Article 21 The scope of the suretyship guaranty includes
the principal claim and the interest thereof, default fine,
compensation for damage and expenses for enforcing the claim,
unless the suretyship contract provides otherwise.
Article 22 If a creditor transfers, in accordance with
law, his principal claim to a third party during the period
of the suretyship, the surety shall continue to be bound by
the suretyship contract within the scope of the original suretyship
guaranty, unless the suretyship contract provides otherwise.
Article 23 Where a creditor permits a debtor to transfer
his debts to a third party during the period of the suretyship,
a consent in writing shall need to be obtained from the surety;
the surety shall no longer be liable if the debts are transferred
without his prior consent in writing.
Article 24 When a creditor and a debtor agree to alter
the principal contract, they shall have to obtain the surety's
consent in writing; the surety shall no longer be liable if
the contract is altered without his prior consent in writing,
unless the suretyship contract provides otherwise.
Article 25 If the surety of general suretyship and
the creditor have no agreement on the term of suretyship,
the term of suretyship shall be six months from the date of
maturity of the principal debts.
Where the creditor neither files a lawsuit against the debtor
nor applies for arbitration during the term of suretyship
agreed in the contract of provided in the preceding paragraph,
the surety shall be relieved of the suretyship liability;
where the creditor has filed a lawsuit or applied for arbitration,
the provisions on the interruption of prescription shall apply
to the term of suretyship.
Article 26 Where the surety of a suretyship of joint
and several liability and the creditor have no agreement on
the term of suretyship, the creditor shall, within six months
from the date of maturity of the principal debts, have the
right to demand that the surety undertake suretyship liability.
If the creditor does not demand that the surety undertake
suretyship liability during the term of suretyship agreed
in the contract or provided by the preceding paragraph, the
surety shall be relieved of the suretyship liability.
Article 27 Where in accordance with the provisions
of Article 14 of this Law, a surety provides a suretyship
to a creditor's claims which successively occur but there
is no agreement on the term of the suretyship, the surety
may at any time notify in writing the creditor of termination
of the suretyship contract, nevertheless, the surety shall
be liable for the creditor's claims which vested before the
creditor receives the notice.
Article 28 Where there are both suretyship and property
security for the same claim, the surety shall be liable for
the creditor's claim unsecured by the property security.
If the creditor waives the property security, the surety shall
be relieved of his suretyship liability to the extent of the
creditor's waiver.
Article 29 If a branch of an enterprise as a legal
person concludes a suretyship contract with a creditor without
the written authorization of the enterprise or beyond the
scope of the authorization, the suretyship contract shall
be null and void or the part of the contract that is beyond
the scope of the authorization shall be null and void. If
the creditor and the enterprise as a legal person are both
at fault, they shall bear their respective civil liabilities
commensurate with their own fault; if the creditor is not
at fault, the enterprise as a legal person shall be civilly
liable.
Article 30 The surety shall not be civilly liable under
any of the following circumstances:
(1) the parties to the principal contract conspire to defraud
the surety of a suretyship; and
(2) the creditor to the principal contract resorts to deception
or coercion to induce or cause the surety to provide a suretyship
against its will.
Article 31 The surety, after his assumption of the
suretyship liability, shall be entitled to recourse against
the debtor.
Article 32 If the creditor does not seek to enforce
his claim after a People's Court acceptance of the debtor's
bankruptcy case, the surety may participate in the distribution
of the bankruptcy property and exercise his right of recourse
in advance.
Chapter 3 Mortgage
Section 1 Mortgage and Mortgaged Property
Article 33 Mortgage as used in this Law means that
the debtor or a third party secures the creditor抯 rights
with property listed in Article 34 of this Law without transference
of its possession. If the debtor defaults, the creditor shall
be entitled to convert the property into money to offset the
debts or have priority in satisfying his claim from the proceeds
of auction or sale of the property in accordance with the
provisions of this Law.
The debtor or the third party specified in the preceding paragraph
is the mortgagor, the creditor is the mortgagee, and the property
provided as security is the mortgaged property.
