Security Transactions 2006

8/13/2019 Security Transactions 2006

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ATENEO CENTRAL BAR OPERATIONS 2006Security TransactionsSUMMER REVIEWER

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LAW ON SECURITY TRANSACTIONS

CREDIT TRANSACTIONS include all tranacti!n in"!l"in#$urc%ae !r l!an !& #!!d' er"ice' !r (!ne) in t%e $reent*it% a $r!(ie t! $a) !r deli"er in t%e &uture +c!ntract !&ecurit),

2 TYPES OF CREDIT TRANSACTIONS:. ecured tranacti!n / t%!e u$$!rted ) a ecurit)!r c!llateral2. unecured tranacti!n / t%!e u$$!rted !nl) )$r!(ie t! $a)

SECURITYi !(et%in# #i"en' de$!ited er"in# a (ean t!enure t%e &ul&ill(ent !r en&!rce(ent !& an !li#ati!n !r !&$r!tectin# !(e interet in t%e $r!$ert)

BAILENTi t%e deli"er) !& $r!$ert) !& !ne $er!n t! an!t%erin trut &!r a $eci&ic $ur$!e' *it% a c!ntract' e1$re !ri($lied' t%at t%e trut %all e &ait%&ull) e1ecuted and t%e$r!$ert) returned !r dul) acc!unted &!r *%en a $ecial$ur$!e i acc!($li%ed !r e$t until t%e ail!r reclai( it.

PARTIES IN BAILENT

. ail!r / t%e #i"er' t%e $art) *%! deli"er$!ei!n3cut!d) !& t%e t%in# ailed

2. ailee. / t%e reci$ient' t%e $art) *%! recei"e t%e$!ei!n3cut!d) !& t%e t%in# deli"ered

!INDS OF CONTRACTUAL BAILENT W" REFERENCE TOCOPENSATION

. &!r t%e !le ene&it !& t%e ail!r +#ratuit!u, e.#.#ratuit!u de$!it' (andatu(' +d! !(e act *3re$ect t! a t%in#,

2. &!r t%e !le ene&it !& t%e ailee +#ratuit!u, e.#.c!((!datu(' #ratuit!u i($le l!an !r (utuu(

4. &!r t%e ene&it !& !t% $artie e.#. de$!it &!rc!($enati!n' in"!luntar) de$!it' $led#e andbailments for hire5

a. %ire !& t%in# / te($!rar) ue. %ire !& er"ice / &!r *!r !r la!rc. %ire !& carria#e !& #!!d / &!r carria#ed. %ire !& cut!d) / &!r t!ra#e

LOAN

C#ARACTERISTICS

. real / deli"er) i eential &!r $er&ecti!n !& t%e l!an+BUT a $r!(ie t! lend' ein# c!nenual' iindin# u$!n t%e $artie ut it i !nl) a&ter deli"er)t%at t%e real c!ntract !& l!an arie

2. unilateral / !nl) t%e !rr!*er %a !li#ati!n

!INDS. c!((!datu( / *%ere t%e ail!r deli"er t! t%e

ailee a n!n- c!nu(ale t%in# ! t%at t%e latter(a) ue it &!r acertain ti(e and return t%e identicalt%in#

it may either be:a. !rdinar) c!((!datu(' !r. $recariu( +*%ere) t%e ail!r (a) de(and

t%e t%in# l!aned at *ill, in cae *%ere5i. neit%er t%e durati!n !& t%e c!ntract n!r t%eue t! *%ic% t%e t%in# l!aned %!uld ede"!ted %a een ti$ulatedii. i& t%e ue !& t%e t%in# i (erel) t!lerated) t%e !*ner

Adviser: Dean Cynthia Roxas-Del Castiillo; Heads: Celeste Marie R Cr!" and Christine # $rinidad; %nderst!dies: Myra Mangente and &leanor %mali


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2. (utuu( !r i($le l!an5 *%ere t%elender deli"er t! t%e !rr!*er (!ne) !r !t%er

c!nu(ale t%in# +*%en it i c!nu(ed in a(anner a$$r!$riate t! it $ur$!e, u$!n t%ec!nditi!n t%at t%e latter *ill $a) t%e a(e a(!unt !&t%e a(e ind and ualit)

LOAN CRE7IT

$% &e'i(ery )y one*arty an& t+erecei*t )y t+e ot+er*arty o, a -i(ensu. o, .oney or

ot+er consu.a)'et+in- u*on ana-ree.ent/e0*ress or i.*'ie&

2% to re*ay t+e sa.ea.ount o, t+esa.e 1in& an&ua'ity/ 3" or 3"ointerest

T%e ailit) !& an indi"idual t!!rr!* (!ne) !r t%in# )"irtue !& t%e c!n&idence !rtrut re$!ed ) a lendert%at %e *ill $a) *%at %e (a)

$r!(ie *3in a $eci&ied$eri!d

LOAN DISCOUNTIN4 PAPER

Interet i uuall) taen at

t%e e1$irati!n !& a credit

Interet i deducted in

ad"anceAl*a) !n in#le-na(e$a$er

7!ule na(e $a$er

M!re e1$eni"e &!r t%e!rr!*er ecaue interet icalculated !n t%e a(!untl!aned and n!t t%e a(!untactuall) recei"ed

COODATU UTUU 5SIPLE LOAN6

Ordinaril) c!nu(ale M!ne) !r !t%er c!nu(ale

t%in#O*ner%i$ i retained )t%e lender

O*ner%i$ i tran&erred t!t%e !rr!*er

Eentiall) #ratuit!u 8ratuit!u !r !ner!u +*3ti$ulati!n t! $a) interet,

B!rr!*er (ut return t%ea(e t%in# l!aned

B!rr!*er need !nl) $a) t%ea(e a(!unt !& t%e a(eind and ualit)

Ma) in"!l"e real !r $er!nal$r!$ert)

Onl) $er!nal $r!$ert)

L!an &!r ue !r te($!rar)

$!ei!n

L!an &!r c!nu($ti!n

Bail!r (a) de(and t%ereturn !& t%e t%in# l!anede&!re t%e e1$irati!n !& t%eter( in cae !& ur#ent need

Lender (a) n!t de(and itreturn e&!re t%e la$e !&t%e ter( a#reed u$!n

L! !& t%e u9ect (atter iu&&ered ) t%e ail!r ince%e i t%e !*ner

B!rr!*er u&&er t%e l!e"en i& caued e1clui"el)) a &!rtuit!u e"ent and %ei n!t t%ere&!re dic%ar#ed&r!( %i dut) t! $a)

Purel) $er!nal N!t $urel) $er!nal

NATURE OF COODATU. eentiall) #ratuit!u +!t%er*ie' i& t%ere I

c!($enati!n' it (i#%t e leae,2. te($!rar) ue !& t%e t%in# l!aned :&!r a certain ti(e;

+!t%er*ie' i& t%e ailee i n!t entitled t! t%e ue !& t%et%in#' it (i#%t e de$!it,

4. u9ect (atter5



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a. n!n-c!nu(ale #!!d / i& t%e$ur$!e !& t%e c!ntract i n!t t%e

c!nu($ti!n !& t%e !9ect' a *%en(erel) &!r e1%iiti!n

. (!"ale !r i((!"ale


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t%in# t! a t%ird $er!n *%! i n!t a(e(er !& %i %!ue%!ld

e. In#ratitude - ein# ale t! a"e t%et%in# !rr!*ed !r %i !*n t%in#' %ec%!e t! a"e t%e latter

=. T%e ailee %a NO RI8T t! retain t%e t%in#l!aned a ecurit) &!r clai( %e %a a#aint t%eail!r' e"en t%!u#% t%e) (a) e ) rea!n !&e1tra!rdinar) e1$ene +Art. @


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2. T%e ail!r (a) de(and t%e t%in# at *ill*%en t%e c!ntract i $recariu(

PRECARIUM / a ind !& c!((!datu( *%ere t%e ail!r (a)de(and t%e t%in# at *ill. It %a een de&ined a a c!ntract )*%ic% t%e !*ner !& a t%in#' at t%e reuet !& an!t%er $er!n'#i"e t%e latter t%e t%in# &!r ue a l!n# a t%e !*ner %all$leae

4. t%e ail!r %all re&und t%e e1tra!rdinar) e1$ene +Art.@


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SIPLELOAN

CONTRACT OFRENT"LEASE

Si#ni&ie t%e deli"er) !&(!ne) !r !(e !t%erc!nu(ale t%in# t!an!t%er *3 a $r!(ie t!re$a) an eui"alent a(!unt!& t%e a(e ind and ualit)

One $art) deli"er t!an!t%er !(e n!n-c!nu(ale t%in# in !rdert%at t%e latter (a) ue itdurin# a certain $eri!d andreturn it t! t%e &!r(er

N!t a $r!(ie t! return t%ea(e t%in# l!aned *%ic%ec!(e $r!$ert) !& !li#!r

T%e !*ner !& t%e leee !rt%e le!r !& t%e $r!$ert)d!e n!t l!e %i !*ner%i$.e i($l) l!e c!ntr!l !"ert%e $r!$ert) rented durin#

t%e $eri!d !& t%e c!ntractT%e relat i!n et*een$artie i t%at !& !li#!r and!li#ee

T%e relati!n i et*eenlandl!rd and tenant

T%e credit!r recei"e$a)(ent &!r %i l!an

T%e !*ner !& t%e $r!$ert)recei"e :c!($enati!n; !r:$rice; eit%er in (!ne)'$r!"ii!n' c%attel' !r la!r&r!( t%e !ccu$ant t%ere!& inreturn &!r it ue