Article 34 The following property may be mortgaged:
(1) houses and other things firmly fixed on the land which
are owned by the mortgagor;
(2) machines, means of transport and other property owned
by the mortgagor;
(3) the land-use right to the State-owed land, State-owned
houses and other things firmly fixed on the land which the
mortgagor is entitled to dispose of according to law;
(4) State-owned machines, means of transport and other property
which the mortgagor is entitled to dispose of according to
law;
(5) The land-use right to barren hills, barren gullies, barren
hillocks, waste flood land and other unreclaimed land contracted
by the mortgagor according to law and consent for the mortgage
of such right is obtained from the party granting the contract;
and
(6) Other property that may be mortgaged according to law.
A mortgagor may at the same time mortgage all the property
listed in the preceding paragraph.
Article 35 The amount of a claim secured by a mortgagor shall
not exceed the value of his mortgaged property.
If the value of the mortgaged property exceeds that of the
claim secured, the surplus may be mortgaged again, but not
in excess of the surplus.
Article 36 Where houses on State-owned land acquired in accordance
with law are mortgaged, the land-use right to the State-owned
land occupied by the houses shall be mortgaged at the same
time.
Where the land-use right to State-owned land acquired by means
of granting is mortgaged, the houses on the State-owned land
shall be mortgaged at the same time.
The land-use right to the land used by a township (town) or
village enterprise may not be mortgaged separately. Where
factories and other buildings of township (town) or village
enterprises are mortgaged, the land-use right to the land
occupied by such buildings shall be mortgaged at the same
time.
Article 37 The following property may not be mortgaged:
(1) ownership of the land;
(2) the land-use right to the land owned by the collectives
such as cultivated land, house sites, private plots and private
hills, with the exception of those provided in sub-paragraph
(5) Article 34 and sub-paragraph (3) of Article 36 of this
Law;
(3) educational facilities, medical and health facilities
of schools, kindergartens, hospitals and other institutions
or public organizations established in the interest of the
public and other facilities in the service of public welfare;
(4) property in relation to which the ownership or the right
of use is unknown or disputed;
(5) property sealed up, distrained or placed under surveillance
in accordance with law; or
(6) other property which may not be mortgaged as prescribed
by law.
Section 2 Mortgage Contract and Registration of Mortgaged
Property
Article 38 A mortgagor and a mortgagee shall conclude
a mortgage contract in writing.
Article 39 A mortgage contract shall include the following
particulars:
(1) the kind and amount of the principal claim secured;
(2) the term in which the debtor performs his obligation;
(3) the name, quantity, quality, condition, location, ownership
or ownership of the right to the use of the mortgaged property;
(4) the scope of the guaranty of mortgage; and
(5) other matters the parties deem necessary to include in
the contract.
If a mortgage contract does not include all the particulars
specified in the preceding paragraph, the omissions may be
added by amendment.
Article 40 In concluding a mortgage contract, the mortgagor
and the mortgagee may not stipulate that the ownership of
the mortgaged property shall be transferred to the creditor
in case the mortgagee抯 claim is not satisfied after maturity
of the debt.
Article 41 Where a party mortgages property provided
for in Article 42 of this Law, he shall register the mortgaged
property, and the mortgage contract shall become effective
as of the date of registration.
Article 42 The departments responsible for the registration
of mortgaged property are as follows:
(1) the land administration departments which verify and issue
certificates evidencing the land-use right if the land-use
right to the land to which nothing is firmly attached is mortgaged;
(2) the departments designated by local people抯 governments
at or above the county level, if urban real estates or factories
and other buildings of township (town) or village enterprises
are mortgaged;
(3) the forestry administration departments at or above the
county level, if forest trees are mortgaged;
(4) the registration departments for means of transport, if
aircraft, ships and vehicles are mortgaged; or
(5) the administrative departments of industry and commerce
in the place where the property is located, if the equipment
and other movables of enterprises are mortgaged.
Article 43 Where a party mortgages other property,
he may, of his own will, register the mortgaged property,
and the mortgage contract shall become effective as of the
date of execution.
If a party does not register the mortgaged property, he may
not defend against the claims of third party. If a party intends
to register the mortgaged property, the notary department
in the place where the mortgagor resides shall be the registration
department.
Article 44 To register the mortgaged property, a party shall
submit to the registration department the following documents
or their duplicates:
(1) the principal contract and the mortgage contract; and
(2) the certificates evidencing the ownership of or the use
right to the mortgaged property.
Article 45 Consulting, transcribing or duplicating
the materials registered with the registration departments
shall be permitted.
Section 3 Effect of Mortgage
Article 46 The scope of guaranty of mortgage includes
the principal debt and the interest thereof, default fine,
compensation for damage and expenses for enforcing the mortgage,
unless otherwise provided in the mortgage contract.
Article 47 If the mortgaged property is seized by a
People抯 Court because of the debtor抯 failure to perform
his obligation prior to the maturity of the debt, the mortgagee
shall, from the date of seizure, be entitled to collect the
natural fruits severed from the mortgaged property and the
legal fruits which the mortgagor may collect from the mortgaged
property. If the mortgagee fails to notify the person who
has the obligation to pay legal fruits of the fact that the
mortgaged property is seized, the mortgagee抯 right shall
not extend to such fruits.
The fruits provided for in the proceeding paragraph shall
first be used to offset the expenses for collecting the fruits.
Article 48 If a mortgagor mortgages leased property,
he shall notify the lessee of the fact in writing, and the
original contract of lease continues in effect.
Article 49 If a mortgagor transfers mortgaged property
already registered during the period of mortgage, he shall
notify the mortgagee and inform the transferee that the transferred
property is mortgaged; if the mortgagor fails to notify the
mortgagee or inform the transferee of the fact, the transfer
shall be null and void.
If the proceeds expected from the transfer of the mortgaged
property are evidently less than its value, the mortgagee
may demand that the mortgagor provide an additional guaranty;
if the mortgagor fails to provide to additional guaranty,
then he may not transfer the mortgaged property.
The proceeds which the mortgagor obtains from the transfer
of the mortgaged property shall first be used to liquidate
the claim secured by the mortgage or it shall be deposited
with a third party agreed upon by the mortgagor and the mortgagee.
If the proceeds exceed the claim, the balance shall belong
to the mortgagor; if the proceeds do not cover the claim,
the difference shall be paid by the debtor.
Article 50 The right of mortgage may not be separated
from the creditor抯 rights and transferred singly, nor used
to secure other creditor抯 rights.
Article 51 Where a mortgagor抯 acts are likely to
cause the value of the mortgaged property to decline, the
mortgagee shall be entitled to demand that the mortgagor cease
and deist from such acts. Where the value of the mortgaged
property has declined, the mortgagee shall be entitled to
demand that the mortgagor restore the original value of the
mortgaged property or provide security corresponding to the
amount of the lost value.
If the mortgagor is not responsible for the decline in the
value of the mortgaged property, the mortgagee may only demand
that the mortgagor provide security to cover the loss resulting
from the decline in value. The part of the mortgaged property
whose value has not declined shall continue to serve as guaranty
for the creditor抯 right.
Article 52 The right of mortgage shall co-exist with
the creditor抯 right secured. If the creditor抯 right
lapses, the right of mortgage shall also lapse.
Section 4 Enforcement of Right of Mortgage
Article 53 The mortgagee, who is not paid at the maturity
of the obligation, may, through agreement with the mortgagor,
be paid out of the proceeds from the conversion of the mortgaged
property or from the auction or sale of the mortgaged property;
if they fail to reach an agreement, the mortgagee may bring
a lawsuit in a People抯 Court.
If the proceeds from the conversion of the mortgaged property
or the proceeds from the auction or sale thereof exceed the
claim, the balance shall be returned to the mortgagor; if
the proceeds do not cover the claim, the difference shall
be paid by the debtor.