Bai !&c!($ari!n

MUTUUM COMMO7ATUM BARTER

Su9ect(atter

M!ne) !ran) !t%er&un#ilet%in#3$er!nal$r!$ert)

Per!nal !r real$r!$ert)

N!n-&un#ile !rn!n-c!nu(alet%in#

Oli#ati!n Pa) !r Return t%e T%e

!& ailee deli"er t%ea(e ind

!r ualit)l!aned t!t%e ailee

identical t%in#!rr!*ed *%en

t%e ti(e %ae1$ired !r t%e$ur$!e %aeen er"ed

eui"alentt%in# i

#i"en inreturn &!r*%at %aeenrecei"ed

Nature !&c!ntract

Ma) e#ratuit!u

Al*a)#ratuit!u

Oner!u

Nature !& Mutuu(a. ilateral- !rr!*er> $r!(ie t! $a) i t%e c!niderati!n

&!r t%e lender> !li#ati!n t! &urni% t%e l!an

. n! cri(inal liailit) u$!n &ailure t! $a)

Su9ect Mattera. &un#ile !r c!nu(ale-de$endin# !n t%e intent !& t%e

$artie' t%at t%e return !& t%et%in# i eui"alent !nl) andn!t t%e identical t%in#

. (!ne)c. i& t%e tran&er !& !*ner%i$ i !n a n!n-&un#ile t%in#'

*it% t%e !li#ati!n !& t%e !t%er t! #i"e t%in# !& t%e a(eind' uantit) and ualit)' it i a arter

Interest4R: Interet (ut e e1$rel) ti$ulated in *ritin#' and it(ut e la*&ul +Art. @=6,&C&.$/0#:

. Inde(nit) &!r da(a#e / t%e det!r in dela) i lialet! $a) le#al interet +6F32F, a inde(nit) &!r da(a#e e"enin t%e aence !& a ti$ulati!n &!r t%e $a)(ent !& interet.Interet a inde(nit) &!r da(a#e i $a)ale !nl) in cae !&de&ault !r n!n-$er&!r(ance !& c!ntract.



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Basis ,or co.*utation ,or in&e.nity:a% Centra' Ban1 Circu'ar 9$ ; $2< *%a% in cases o,:

L!an G!rearance !& (!ne)' #!!d !r credit

Hud#(ent in"!l"in# uc% l!an !r

&!rearance' in t%e aence !& t%e e1$rea#ree(ent a t! uc% rate !& interet

7urin# t%e interi( $eri!d &r!( t%e date

9ud#(ent until actual $a)(ent)% Art% 22=> o, t+e Ci(i' Co&e ; < *%a% in cases o,:

Ot%er !urce +e.#. ale,

7a(a#e ariin# &r!( in9ur) t! $er!n

L! !& $r!$ert) *%ic% d!e n!t in"!l"e a l!an

2. Interet accruin# &r!( un$aid interet - interet due %allearn interet &r!( t%e ti(e it i 9udiciall) de(anded alt%!u#%t%e !li#ati!n (a) e ilent u$!n t%i $!int.

Deter.ination o, interest *aya)'e in 1in&:It "alue %all e a$$raied at t%e current $rice !& t%e $r!duct!r #!!d at t%e ti(e and $lace !& $a)(ent. +Art. @=,Pur*ose: t! (ae uur) %arder t! $er$etrate

Co.*oun&in- Interest 5Art% $>?>64R: accrued interet +interet due and un$aid, %all n!t earninteretExceptions:

W%en 9udiciall) de(anded

W%en t%ere i an e1$re ti$ulati!n (ade ) t%e

$artie t! *it5 t%at t%e interet due and un$aid %all eadded t! t%e $rinci$al !li#ati!n and t%e reultin# t!tala(!unt %all earn interet

C!($!undin# interet (a) e a"ailed !& !nl) *%en t%ere i a*ritten ti$ulati!n in t%e c!ntract &!r t%e $a)(ent !& interet.

BARTER

De,initionA c!ntract *%ere) !ne $er!n tran&er t%e !*ner%i$ !&n!n-&un#ile t%in# t! an!t%er *it% t%e !li#ati!n !n t%e $art !&t%e latter t! #i"e t%in# !& t%e a(e ind' uantit) and ualit).

DEPOSIT

De,inition o, DEPOSIT

A de$!it i c!ntituted &r!( t%e (!(ent a $er!n recei"e at%in# el!n# t! an!t%er' *it% t%e !li#ati!n !& a&el) ee$in# itand !& returnin# t%e a(e. I& t%e a&eee$in# !& t%e t%in#deli"ered i not t+e *rinci*a' *ur*ose!& t%e c!ntract' t%ere in! de$!it ut !(e !t%er c!ntract.NOTE: it i eential t%at t%e de$!it!r) i n!t t%e !*ner !&t%e t%in# de$!ited

C+aracteristics. real - ecaue it i $er&ected !nl) ) t%e deli"er) !&

t%e u9ect (atter BUT an a#ree(ent t! c!ntitute a

de$!it i indin# and en&!rceale' ince it i (erel)c!nenual

2. unilateral - i& #ratuit!u4. ilateral - i& *it% c!($enati!n

Basis o,co.*arison

De*osit utuu. Co..o&atu.

Princi*a' Sa&eee$in# C!nu($ti!n Tran&er !& t%e



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Pur*ose!r(ere

cut!d)

!& t%eu9ect

(atter

ue

De.an&a)i'ity 7e(andreturn!& t%et%in#at *ill

Lender (ut*aituntile1$irati!n !&$eri!d#ranted t!det!r

Ma) de(andreturn at *il l+PRECARIUM,!r !nl) a&ter t%ee1$irati!n !& t%e$eri!d !racc!($li%(ent!& t%e ue !& t%et%in# u9ect t!

e1ce$ti!nO)@ect B!t%

(!"aleandi((!"ale(a)e t%e!9ect

But ine1tra9udicialde$!it'!nl) a(!"ale+c!r$!real,t%in# (a)e t%e!9ect

Onl) (!ne)andan)!t%er&un#ile t%in#(a)e t%e!9ect

B!t% (!"aleand i((!"ale(a) e t%e!9ect

Nature o, ay )e ay )e Essentia''y

contract -ratuitous -ratuitous an& a'3ays-ratuitous

Creation o, &e*osit 5Art% $>96. B) "irtue !& a c!urt !rderD !r2. B) la*4. N!t ) t%e *ill !& t%e $artie


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(!"ale !nl)utal! (!"ale

caue Al*a) !ner!u Ma)e c!($enatedut #enerall)#ratuiti!u

Return !&t%in#

U$!n !rder !& t%ec!urt3 end !& liti#ati!n

U$!n de(and !&de$!it!r

In *%!ee%al& %eld

Per!n *%! %a ari#%t

7e$!it!r !r 34rd$er!n dei#nated

De*osit is -enera''y -ratuitous: +Art. @6=,4R: A de$!it i #enerall) #ratuit!u.EXCEPTIONS:

a. *%en t%ere i a c!ntrar) ti$ulati!n. *%ere de$!itar) i en#a#ed in t%e uine !&

t!rin# #!!dc. *%ere $r!$ert) i a"ed *it%!ut n!*led#e !& t%e

!*nerSu)@ect atter o, De*osit 5Art% $>64R: !nl) (!"ale !r $er!nal $r!$ert) (a) e t%e !9ect !&de$!it' *%et%er "!luntar) !r necear).E0ce*tion: In 9udicial de$!it' it (a) c!"er !t% (!"ale andi((!"ale $r!$ert).

De*ositor nee& not )e t+e o3ner o, t+e t+in-:4R: T%e de$!it!r (ut e t%e !*ner !& t%e t%in# de$!ited.Exceptions: It (a) el!n# t! an!t%er $er!n t%an t%ede$!it!r.

a, *%en t*! !r (!re $er!n clai(in# t! e entitled t! at%in# (a) de$!it t%e a(e *it% a t%ird $er!n. In uc%cae' t%e t%ird $er!n au(e t%e !li#ati!n t! deli"ert! t%e !ne t! *%!( it el!n#.

, Inter$leader / t%e acti!n t! c!($el t%e de$!it!r t!ettle t%eir c!n&lictin# clai(. ere !ne !& t%e

de$!it!r i n!t t%e !*ner.

For. o, contract o, &e*osit:4R: A c!ntract !& de$!it (a) e entered int! !rall) !r in*ritin#.5Art% $>>6Exception: 7eli"er) !& t%e t%in# de$!ited. +It i a realc!ntract' %ence' deli"er) i reuired &!r $er&ecti!n.,

De*ositary ca*acitate&De*ositor inca*acitate&

De*ositary inca*acitate&De*ositor ca*acitate&

7e$!itar) i u9ect t! ALL

t%e !li#ati!n !& a de$!itar)

7e$!itar) d!e n!t incur t%e

!li#ati!n !& a de$!itar)7e$!itar) (ut return t%e$r!$ert) eit%er t!5a, t%e le#al re$reentati"e !&t%e inca$acitated' OR, t%e de$!it!r %i(el& i& %e%!uld acuire ca$acit)

7e$!itar)' %!*e"er i lialet!5a, return t%e t%in# de$!ited*%ile till in %i $!ei!nDAN7, $a) t%e de$!it!r t%ea(!unt ) *%ic% %e (a)%a"e ene&ited %i(el& *it%t%e t%in# !r it $rice u9ect t!t%e ri#%t !& an) 4rd$er!n *%!

acuire t%e t%in# in #!!d&ait%

Bai !&C!($ari!n

Irre#ular de$!it Mutuu(

7e(andailit) 7e(andale at *ill !&t%e irre#ularde$!it!r &!r *%!eene&it t%e de$!it

Lender i !und )t%e $r!"ii!n !& t%ec!ntract and cann!tee retituti!n until



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%a een c!ntituted t%e ti(e !& $a)(enta $r!"ided in t%e

c!ntract %a arienBene&it Bene&it accrue t!

t%e de$!it!rNeceit) !& t%e!rr!*er

Pre&erence !&credit

7e$!it!r %a$re&erence !"er !t%ercredit!r *it% re$ectt! t%e t%in# de$!ited

En9!) n! $re&erencein t%e ditriuti!n !&t%e det!r>$r!$ert).