Article 54 Where the same property is mortgaged to
two or more creditors, the proceeds from the auction or sale
of the mortgaged property shall be used for liquidation according
to the following provisions:
(1) Where a mortgage contract takes effect with its registration,
the liquidation shall be made in the order of the time of
registration of the mortgaged property; if the registration
is in the same order, the liquidation shall be made according
to the respective proportions of the claims;
(2) Where a mortgage contract takes effect on the date of
its execution and the mortgaged property is registered, the
liquidation shall be made according to the provisions of sub-paragraph
(1) of this Article; if the mortgaged property is not registered,
the liquidation shall be made in the order of the effective
dates of the contracts; if the order of the effective dates
is the same, the liquidation shall be made according to the
respective proportions of the claims. The claim secured by
registered mortgage shall be satisfied prior to the claim
secured by unregistered mortgage.
Article 55 After the execution of a contract in which
urban real estate is mortgaged, the newly-built houses on
the land shall not be included in the mortgaged property.
Where it is necessary to auction the mortgaged real estate,
the newly-built houses on the land may be auctioned, according
to law, together with the mortgaged property, but the mortgagee
shall have no right to enjoy the priority of having his claim
satisfied with the proceeds from auction of the newly-built
houses.
Where the land-use right to contracted barren hills is mortgaged
or the land-use right to the land occupied by the factories
and other buildings of a township (town) or village enterprise
is mortgaged in accordance with the provisions of this Law,
the collective ownership and the uses of the land may not
be altered without following the legal procedure after enforcement
of the right of mortgage.
Article 56 The mortgagee shall be entitled to the priority
of having his claim satisfied with the proceeds from auction
of the land-use right to the allocated State-owned land after
payment of the granting fees for the land-use right.
Article 57 The third party who provides guaranty of
mortgage for the debtor shall have the right of recourse against
the debtor after enforcement of the right of mortgage by the
mortgagee.
Article 58 The right of mortgage shall lapse due to
loss or destruction of the mortgaged property. The compensation
obtained for the loss or destruction shall be used as the
mortgaged property.
Section 5 Mortgage of Maximum Amount
Article 59 A mortgage of maximum amount as used in
this Law means that the mortgaged property shall be used to
secure the creditor抯 claims which occur successively during
a given period of time and to the extent of the total amount
of the claims, as agreed upon between a mortgagor and a mortgagee.
Article 60 A loan contract may be accompanied by a
contract of mortgage of maximum amount.
The contract executed by a creditor and a debtor for the continuous
transaction of a specific commodity in a given period of time
may be accompanied by a contract of mortgage of maximum amount.
Article 61 The creditor抯 right to the principal
contract secured by a mortgage of maximum amount may not be
transferred.
Article 62 The provisions of this section plus other
provisions of this Chapter shall apply to mortgage of maximum
amount.
Chapter 4 Pledge
Section 1 Pledge of Movables
Article 63 Pledge of movables as used in this Law means
that the debtor or a third party transfers the possession
of his movables to the creditor as a security for debt. If
the debtor defaults, the creditor shall, in accordance with
the provisions of this Law, be entitled to convert the property
into money as payment of the debt or enjoy priority of having
his claim satisfied with the proceeds of auction or sale of
the pledged property.
The debtor or the third party mentioned in the proceeding
paragraph shall be the pledgor, the creditor shall be the
pledgee, and the movables transferred shall be the pledged
property.
Article 64 A pledgor and a pledgee shall conclude a
pledge contract in writing.
A pledge contract shall become effective upon the delivery
of the pledged property to the possession of the pledgee.
Article 65 A pledge contract shall include the following
particulars:
(1) the kind and amount of the principal debt secured;
(2) the time limit for the debtor to perform his obligation;
(3) the name, quantity, quality and condition of the pledged
property;
(4) the scope of the guaranty of pledge;
(5) the time for delivering the pledged property; and
(6) other matters the parties deem necessary to include in
the contract.
If a pledge contract does not contain all the particulars
specified in the preceding paragraph, the omissions may be
added by amendment.
Article 66 A pledgor and a pledgee may not stipulate
in the contract that ownership of the pledged property shall
be transferred to the pledgee if the obligation is not discharged
at its maturity.
Article 67 The scope of guaranty of pledge includes
the principal claim and the interest thereof, default fine,
the compensation for damage, the storage charges and the cost
of enforcing the right of the pledge. If otherwise provided
for in the pledge contract, the provisions there shall apply.