O)'i-ations o, t+e De*ositary$% T3o *ri.ary o)'i-ations 5Art% $>726

a, a&eee$in# !& t%e !9ectD, Return !& t%e t%in# *%en reuired / e"en t%!u#% a

$eci&ied ter( !r ti(e &!r uc% (a) %a"e eenti$ulated in t%e c!ntract.

De-ree o, Care/ a(e dili#ence a %e *!uld e1ercie!"er %i $r!$ert).

Reasons:a, Eential reuiite !& 9udicial relati!n *%ic%

in"!l"e t%e de$!it!r> c!n&idence in %i #!!d&ait% and trut *!rt%ineD

, T%e $reu($ti!n t%at t%e de$!it!r t!! int!acc!unt t%e dili#ence *%ic% t%e de$!itar) iaccut!(ed *it% re$ect t! %i !*n $r!$ert).

T%e de$!itar) cann!t e1cue %i(el& &r!( liailit) int%e e"ent !& l! ) clai(in# t%at %e e1ercied t%ea(e a(!unt !& care t!*ard t%e t%in# de$!ited a %e*!uld t!*ard %i !*n i& uc% care i le t%an t%atreuired ) t%e circu(tance.

2% O)'i-ation not to trans,er &e*osit 5Art% $>764enera' ru'e: t%e de$!itar) i n!t all!*ed t! de$!itt%e t%in# *it% a t%ird $er!n.

Reason:A de$!it i &!unded !n trut and c!n&idenceand it can e u$$!ed t%at t%e de$!it!r' in c%!!in#

t%e de$!itar)' %a taen int! c!niderati!n t%e latter>uali&icati!n.Exception: T%e de$!itar) i aut%!ried ) e1$reti$ulati!n.Lia)i'ities: 7e$!itar) i liale &!r l! !& t%e t%in#de$!ited *%en5

a. e tran&er t%e de$!it *it% a t%ird $er!n*it%!ut aut%!rit) alt%!u#% t%ere i n!ne#li#ence !n %i $art and t%e t%ird $er!nD

. e de$!it t%e t%in# *it% a t%ird $er!n *%! i(ani&etl) carele !r un&it alt%!u#% aut%!ried'

e"en in t%e aence !& ne#li#enceD !rc. T%e t%in# i l!t t%r!u#% t%e ne#li#ence !& %i

e($l!)ee *%et%er t%e latter are (ani&etl)carele !r n!t.

E0e.*tion ,ro. 'ia)i'ity: T%e t%in# i l!t *it%!ut t%ene#li#ence !& t%e t%ird $er!n *it% *%!( %e *aall!*ed t! de$!it t%e t%in# i& uc% t%ird $er!n i n!t:(ani&etl) carele !r un&it.;

% O)'i-ation not to c+an-e t+e 3ay o, &e*osit 5Art%$>7964enera' ru'e: 7e$!itar) (a) n!t c%an#e t%e *a) !&

t%e de$!itException: I& t%ere are circu(tance indicatin# t%att%e de$!it!r *!uld c!nent t! t%e c%an#e. T%i i aituati!n *%erein t%e de$!itar) *!uld rea!nal)$reu(e t%at t%e de$!it!r *!uld a#ree t! t%e c%an#ei& %e n!* !& t%e &act !& t%e ituati!n.Reuisites:

a, T%e de$!itar) (ut n!ti&) t%e de$!it!r !&uc% c%an#e and



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, Mut *ait &!r t%e re$l) !& t%ede$!it!r t! uc% c%an#e.

Exception:I& t%e dela) !& t%e re$l) *!uld caue dan#er.9% O)'i-ation to co''ect on t+e c+oses in action

&e*osite& 5Art% $>7?6I& t%e t%in# de$!ited %!uld earn interet' t%e

de$!itar) i under t%e !li#ati!n t!5a, C!llect t%e interet a it ec!(e dueD, Tae uc% te$ a (a) e necear) t!

$reer"e it "alue and t%e ri#%t c!rre$!ndin#t! it.

T%e de$!itar) i !und t! c!llect t%e ca$ital' a *ella t%e interet' *%en due.

Contract o, rent o, sa,ety &e*osit )o0es 5Art% $>7?6A c!ntract &!r t%e rent !& a&et) de$!it !1e i n!t an!rdinar) c!ntract !& leae !& t%in#' ut a $ecial ind!& de$!itD %ence' it i n!t t! e trictl) #!"erned ) t%e$r!"ii!n !n de$!it. T%e $re"ailin# rule in t%e US it%at t%e relati!n et*een a an rentin# !ut a&et)de$!it !1e and it cut!(er *it% re$ect t! t%ec!ntent !& t%e !1 i t%at !& ail!r and ailee.

?% OBLI4ATION NOT TO COIN4LE T#IN4S IFSTIPULATED 5Art% $>76

4enera' ru'e: T%e de$!itar) i $er(itted t!c!((in#le #rain !r !t%er article !& t%e a(e ind andualit).E,,ects:

a, T%e "ari!u de$!it!r !& t%e (in#led #!!d%all !*n t%e entire (a in c!((!n.

, Eac% de$!it!r %all e entitled t! uc% $!rti!n!& t%e entire a t%e a(!unt de$!ited ) %i(ear t%e *%!le.

Exception:W%en t%ere i a ti$ulati!n t! t%e c!ntrar).

% OBLI4ATION NOT TO A!E USE OF T#E T#IN4DEPOSITED 5Art% $>776

a. 4enera' ru'e: 7e$!it i &!r a&eee$in# !& t%eu9ect (atter and n!t &!r it ue.E0ce*tions:a, E1$rel) aut%!ried ) t%e de$!it!rD, Suc% ue i necear) &!r it $reer"ati!n ut

li(ited &!r t%e $ur$!e !nl).E,,ect o, unaut+orie& use: Liailit) &!r da(a#eE,,ects o, aut+orie& use: 5Art% $>786

a, T%in# de$!ited' n!n-c!nu(ale54enera' ru'e: T%e c!ntract l!e t%ec%aracter !& a de$!it and acuire t%at

!& a c!((!datu( de$ite t%e &act t%att%e $artie (a) %a"e den!(inated it aa de$!it.Exception: Sa&eee$in# i till t%e$rinci$al $ur$!e !& t%e c!ntract.

, T%in# de$!ited' (!ne) !r !t%erc!nu(ale t%in#5

4enera' ru'e:C!n"ert t%e c!ntract int!a i($le l!an !r (utuu(.Exception: Sa&eee$in# i till t%e$rinci$al $ur$!e !& t%e c!ntract' ut it

ec!(e an irre#ular de$!it. Bande$!it are in t%e nature !& irre#ularde$!it ut t%e) are reall) l!an#!"erned ) t%e la* !n l!an.

7% LIABILITY FOR LOSS T#ROU4# FORTUITOUSEENT 5Art% $>7>64enera' ru'e: T%e de$!itar) i n!t liale &!r l!t%r!u#% &!rtuit!u e"ent *it%!ut %i &ault.E0ce*tions:a, I& it i ! ti$ulatedD



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, I& %e ue t%e t%in# *it%!ut t%ede$!it!r> $er(ii!n

c, I& %e dela) in it returnDd, I& %e all!* !t%er t! ue it' e"en t%!u#% %e %i(el&

(a) %a"e een aut%!ried t! ue t%e a(e.LIABILITY FOR LOSS WIT#OUT FORTUITOUS

EENT7e$!itar) / $reu(ed at &ault 5Art% $2?6

in $!ei!n8% RELATION BETWEEN BAN! AND DEPOSITOR 5Art%

$>8=6Gi1ed' a"in#' and current de$!it !& (!ne) in anand i(ilar intituti!n %all e #!"erned ) t%e

$r!"ii!n c!ncernin# i($le l!an.a, Contract o, 'oan / de$!it in an are reall)l!an ecaue t%e an can ue t%e a(e &!r it!rdinar) tranacti!n, Re'ation o, cre&itor an& &e)tor / t%e relati!net*een a de$!it!r and a an i t%at !& a credit!rand a det!r.

>% OBLI4ATION W#EN T#E T#IN4 DEPOSITED ISCLOSED AND SEALED% 5Art% $>8$6T%e de$!itar) %a t%e !li#ati!n t!5a, return t%e t%in# de$!ited *%en deli"ered cl!ed

and ealed in t%e a(e c!nditi!nD, $a) &!r da(a#e %!uld t%e eal !r l!c e r!en

t%r!u#% %i &ault' *%ic% i $reu(ed unle $r!"en!t%er*ieD

c, Jee$ t%e ecret !& t%e de$!it *%en t%e eal !rl!c i r!en' *it% !r *it%!ut %i &ault.

$=% W#EN DEPOSITARY USTIFIED IN TO OPENCLOSED AND SEALED SUBECT ATTER 5Art%$>826

a, W%en t%e de$!itar) i $reu(ed aut%!ried t! d!!' i& t%e e) %a een deli"ered t! %i(D

, W%en t%e intructi!n !& t%e de$!it!r a re#ardt%e de$!it cann!t e e1ecuted *it%!ut !$enin# t%e!1 !r rece$tacle. +Neceit),

$$% OBLI4ATION TO RETURN PRODUCTS/ACCESSORIES/ AND ACCESSIONS 5Art% $>86

$2% OBLI4ATION TO PAY INTEREST ON SUSCONERTED FOR PERSONAL USE 5Art% $>8

$% T+e &e*ositary 3+o recei(es t+e t+inin &e*ositcannot reuire t+at t+e &e*ositor *ro(e +iso3ners+i* o(er t+e t+in- 5Art% $>896

$9% W+ere t+ir& *erson a**ears to )e t+e o3ner% 5Art%

$>896T%e de$!itar) (a) e relie"ed &r!( liailit) *%en5a, e ad"ied t%e true !*ner !& t%e t%in# !& t%e

de$!it., I& t%e !*ner' i $ite !& uc% in&!r(ati!n' d!e n!t

clai( it *it%in t%e $eri!d !& !ne (!nt% +40 da),$?% O)'i-ation o, t+e &e*ositary 3+en t+ere are t3o or

.ore &e*ositors% 5Art% $>8?6a, Di(isi)'e t+in- an& @oint &e*ositors/ eac% !ne

!& t%e de$!it!r can de(and !nl) %i %are$r!$!rti!nate t%eret!.

, In&i(isi)'e t+in- an& so'i&ary &e*ositors/ rule!n acti"e !lidarit)

4enera' Ru'e: Eac% !ne !& t%e de$!it!r(a) d! *%ate"er (a) e ue&ul t! t%e!t%er. +Art. 22,Exception: An)t%in# *%ic% (a) e

$re9udicial t! t%e !t%er de$!it!r.

4enera' Ru'e: T%e de$!itar) (a) returnt%e t%in# t! an) !ne !& t%e !lidar)de$!it!r



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Exception: W%en a de(and' 9udicial !re1tra9udicial' &!r it return %a een (ade

) !ne !& t%e( in *%ic% cae deli"er)%!uld e (ade t! %i(.

c, Return to one o, t+e &e*ositors sti*u'ate&/ i& )ti$ulati!n' t%e t%in# %!uld e returned t! !ne !&t%e de$!it!r' t%e de$!itar) i !und t! return it!nl) t! t%e $er!n dei#nated alt%!u#% %e %a n!t(ade an) de(and &!r it return.

$% O)'i-ation to return to t+e *erson to 3+o. return.ust )e .a&e% 5Art% $>86a, T+e &e*ositary is o)'i-e& to return t+e t+in-

&e*osite&/ 3+en reuire&/ to:

T%e de$!it!rD T! %i %eir !r ucce!rD !r

T! t%e $er!n *%! (a) %a"e eendei#nated in t%e c!ntract.

, I, t+e &e*ositor 3as inca*acitate& at t+e ti.e o,.a1in- t+e &e*osit/ t+e *ro*erty .ust )ereturne& to:

i #uardian !r ad(initrat!rD

T! t%e $er!n *%! (ade t%e de$!itD

T! t%e de$!it!r %i(el& %!uld %e acuireca$acit).

c, E(en i, t+e &e*ositor +a& ca*acity at t+e ti.e o,.a1in- t+e &e*osit )ut +e su)seuent'y 'oses+is ca*acity &urin- t+e &e*osit/ t+e t+in- .ust)e returne& to +is 'e-a' re*resentati(e%

$7% O)'i-ation to return at t+e *'ace o, return 5Art%$>876 ; sa.e as t+e -enera' ru'e o, 'a3 re-ar&in-t+e *'ace o, *ay.ent% 5Art% $2?$6

4enera' ru'e:At t%e $lace a#reed u$!n ) t%e $artie'tran$!rtati!n e1$ene %all e !rne ) t%e

de$!it!r.E0ce*tion: +In t%e aence !& ti$ulati!n, At t%e $lace*%ere t%e t%in# de$!ited (i#%t e e"en i& it %!uld n!te t%e a(e $lace *%ere t%e !ri#inal de$!it *a(ade.

$8% O)'i-ation to return u*on t+e ti.e o, return% 5Art%$>8864enera' ru'e: T%e t%in# de$!ited (ut e returned t!t%e de$!it!r u$!n de(and' e"en t%!u#% a $eci&ied$eri!d !r ti(e &!r uc% return (a) %a"e een &i1ed.Exceptions:

a, W%en t%e t%in# i 9udiciall) attac%ed *%ile in t%ede$!itar)> $!ei!n

, W%en n!ti&ied !& t%e !$$!iti!n !& a t%ird $er!n t!t%e return !r t%e re(!"al !& t%e t%in# de$!ited.

$>% Ri-+t o, t+e &e*ositary to return t+e t+in-&e*osite&% 5Art% $>8>6 5NOTE: in t+is case/ it is t+e&e*ositary 3+o is returnin- t+e &e*osit WIT# ORWIT#OUT T#E DEAND o, t+e &e*ositor64enera' ru'e: T%e de$!itar) (a) return t%e t%in#de$!ited n!t*it%tandin# t%at a $eri!d %a een &i1ed&!r t%e de$!it i&5

a, T%e de$!it i #ratuit!uD, T%e rea!n i 9uti&iale.Re.e&y i, &e*ositor re,uses to recei(e t+e t+in-:T%e de$!itar) (a) de$!it t%e t%in# at t%e di$!al !&t%e 9udicial aut%!rit).Exception: W%en t%e de$!it i &!r a "alualec!niderati!n' t%e de$!itar) %a n! ri#%t t! return t%et%in# e&!re t%e e1$irati!n !& t%e ti(e dei#nated e"eni& %e %!uld u&&er inc!n"enience a a c!neuence.



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2=% De*ositarys 'ia)i'ity in case o, 'oss)y ,orce .a@eure or -o(ern.ent or&er% 5Art% $>>=6

7e$!itar) i n!t liale in cae !& l! ) &!rce (a9eur!r ) #!"ern(ent !rder. !*e"er' %e %a t%e dut) t!deli"er t! t%e de$!it!r (!ne) !r an!t%er t%in# %erecei"e in $lace !& t%e t%in#.

2$% Lia)i'ity in case o, a'ienation o, t+e &e*ositarys+eir% 5Art% $>>$6W+en a'ienation is &one in 4OOD FAIT#:a, Return t%e "alue !& t%e t%in# de$!ited, Ai#n t%e ri#%t t! c!llect &r!( t%e u)er.

T%e %eir d!e n!t need t! $a) t%e actual $rice!& t%e t%in# de$!ited.

W+en a'ienation is &one in BAD FAIT#:a, Liale &!r da(a#eD, Pa) t%e actual $rice !& t%e t%in# de$!ited.

22% De*ositary .ay retain t+e t+inin *'e&-e unti' t+e,u'' *ay.ent o, 3+at .ay )e &ue +i. )y reason o,t+e &e*osit% 5Art% $>>96T%e t%in# retained er"e a ecurit) &!r t%e $a)(ent!& *%at (a) e due t! t%e de$!itar) ) rea!n !& t%ede$!it. +ee Art. @6=' @@2' @@4,.N!te5 T%e det (ut e $ri!r t! t%e de$!it.

Irre-u'ar De*osit utuu.

Ma) e de(anded at *ill )

t%e irre#ular de$!it!r&!r *%!e ene&it t%ede$!it %a eenc!ntituted

Lender i !und ) t%e

$r!"ii!n !& t%e c!ntract andcann!t ee retituti!n untilt%e ti(e &!r $a)(ent' a$r!"ided in t%e c!ntract %aarien

Onl) ene&it i t%at *%ic%accrue t! t%e de$!it!r

I& *it% interet' ene&it i& !t%$artie

7e$!it!r %a $re&erence!"er !t%er credit!r

N! $re&erence

O)'i-ations o, t+e De*ositor$% O)'i-ation to *ay e0*enses o, *reser(ation% 5Art%

$>>262% O)'i-ation to *ay 'osses incurre& &ue to c+aracter

o, t+in- &e*osite&% 5Art% $>>64enera' ru'e: T%e de$!itar) (ut e rei(ured &!rl! u&&ered ) %i( ecaue !& t%e c%aracter !& t%et%in# de$!ited.Exceptions:a, 7e$!it!r *a n!t a*are !& t%e dan#erD, 7e$!it!r *a n!t e1$ected t! n!* t%e dan#er!u

c%aracter !& t%e t%in#Dc, 7e$!it!r n!ti&ied t%e de$!itar) !& uc% dan#er!u

c%aracterDd, 7e$!itar) *a a*are !& t%e dan#er *it%!ut ad"ice

&r!( t%e de$!it!r.% E,,ect o, &eat+ o, &e*ositor or &e*ositary% 5Art%

$>>?6a, De*osit -ratuitous / deat% !& eit%er !& t%e

de$!it!r !r de$!itar) e1tin#ui%e t%e de$!it+$er!nal in nature,. B) t%e *!rd :e1tin#ui%ed';



15/61


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T%e %!tel-ee$er cann!t &ree%i(el& &r!( re$!niilit) ) $!tin# n!tice t!

t%e e&&ect t%at %e i n!t liale &!r t%e articler!u#%t ) t%e #uet. +Art. 2004,E,,ect: An) ti$ulati!n et*een t%e %!tel-ee$er and t%e #uet *%ere) t%e re$!niilit)!& t%e &!r(er +a et &!rt% in Art. @@-200, iu$$reed !r di(ini%ed %all e VOI7.