Article 68 The pledgee shall be entitled to collect
the fruits derived from the pledged property. If otherwise
provided for in the pledge contract, the provisions there
shall apply.
The fruits mentioned in the preceding paragraph shall first
be used to pay the expenses for collecting the fruits.
Article 69 The pledgee shall have the obligation to
maintain the pledged property in good condition. The pledgee
shall be civilly liable for the loss or destruction of or
damage to the pledged property resulting from his negligence
in storage.
Where the pledgee is unable to maintain the pledged property
in good condition and may thus cause loss or destruction of
or damage to the pledged property, the pledgor may demand
that the pledgee have the pledged property deposited, or demand
that his obligation be discharged in advance and the pledged
property returned.
Article 70 Where there is a possibility for the pledged
property to perish or for its value to obviously decline to
a point sufficient to impair the rights of the pledgee, the
pledgee may demand that the pledgor provide additional security
in like amount. If the pledgor refuses to provide the additional
security, the pledgee may auction or sell the pledged property,
and conclude an agreement with the pledgor that the proceeds
from the auction or sale shall be used to pay in advance the
debt secured or be deposited with a third party as agreed
upon with the pledgor.
Article 71 Where the debtor performs his obligation
at its maturity, or where the pledgor pays, prior to maturity,
the debt secured, the pledgee shall return the pledged property.
If the pledgee is not paid at the maturity of the obligation,
he may conclude an agreement with the pledgor that the pledged
property be converted into money in order to pay the debt,
or he may auction or sell the said property according to law.
Where the money converted from the pledged property or the
proceeds from auction or sale exceed the debt secured, the
balance shall be paid to the pledgor. Where the money or the
proceeds do not cover the whole debt secured, the difference
shall be paid by the debtor.
Article 72 The third party who secures the obligation
of the debtor shall have the right of recourse against the
debtor after the pledgee抯 enforcement of the right of the
pledge.
Article 73 The right of pledge shall lapse due to loss
or destruction of the pledged property. The compensation obtained
for the loss or destruction shall be used as the pledged property.
Article 74 The right of pledge shall co-exist with
the creditor抯 right secured. When the creditor抯 right
lapses, the right of pledge shall also lapse.
Section 2 Pledge of Rights
Article 75 The following rights may be pledged:
(1) bills of exchange, cheques, promissory notes, bonds, certificates
of deposit, warehouse receipts, bills of lading;
(2) shares of stocks or certificates of stocks which are transferable
according to law;
(3) the rights to exclusive use of trademarks, the property
right among patent rights and copyrights which are transferable
according to law; and
(4) other rights which may be pledged according to law.
Article 77 Where a bill of exchange, cheque, promissory
note, bond, certificate of deposit warehouse receipt or bill
of lading, which carries the date of payment or the date of
delivery of goods, is pledged and if the date of its payment
or delivery of goods is prior to the time limit for the performance
of the obligation, the pledgee may be paid or accept the delivery
of the goods before the expiration of the time limit for the
performance of the obligation, and conclude an agreement with
the pledgor that the payment or the goods accepted shall be
used to pay in advance the debt secured or be deposited with
a third party as agreed upon with the pledgor.
Article 78 Where certificates of stock transferable
according to law are pledged, the pledgor and the pledgee
shall conclude a contract in writing and register the pledge
contract with the securities registration authorities. The
pledge contract shall become effective on the date of the
registration.
The certificates of stocks pledged may not be transferred,
unless agreed between the pledgor and the pledgee. The proceeds
the pledgor obtained from the transfer of the certificates
of stocks shall be used to pay in advance the pledgee抯
claims secured, or be deposited with a third party as agreed
upon with the pledgor.
Where shares of stocks of a limited liability company are
pledged, the relevant provisions of the Company Law governing
the transfer of shares shall apply. The pledge contract shall
become effective on the date on which the pledge of shares
is written into the shareholders name-list.
Article 79 Where the right to exclusive use of trademarks,
the property rights among parent rights and copyrights transferable
according to law are pledged, the pledgor and the pledgee
shall conclude a contract in writing and register the pledge
contract with the administrative department in charge. The
pledge contract shall become effective upon registration.