#ote'1ee*ers ri-+t to retainT%e %!tel-ee$er %a a ri#%t t! retain t%e t%in#r!u#%t int! t%e %!tel ) t%e #uet' a aecurit) &!r credit !n acc!unt !&5

a, l!d#in#D, u$$lie uuall) &urni%ed t! %!tel #uet.Reason: It i #i"en t! %!tel-ee$er t!c!($enate t%e( &!r t%e liailitie i($!edu$!n t%e( ) la*. T%e ri#%t !& retenti!nrec!#nied in t%i article i in t%e nature !& a$led#e created ) !$erati!n !& la*.

In c!($liance *it% a le#al !li#ati!n

+#!"erned ) t%e la* etali%in# it' and in cae !&de&icienc)' t%e rule !n "!luntar) de$!it egArt. =4'

=6 and 20


17/61


--page 12 of 61

re(unerated+!ner!u,

ut (a) ec!($enated

In *%!e e%al&it i %eld

In e%al& !& t%e$er!n *%!' ) t%e9ud#(ent' %a ari#%t

In e%al& !& t%ede$!it!r !r t%ird$er!n dei#nated

WARE#OUSE RECEIPTS LAW

Sco*e: all *are%!ue' *%et%er $ulic !r $ri"ate' !nded !rn!t

A**'ication: a$$lie t! *are%!ue recei$t iued ) a*are%!ue(an a de&ined in Sec. =+a,' *%ile t%eCi"il C!de' t! !t%er cae *%ere recei$t are n!tiued ) a *are%!ue(an.

The Issue of Warehouse ReceiptsW+o .ay issue

a. !nl) a *are%!ue(an' BUT a dul) aut%!ried!&&icer !r a#ent !& a *are%!ue(an (a) d! !D

. *are%!ue(an - a $er!n la*&ull) en#a#ed in t%euine !& t!rin# #!!d &!r $r!&itD

c. recei$t not issue& ) a *are%!ue(an alt%!u#%

in t%e &!r( !& *are%!ue recei$t are n!t*are%!ue recei$t

For. an& Content:need note in $articular &!r(' ut certaineential ter( (ut e $reent5

. o*ation of 7areho!se -ecauet%e *are%!ue(an (a) %a"e !t%er *are%!ue

2. Date of iss!e and re*eipt -indicate $ri(a &acie t%e date *%en t%e c!ntract !&

de$!it i $er&ected and *%en t%e t!ra#e c%ar#e%all e#in

4. Conse*!tive n!mber of re*eipt- t!identi&) eac% recei$t *it% t%e #!!d &!r *%ic% it *aiued


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--page 13 of 61

W+at ter.s .ay )e inserte&

AN? !t%er ter( !r c!nditi!nEKCEPT5a. t%!e c!ntrar) t! t%i Act +e.#. e1e($ti!n &r!(

liailit) &!r (ideli"er) in Sec. 0' n!t #i"in#tatut!r) n!tice in cae !& ale !& #!!d in Sec. 44and 4


19/61


--page 14 of 61

a"!id cri(inal liailit)D t%i i u9ect t!*ai"er

c. an !&&er t! i#n *%en t%e #!!d aredeli"ered' an acn!*led#(ent t%at t%e)%a"e een deli"ered

BUT a *are%!ue(an (a) till re&ue deli"er) !n t%e#r!und !& !(e la*&ul e1cue lie5

a. Sec. 0. %e %a een reueted ) t%e

$er!n la*&ull) entitled t! t%e #!!dn!t t! (ae deli"er)D

2. %e %a in&!r(ati!n t%at t%e deli"er)a!ut t! e (ade *a t! !ne n!t

la*&ull) entitled t! t%e #!!dD. Sec. 65 e %a acuired title t! t%e #!!d*%ic% *a deri"ed &r!(

. tran&er (ade ) t%e de$!it!r att%e ti(e !& t%e de$!it &!r t!ra#e!r ueuent t%eret!

2. t%e *are%!ue(an> lienc. Sec. 5 I& t%ere are e"eral clai(ant t! t%e#!!dd. Sec. 25 I& t%e #!!d *ere l!t and %e %adn! &ault

e. Sec. 465 e %a alread) la*&ull) !ld t%e#!!d

.ersons to 7hom the goods m!st be delivered. Per!n la*&ull) entitled t! t%e $!ei!n !& t%e

#!!d !r it a#ent2. Per!n entitled t! deli"er under5

a. a n!n-ne#!tiale recei$tD !r. *it% *ritten aut%!rit)

4. $er!n in $!ei!n !& a ne#!tiale recei$t +*%ic%*a la*&ull) ne#!tiated,

NOTE5 a *are%!ue(an d!e NOT %a"e a caue !&acti!n a#aint a $er!n t! *%!( %e (ideli"ered t%et%in# UNLESS t%e de$!it!r ue %i(.

Acts ,or 3+ic+ a 3are+ouse.an is 'ia)'e(! "ailure to sta#p $%uplicate& on copies of anegotiable receipt (Sec' an% )!

W%en (!re t%an !ne ne#!tiale recei$t are iued &!r

t%e a(e #!!d' t%e *!rd :du$licate; (ut e $lainl)$laced ) t%e *are%!ue(an u$!n t%e &ace !& e"er)

uc% recei$t e1ce$t t%e t

. In uc% cae' t%e*are%!ue(an *arrant5

a. t%at t%e du$licate i an accuratec!$) !& t%e !ri#inal recei$t

. uc% !ri#inal recei$t iuncancelled at t%e date !& t%e iue !& t%e du$licate

NOTE5 T%e du$licate i($!e n! !t%er liailit) u$!nt%e *are%!ue(an.

(*! "ailure to place $non+negotiable& on a non+negotiable receipt (Sec' ,!(-! .is%eli/er0 of the goo%s (Sec' 1!

a $o one not la7f!lly entitled to possession- Liale &!r c!n"eri!n +unaut%!ried au($ti!n

and e1ercie !& t%e ri#%t !& !*ner%i$ !"er#!!d el!n#in# t! an!t%er t%r!u#% alterati!n!r t%e e1clui!n !& t%e !*ner> ri#%t,

b $o a person entitled to delivery !nder a non-negotiable re*eipt or 7ritten a!thori"ation 0Rperson in possession of a negotiable re*eipt

- Still liale &!r c!n"eri!n i&5



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. $ri!r t! deli"er)' %e %ad eenreueted NOT t! (ae uc% deli"er)

2. %e %ad recei"ed n!tice !& t%e ad"ereclai( !r title !& a 4rd$er!n

(2! "ailure to effect cancellation of a negotiable receiptupon %eli/er0 of the goo%s (Sec' !

- T%i i a$$licale ONL? t! ne#!tiale recei$t utNOT t! a ituati!n *%ere t%ere *a a "alid ale inacc!rdance *it% Sec. 46

a. 9hen the goods are delivered already5 Gailuret! cancel *ill (ae %i( liale t! an) !ne *%!$urc%aed &!r "alue in #!!d &ait% uc% recei$t

. 9hen only some of the goods 7ere delivered5

Gailure t! cancel !r t! tate $lainl) in t%e recei$tt%at !(e #!!d *ere deli"ered *ill (ae %i(liale t! an) !ne *%! $urc%aed &!r "alue in#!!d &ait% uc% recei$t

()! Issuing receipt for non+existing goo%s or#is%escribe% goo%s (Sec' *1!:

)R5 a *are%!ue(an i under !li#ati!n t! deli"ert%e identical $r!$ert) t!red *it% %i( and i& %e&ail t! d! ! %e i liale.

&x*eption: i& t%e decri$ti!n c!nit (erel) !& (ar!r lael u$!n t%e #!!d !r u$!n t%e

$aca#e c!ntainin# t%e(' etc.' t%e*are%!ue(an i NOT liale e"en i& t%e#!!d are n!t !& t%e ind a indicated int%e (ar !r lael

(! In case of lost or %estro0e% receipts (Sec' 2!

Re(e(er t%at a *are%!ue(an (ut deli"er t! t%e

!ne *%! %a t%e recei$t ut i& uc% *a l!t' aco.*etent court(a) !rder t%e deli"er) !& t%e #!!d!nl)5

a. u$!n $r!!& !& t%e l! !r detructi!n !& t%erecei$tD AN7

. u$!n #i"in# !& a !nd *it% u&& icientecuritie

NOTE5 t%e *are%!ue(an i till liale t! a %!lder !& t%erecei$t &!r "alue *it%!ut n!tice ince t%e *are%!ue(ancan ecure %i(el& in t%e !nd #i"en.

(,! "ailure to ta3e care of the goo%s (Sec' *!(4! "ailure to gi/e notice in case of sales of goo%s tosatisf0 his lien (Sec' --! or because the goo%s areperishable an% ha5ar%ous (Sec' -2!

E&&ect !& ALTERE7 RECEIPTS

a. Alteration immaterial5 *%et%er &raudulent !r n!t' aut%!ried!r n!t' t%e *are%!ue(an i liale !n t%e altered recei$tacc!rdin# t! it !ri#inal ten!rD

. Alteration material5 ut it *a aut%!ried' t%e*are%!ue(an i liale acc!rdin# t! t%e ter( !& t%erecei$t a alteredD

c. Material alteration inno*ently made5 t%!u#% unaut%!ried't%e *are%!ue(an i liale !n t%e altered recei$tacc!rdin# t! it !ri#inal ter(D

d. Material alteration fra!d!lently made: *are%!ue(an iliale acc!rdin# t! t%e !ri#inal ten!r t! a5

. $urc%aer !& t%e recei$t &!r "alue*it%!ut n!ticeD and

2. t! t%e alterer and ueuent $urc%aer *it%n!tice + BUT %i liailit) i li(ited !nl) t! deli"er) a%e i e1cued &r!( an) !t%er liailit),

E"en a &raudulent alterati!n cann!t di"et t%e title !& t%e!*ner !& t!red #!!d and t%e *are%!ue(an i liale t!return t%e( t! t%e !*ner. BUT a bona fide%!lder acuire n!ri#%t t! t%e #!!d under a ne#!tiale recei$t *%ic% %a een



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t!len !r l!t !r *%ic% t%e ind!re(ent %aeen &!r#ed.

Wit+ Re-ar& to O3ners+i*a. O*ner%i$ i n!t a de&ene &!r re&ual t! deli"er

T%e *are%!ue(an cann!t re&ue t! deli"er t%e

#!!d !n t%e #r!und t%at %e %a acuired title!r ri#%t t! t%e $!ei!n !& it unle uc% ideri"ed5

. directl) !r indirectl) &r!( a tran&er(ade ) t%e de$!it!r at t%e ti(e !&t%e de$!it &!r t!ra#e !r ueuentt%eret!D

2. &r!( t%e *are%!ue(an> lien. Ad"ere title !& a 4rd$er!n i n!t a de&ene &!r re&ual

t! deli"er ) a *are%!ue(an t! %i ail!r !n de(and&C&.$:

. T! $er!n t! *%!( t%e #!!d (ut e li"ered+Sec. @,

2. T! t%e $er!n *%! *in in t%e inter$leader cae+Sec. ,

4. T! t%e $er!n %e &ind t! e entitled t! t%e$!ei!n a&ter in"eti#ati!n +Sec. ,


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. t%e ne#!tiati!n ien9!ined' !r

c. t%e d!cu(ent i i($!unded ) t%e c!urt T%e *are%!ue(an cann!t e c!($elled t! deli"er t%e

#!!d until5a. t%e recei$t i urrendered t! %i(D. it i i($!unded ) t%e c!urt

NOTE: T%i $r!"ii!n d!e NOT a$$l) i& t%e $er!nde$!itin# i NOT t%e !*ner !& t%e #!!d !r !ne *%! %an!t t%e ri#%t t! c!n"e) title t! t%e #!!d indin# u$!n t%e!*ner.

Re.e&y o, cre&itor 3+ose &e)tor o3ns a ne-otia)'e

recei*tAttac%(ent !& t%e ne#!tiale recei$t +NOT t%e #!!d,NOTE: t%e #!!d t%e(el"e cann!t readil) e attac%ed !rle"ied u$!n ) !rdinar) le#al $r!ce

E0tent o, 3are+ouse.ans 'iena. la*&ul c%ar#e &!r

. t!ra#e' and2. $reer"ati!n !& t%e #!!d

. la*&ul clai( &!r. (!ne) ad"anced

2. la!r 4. interet


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. *r!n#&ull) re&uin# t! deli"er t%e#!!d t! a $er!n *%! %!ld t%e recei$t !r t%e

de$!it!r u$!n 7EMAN7 acc!($anied *it%5. an !&&er t! ati&) t%e *are%!ue(an> lien+ecaue a *are%!ue(an (a) re&ue deli"er)until %i lien i ati&ied,

2. an !&&er t! urrender t%e recei$ta. &!r t%e $r!tecti!n !& t%e

*are%!ue(an and t! a"!id cri(inal liailit). t%i i u9ect t! *ai"er

4. an !&&er t! i#n *%en t%e #!!d are deli"ered'an acn!*led#(ent t%at t%e) %a"e eendeli"ered

Re.e&ies ,or a 3are+ouse.an. E"en i& *it%!ut lien' all re(edie all!*ed ) la* t! a

credit!r a#aint %i det!r &!r c!llecti!n !& c%ar#eD2. B) re&uin# t! deli"er t%e #!!d until %i lien i ati&iedD4. All re(edie all!*ed ) la* &!r t%e en&!rce(ent !& a lien

a#aint $er!nal $r!$ert) and rec!"er) !& an) de&icienc)in cae it e1it a&ter t%e ale !& t%e $r!$ert)D


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$a)(ent !& t%e c%ar#e. Ot%er*ie' t%e*are%!ue(an %all retain !*ner%i$ !& t%e #!!d.

=. 9ith regard to perishable and ha"ardo!s goodsWare%!ue(an *ill #i"e n!tice t! !*ner !r $er!n in *%!e

na(e t%e #!!d are t!red5a. t! ati&) %i lien. t! re(!"e t%e #!!dc. &ailure t! d! a *ill #i"e t%e *are%!ue(an

aut%!rit) t! ell t%e #!!d *it%!ut ad"ertiin#d. i& ale i n!t $!ile' %e (a) di$!e !& t%e #!!d

in an) la*&ul (anner *it%!ut liailit) Pr!ceed !& t%e ale %all e di$!ed !& in acc!rdance

*it% t%e PROCESS in t%e ale !& t%e#!!d.

6. &ffe*ts of salea. *are%!ue(an i NOT liale &!r n!n-deli"er) e"en i&

t%e recei$t *a #i"en &!r t%e #!!d *%en t%e) *erede$!ited e ne#!tiated

. *%en t%e ale *a (ade *it%!ut t%e $ulicati!nreuired and e&!re t%e ti(e $eci&ied ) la*' uc%ale i "!id and t%e $urc%aer !& t%e #!!d acuire n!title in t%e(

Negotiation an% Transfer of ReceiptsNe#!tiale recei$t ne#!tiale ) deli"er)

. i& t%e #!!d are deli"erale t! t%e earerD !r2. *%en ind!red in lanD !r 4. $er!n t! *%!e !rder t%e #!!d are deli"ered

!r ) a ueuent ind!ree ind!red it t!earer

PROISIONS COON TO PLED4E AND ORT4A4E

5Art 2=8?2$26

PLED4E5A c!ntract ) "irtue !& *%ic% t%e det!r deli"er t!t%e credit!r !r t! a t%ird $er!n a (!"ale !r d!cu(ente"idencin# inc!r$!real ri#%t &!r t%e $ur$!e !& ecurin#t%e &ul&ill(ent !& a $rinci$al !li#ati!n *it% t%eundertandin# t%at *%en t%e !li#ati!n i &ul&illed' t%et%in# deli"ered %all e returned *it% all it &ruit andaccei!n.

Eential Reuiite t! C!ntract !& Pled#e and M!rt#a#e

. c!ntituted t! ecure t%e &ul&ill(ent !& a $rinci$al!li#ati!n2. $led#!r !r (!rt#a#!r e t%e a!lute !*ner !& t%e

t%in# $led#ed !r (!rt#a#ed4. t%e $er!n c!ntitutin# t%e $led#e !r (!rt#a#e %a"e

t%e &ree di$!al !& t%eir $r!$ert)' and in t%e aencet%ere!&' t%at t%e) e le#all) aut%!ried &!r t%e $ur$!e


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4. unilateral- create !li#ati!n !lel) !nt%e $art !& t%e credit!r t! return t%e t%in# u9ect u$!n

t%e &ul&ill(ent !& t%e $rinci$al !li#ati!n


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4. rule t%at real $r!$ert)' c!nitin# !&e"eral l!t %!uld e !ld e$aratel)' a$$lie t! ale

in e1ecuti!n' and n!t t! &!recl!ure !& (!rt#a#e


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&. (a) eit%er clai( an!t%er t%in#in $led#e !r de(and i((ediate $a)(ent !& t%e

$rinci$al !li#ati!n i& %e i decei"ed !n t%eutance !r ualit) !& t%e t%in#4' ple%gee:

a. cann!t de$!it t%e t%in# $led#ed *it% a t%ird$er!n' unle t%ere i a ti$ulati!n aut%!riin#%i( t! d! !

. i re$!nile &!r t%e act !& %i a#ent !re($l!)ee *it% re$ect t! t%e t%in# $led#ed

c. %a n! ri#%t t! ue t%e t%in# !r t! a$$r!$riatet%e &ruit *it%!ut t%e aut%!rit) !& t%e !*ner

d. (a) caue $ulic ale !& t%e t%in# $led#ed i&'

*it%!ut &ault !n %i $art' t%ere i dan#er !&detructi!n' i($air(ent !r di(uniti!n in "alue !&t%e t%in#. T%e $r!ceed !& t%e aucti!n %all ea ecurit) &!r t%e $rinci$al !li#ati!n.

6' ple%gor :a. %a t%e re$!niilit) &!r &la* !& t%e t%in#

$led#ed.. cann!t a &!r t%e return !& t%e t%in# a#aint t%e

*ill !& t%e credit!r' unle and until %e %a $aidt%e det and it interet' *it% e1$ene in a$r!$er cae

c. i all!*ed t! utitute t%e t%in# *%ic% i indan#er !& detructi!n !r i($air(ent *it%!ut an)&ault !n t%e $art !& t%e $led#ee' *it% an!t%ert%in# !& t%e a(e ind and ualit)

d. (a) reuire t%at t%e t%in# e de$!ited *it% a4rd$er!n i& t%r!u#% t%e ne#li#ence !r *ill&ul act!& t%e $led#ee t%e t%in# i in dan#er !& ein#l!t !r i($aired

E0tin-uis+.ent o, P'e&-e

I& t%e t%in# $led#ed i returned ) t%e $led#ee t! t%e $led#!r

!r !*ner' $led#e i e1tin#ui%ed.A tate(ent in *ritin# ) t%e $led#ee t%at %e ren!unce !r

aand!n t%e $led#e i u&&icient t! e1tin#ui%. G!r t %i$ur$!e' neit%er t%e acce$tance ) t%e $led#!r ! !*ner' n!rt%e return !& t%e t%in# $led#ed i necear)' t%e $led#eeec!(in# a de$!itar).