Article 80 If a right mentioned in Article 79 of this
Law is pledged, the pledgor may not transfer or permit the
right to be used by another, unless agreed between the pledgee
and the pledgor. The proceeds from the transfer or the use
obtained by the pledgor shall be used to pay in advance the
pledgee抯 claims secured or be deposited with a third party
as agreed between the pledgor and the pledgee.
Article 81 The pledge of rights is governed not only
by the provisions of this Section, but also by the provisions
of Section 1 of this Chapter.
Chapter
5 Lien
Article 82 Lien as used in this Law means that the
creditor shall possess the debtor抯 movables according to
the terms of the contract as provided by Article 84
of this Law. If the debtor defaults on his debt, the creditor
shall be entitled to retain the property in accordance with
the provisions of this Law and to the priority of having the
debt paid with the money converted from the property or proceeds
from sale or auction of the property.
Article 83 The scope of guaranty of lien covers the
principal claim and the interest thereof, default fine, compensation
for damage, cost of preservation of the retained property
and expenses for enforcing the lien.
Article 84 In the event of any costs arising from a
storage, transportation or processing contract, if the debtor
defaults, the creditor shall have the right to retain the
property.
The provisions of the preceding paragraph shall be applicable
to other contracts whereby the creditor has the right of retention
as provided by law.
The parties may specify in the contract the property that
may not be retained.
Article 85 Where the retained property can be divided,
the value of the part retained shall be equal to the sum of
the debt.
Article 86 The lien holder shall have the obligation
to maintain the retained property in good condition. The lien
holder shall be civilly liable for loss or destruction of
or damage to the retained property resulting from his negligence.
Article 87 The creditor and the debtor shall stipulate
in the contract that the debtor shall perform his obligation
within not less than two months after the creditor takes possession
of the debtor抯 property. If the creditor and the debtor
fail to stipulate the same in the contract, the creditor shall,
after taking possession of the debtor抯 property, fix a
time limit of two months or more and notify the debtor to
perform his obligation within such time limit.
If the debtor defaults within the specified time limit, the
creditor may convert the retained property into money upon
agreement with the debtor, or may auction or sell the retained
property according to law.
Where the money converted from the retained property or the
proceeds from auction or sale exceed the debt secured, their
balance shall be paid to the debtor; where the money or proceeds
do not cover the entire secured debt; the difference shall
be paid by the debtor.
Article 88 The right of retention shall lapse due to
the following reasons:
(1) the creditor抯 right lapses; or
(2) the debtor gives other security which is accepted by the
creditor.
Chapter 6 Deposit
Article 89 The parties may agree that one party shall
pay a deposit to the other for the security of a debt. After
the debtor performs his obligation, the deposit shall either
be retained as partial payment or be returned. If the party
paying the deposit defaults, he shall have no right to demand
the return of the deposit; if the party accepting the deposit
defaults, he shall return twice the amount of the deposit.
Article 90 The deposit shall be executed in written
form. The parties shall specify the time limit for the delivery
of the deposit in the deposit contract. The deposit contract
shall become effective on the date of the actual delivery
of the deposit.
Article 91 The amount of the deposit shall be stipulated
by the parties, but it shall not exceed 20 percent of the
amount of the principal contract.
Chapter
7 Supplementary Provisions
Article 92 The immovables as used in this Law means
land, and houses, forest, tress and other things firmly fixed
on the land.
The movables as used in this Law means things other than the
immovables.
Article 93 Suretyship contract, mortgage contract,
pledge contract or deposit contractas used in this Law may
be contract concluded separately in writing that includes
the letters and telex in the nature of guaranty between the
parties, or the guaranty clauses in the principal contract.
Article 94 Where the mortgaged property, the pledged
property or the retained property is converted into money
or sold, the price shall be fixed with reference to the market
price.
Article 95 Where the Maritime Code and other laws have
special provisions on guaranty, such provisions shall apply.
Article 96 The Law shall be implemented as of October
1, 1995.
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