I& ueuent t! t%e $er&ecti!n !& t%e $led#e' t%e t%in# i in

t%e $!ei!n !& t%e $led#!r !r !*ner' t%ere i prima fa*ie$reu($ti!n t%at t%e t%in# %a een returned ) t%e$led#ee.

I& t%e t%in# i in t%e $!ei!n !& 4rd $er!n *%! %a

recei"ed it &r!( t%e $led#!r !r !*ner a&ter t%e c!ntituti!n !&t%e $led#e' t%ere i prima fa*ie $reu($ti!n t%at t%e t%in#%a een returned ) t%e $led#ee.

>ormalities re!ired in sale by a *reditor if *redit not paid ind!e time:

. t%e det i due and un$aid2. t%e ale (ut e at a $ulic aucti!n4. t%ere (ut e n!tice t! t%e $led#!r and !*ner' tatin#

t%e a(!unt due' and


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4. i& t%e $rice !& t%e ale i le' neit%eri t%e credit!r entitled t! rec!"er t%e de&icienc).

C!ntrar) ti$ulati!n i "!id.Le-a' P'e&-es. Necear) e1$ene %all e re&unded t! e"er)

$!e!r' ut !nl) $!e!r in #!!d &ait% (a) retaint%e t%in# until %e %a een rei(ured- Ue&ul e1$ene %all e re&unded !nl) t! t%e$!e!r in #!!d &ait% *it% t%e a(e ri#%t !& retenti!n't%e $er!n *%! %a de&eated %i( in t%e $!ei!n%a"in# t%e !$ti!n !& re&undin# t%e a(!unt !& t%ee1$ene !r !& $a)in# t%e increae in "alue *%ic% t%et%in# (a) %a"e acuired and ) rea!n t%ere!& +art

=


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Essentia' Reuisites o, ort-a-e

. c!ntituted t! ecure t%e &ul&ill(ent !& a $rinci$al!li#ati!n2. (!rt#a#!r e t%e a!lute !*ner !& t%e t%in# $led#ed

!r (!rt#a#ed4. t%e $er!n c!ntitutin# t%e $led#e !r (!rt#a#e %a"e

t%e &ree di$!al !& t%eir $r!$ert)' and in t%e aencet%ere!&' t%at t%e) e le#all) aut%!ried &!r t%e $ur$!e


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t%an @0 da) n!r (!re t%an 20 da)&r!( t%e entr) !& 9ud#(ent

4. I& t%e (!rt#a#!r &ail t! $a) at ti(e directed' t%e c!urt'u$!n (!ti!n' %all !rder t%e $r!$ert) t! e !ld t! t%e%i#%et idder at a $ulic aucti!n.

certi&icate i e1ecuted' acn!*led#ed andrec!rded t! c!($lete t%e &!recl!ure

Nature o, u&icia' Forec'osure Procee&in-s. uai in re( acti!n2. &!recl!ure i !nl) t%e reult !r incident !& t%e &ailure t!

$a) det4. ur"i"e deat% !& (!rt#a#!r

EJTRAUDICIAL FORECLOSURE +#!"erned ) Act N!'44=' a a(ended,. e1$re aut%!rit) t! ell i #i"en t! t%e (!rt#a#ee.

2. aut%!rit) i n!t e1tin#ui%ed ) deat% !& (!rt#a#!r !r(!rt#a#ee

4. $ulic ale %!uld e (ade a&ter $r!$er n!tice $r!tecti!n2. an ancillar) ti$ulati!n4. a $rer!#ati"e !& t%e (!rt#a#ee

N!te5 Sti$ulati!n !& u$et $rice in (!rt#a#e c!ntract i "!id

E,,ect o, ina&euacy o, *rice in ,orec'osure sa'e. W%ere t%ere i ri#%t t! redee(

)R5 Inadeuac) !& $rice i i((aterial ecauet%e 9ud#(ent det!r (a) redee( t%e$r!$ert)

&C&.$/05 t%e $rice i ! inadeuate a t!%!c t%e c!ncience !& t%e c!urttain# int! c!niderati!n t%e $eculiarcircu(tance



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2. Pr!$ert) (a) e !ld &!r le t%an it&air (aret "alue u$!n t%e t%e!r) t%at t%e leer t%e

$rice t%e eaier &!r t%e !*ner t! redee(4. T%e "alue !& t%e (!rt#a#ed $r!$ert) %a n! earin# !nt%e id $rice at t%e $ulic aucti!n' $r!"ided t%at t%e$ulic aucti!n *a re#ularl) and %!netl) c!nducted

Wai(er o, security )y cre&itor. M!rt#a#ee (a) *ai"e ri#%t t! &!recl!e %i (!rt#a#e

and (aintain a $er!nal acti!n &!r rec!"er) !& t%eindetedne

2. M!rt#a#ee cann!t %a"e !t% re(edieN!te5 G!recl!ure retr!act t! t%e date !& re#itrati!n !&

(!rt#a#e

Sti*u'ation o, U*set PriceA ti$ulati!n !& (ini(u( $rice at *%ic% t%e $r!$ert) %all e!ld t! ec!(e !$erati"e in t%e e"ent !& a &!recl!ure ale at$ulic aucti!n i NULL and VOI7

REDEPTION It i a tranacti!n ) *%ic% t%e (!rt#a#!r reacuire t%e$r!$ert) *%ic% (a) %a"e $aed under t%e (!rt#a#e !rdi"et t%e $r!$ert) !& t%e lien *%ic% t%e (!rt#a#e (a) %a"ecreated.

!in&s o, Re&e.*tion. e!ity of redemption: ri#%t !& t%e (!rt#a#!r t! redee(

t%e (!rt#a#ed $r!$ert) a&ter %i de&ault in t%e$er&!r(ance !& t%e c!nditi!n !& t%e (!rt#a#e ute&!re t%e ale !& t%e (!rt#a#ed $r!$ert) !rc!n&ir(ati!n !& ale

2. right of redemption: ri#%t !& t%e (!rt#a#!r t! redee(t%e $r!$ert) *it%in a certain $eri!d a&ter it *a !ld &!rt%e ati&acti!n !& t%e det

C#ATTEL ORT4A4E +Art. 2


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=. S%i$ M!rt#a#e 7ecree !& @ +P7=2, #!"ern (!rt#a#e !& "eel !& d!(etic

!*ner%i$

A,,i&a(it o, 4oo& Fait+An !at% in a c!ntract !& c%attel (!rt#a#e *%erein t%e $artiee"erall) *ear t%at t%e (!rt#a#e i (ade &!r t%e $ur$!e !&ecurin# t%e !li#ati!n $eci&ied in t%e c!nditi!n t%ere!& and&!r n! !t%er $ur$!e and t%at t%e a(e i a 9ut and "alid!li#ati!n and !ne n!t entered int! &!r t%e $ur$!e !& &raud.

E,,ect o, Re-istration. create real ri#%t

2. add n!t%in# t! (!rt#a#eN!te5 Re#itrati!n !& ai#n(ent !& (!rt#a#e i n!t reuired

Ri-+t o, Re&e.*tion. *%en t%e c!nditi!n !& a c%attel (!rt#a#e i r!en' t%e

&& (a) redee(5a. (!rt#a#!rD. $er!n %!ldin# a ueuent (!rt#a#eDc. ueuent attac%in# credit!r.

2. an attac%in# credit!r *%! ! redee( %all eur!#ated t! t%e ri#%t !& t%e (!rt#a#ee and entitled t!

&!recl!e t%e (!rt#a#e in t%e a(e (anner t%at t%e(!rt#a#ee c!uld &!recl!e it4. t%e rede($ti!n i (ade ) $a)in# !r deli"erin# ! t%e

(!rt#a#ee t%e a(!unt due !n uc% (!rt#a#e and t%ec!t and e1$ene incurred ) uc% reac% !& c!nditi!ne&!re t%e ale

Forec'osure o, C+atte' ort-a-e. $ulic ale

2. $ri"ate ale / t%ere i n!t%in# ille#al' i((!ral !ra#aint $ulic !rder in an a#ree(ent &!r t%e $ri"ate

ale !& t%e $er!nal $r!$ertie c!"ered ) c%attel(!rt#a#ePerio& to Forec'ose

. A&ter 40 da) &r!( t%e ti(e !& t%e c!nditi!n i r!en2. T%e 40-da) $eri!d i t%e (ini(u( $eri!d a&ter "i!lati!n

!& t%e (!rt#a#e c!nditi!n &!r t%e credit!r t! caue t%eale at $ulic aucti!n *it% at leat 0 da) n!tice t! t%e(!rt#a#!r and $!tin# !& $ulic n!tice !& ti(e' $lace'and $ur$!e !& uc% ale' and i a $eri!d !& #race &!rt%e (!rt#a#!r' t! dic%ar#e t%e !li#ati!n.

4. A&ter t%e ale at $ulic aucti!n' t%e ri#%t !& rede($ti!n

i n! l!n#er a"ailale t! t%e (!rt#a#!r.

Ci(i' action to reco(er cre&it. inde$endent acti!n n!t reuired2. (!rt#a#e lien dee(ed aand!ned ) !tainin# a

$er!nal 9ud#(ent

Ri-+t o, .ort-a-ee to reco(er &e,iciency. 7here mortgage fore*losed:credit!r (a) (aintain acti!n

&!r de&icienc) alt%!u#% C%attel M!rt#a#e La* i ilent !nt%i $!int. Rea!n i c%attel (!rt#a#e i !nl) #i"en a a

ecurit) and n!t a $a)(ent !& t%e det.2. 7here mortgage *onstit!ted as se*!rity for p!r*hase ofpersonal property payable in installments: n! de&icienc)9ud#(ent can e aed and an) c!ntrar) a#ree(ent %alle "!id

4. 7here mortgaged property s!bse!ently atta*hed andsold: (!rt#a#ee i entitle t! de&icienc) 9ud#(ent in anacti!n &!r $eci&ic $er&!r(ance



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A**'ication o, *rocee&s o, sa'e. c!t and e1$ene !& ee$in# and ale

2. $a)(ent !& t%e !li#ati!n4. clai( !& $er!n %!ldin# ueuent (!rt#a#e int%eir !rder


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2.!rdinar) $re&erred credit +Art 22


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i. Rea' .ort-a-e 52$296 or antic+resis52$26 ;#uarant) i i((!"ale

ii. C+atte' .ort-a-e 52$9=6 or *'e&-e52=>6 ;#uarant) i (!"ale2% As to its ori-in:

a. Con(entiona' ; c!ntituted ) a#ree(ent !&t%e $artie 52=?$K$6

. Le-a' ; i($!ed ) "irtue !& a $r!"ii!n !& la*c. u&icia' ;reuired ) a c!urt t! #uarantee t%e

e"entual ri#%t !& !ne !& t%e $artie in a cae.% As to consi&eration:

a. 4ratuitous ; #uarant!r d!e n!t recei"e an)$rice !r re(unerati!n &!r actin# a uc% 52=986

. Onerous ; !ne *%ere t%e #uarant!r recei"e"aluale c!niderati!n &!r %i #uarant)9% As to *erson -uarantee&:

a. Sin-'e ; c!ntituted !lel) t! #uarantee !recure $er&!r(ance ) t%e det!r !& t%e$rinci$al !li#ati!nD

. Dou)'e or su)-uaranty ; c!ntituted t!ecure t%e &ul&ill(ent ) t%e #uarant!r !& a $ri!r#uarant)

?% As to its sco*e an& e0tent:a. De,inite ; *%ere t%e #uarant) i li(ited t! t%e

$rinci$al !li#ati!n !nl)' !r t! a $eci&ic $!rti!nt%ere!&D. In&e,inite or si.*'e ; *%ere t%e #uarant)

included all t%e acce!r) !li#ati!n !& t%e$rinci$al' e.#. c!t' includin# 9udicial c!t.

4UARANTY 4ENERALLY 4RATUITOUS 52=986

4R: 8uarant) i #ratuit!u

Exception:W%en t%ere i a ti$ulati!n t! t%e c!ntrar)

Cause o, contract o, -uaranty

. Presence o, cause 3+ic+ su**orts *rinci*a'o)'i-ation: Caue !& t%e c!ntract i t%e a(ecaue *%ic% u$$!rt t%e !li#ati!n a t! t%e$rinci$al det!r. T%e c!niderati!n *%ic% u$$!rtt%e !li#ati!n a t! t%e $rinci$al det!r i au&&icient c!niderati!n t! u$$!rt t%e !li#ati!n !&a #uarant!r !r uret).

2. A)sence o, &irect consi&eration or )ene,it to-uarantor: 8uarant) !r uret) a#ree(ent ire#arded "alid de$ite t%e aence !& an) directc!niderati!n recei"ed ) t%e #uarant!r !r uret)'uc% c!niderati!n need n!t $a directl) t! t%e#uarant!r !r uret)D a c!niderati!n (!"in# t! t%e$rinci$al *ill u&&ice.

ARRIED WOAN AS 4UARANTOR 52=9>6

4enera' ru'e: Married *!(an ind !nl) %er e$arate$r!$ert)

Exceptions:

. Wit% %er %uand> c!nent' ind t%e c!((unit) !rc!n9u#al $artner%i$ $r!$ert)

2. Wit%!ut %uand> c!nent' in cae $r!"ided ) la*'uc% a *%en t%e #uarant) %a red!unded t! t%eene&it !& t%e &a(il).

4UARANTY UNDERTA!EN WIT#OUT !NOWLED4E OFDEBTOR 52=?=6

. 4uaranty is uni'atera'/ e1it &!r t%e ene&it !& t%ecredit!r and n!t &!r t%e ene&it !& t%e $rinci$al det!r



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2. Cre&itor +as e(ery ri-+t to ta1e a''*ossi)'e .easures to secure *ay.ent o, +is cre&it

/ #uarant) can e c!ntituted e"en a#aint t%e *ill !&t%e $rinci$al det!r

Ri#%t !& t%ird $er!n *%! $a)5

$% Pay.ent 3it+out t+e 1no3'e&-e or a-ainst t+e 3i''o, t+e &e)tor:

a. 8uarant!r can rec!"er !nl) in!&ar a t%e$a)(ent %a een ene&icial t! t%e det!r

. 8uarant!r cann!t c!($el t%e credit!r t!ur!#ate %i( in %i ri#%t

2. Pay.ent 3it+ 1no3'e&-e or consent o, t+e &e)tor:Sur!#ated t! all t%e ri#%t *%ic% t%e credit!r %ada#aint t%e det!r

4UARANTY BY REASON OF ORI4IN 52=?$K$6

. C!n"enti!nalD2. HudicialD4. Le#al

DOUBLE OR SUB4UARANTY 52=?$K26

One c!ntituted t! #uarantee t%e !li#ati!n !& a #uarant!r. It%!uld n!t e c!n&!unded *it% #uarant) *%erein e"eral#uarant!r c!ncur.

NECESSITY OF ALID PRINCIPAL OBLI4ATION 52=?2K$6

4uaranty is an accessory contract: It i an indi$enalec!nditi!n &!r it e1itence t%at t%ere (ut e a $rinci$al

!li#ati!n. ence' i, t+e *rinci*a' o)'i-ation is (oi&/ it isa'so (oi&%

4UARANTY OF OIDABLE/ UNENFORCEABLE/ ANDNATURAL OBLI4ATIONS 52=?2K26

A #uarant) (a) ecure t%e $er&!r(ance !& a5

. oi&a)'e contract ; uc% c!ntract i in#in#' unle iti annulled ) a $r!$er c!urt acti!n

2. Unen,orcea)'e contract ;ecaue uc% c!ntract in!t "!id

4. Natura' o)'i-ation ;t%e credit!r (a) $r!ceed a#aintt%e #uarant!r alt%!u#% %e %a n!t ri#%t !& acti!na#aint t%e $rinci$al det!r &!r t%e rea!n t%at t%elatter> !li#ati!n i n!t ci"ill) en&!rceale.W%en t%e det!r %i(el& !&&er a #uarant) &!r %inatural !li#ati!n' %e i($liedl) rec!#nie %i liailit)'t%ere) tran&!r(in# t%e !li#ati!n &r!( a natural int!a ci"il !ne.

4UARANTY OF FUTURE DEBTS 52=?6

Continuin- 4uaranty or Suretys+i*:

. N!t l i(ited t! a in#le tranacti!n ut *%ic%c!nte($late a &uture c!ure !& dealin#' c!"erin# aerie !& tranacti!n #enerall) &!r an inde&inite ti(e !runtil re"!ed.

2. It i $r!$ecti"e in it !$erati!n and i #enerall)intended t! $r!"ide ecurit) *it% re$ect t! &uturetranacti!n.

4. Guture det' e"en i& t%e a(!unt i n!t )et n!*n' (a)e #uaranteed ut t%ere can e n! clai( a#aint t%e



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Interest runs ,ro.:

a. Gilin# !& t%e c!($laint +u$!n 9udicial de(and,D

!r. T%e ti(e de(and *a (ade u$!n t%e uret)

until t%e $rinci$al !li#ati!n i &ull) $aid +u$!ne1tra-9udicial de(and,

2. Pena'ty .ay )e *ro(i&e& ; a uret) (a) e %eldliale &!r t%e $enalt) $r!"ided &!r in a !nd &!r "i!lati!n!& t%e c!nditi!n t%erein.Princi*a's 'ia)i'ity .ay e0cee& -uarantors

o)'i-ations

T%e a(!unt $eci&ied in a uret) !nd a t%e uret)>!li#ati!n d!e n!t li(it t%e e1tent !& t%e da(a#e t%at(a) e rec!"ered &r!( t%e $rinci$al' t%e latter> liailit)ein# #!"erned ) t%e !li#ati!n %e au(ed under%i c!ntract.

4UARANTY NOT PRESUED 52=??6

8uarant) reuire t%e e1$rei!n !& c!nent !n t%e $art !& t%e#uarant!r t! e !und. It cann!t e $reu(ed ecaue !& t%ee1itence !& a c!ntract !r $rinci$al !li#ati!n.

Reasons:

. T%ere e aurance t%at t%e #uarant!r %ad t%e trueintenti!n t! ind %i(el&D

2. T! (ae certain t%at !n (ain# it' t%e #uarant!r$r!ceeded *it% c!nci!une !& *%at %e *a d!in#.

4uaranty Co(ere& )y t+e Statute o, Frau&s

8uarant) (ut n!t !nl) e e1$reed ut (ut! e re&uce& into 3ritin-%

ence' it %all e unen&!rceale ) acti!n'unle t%e a(e !r !(e n!te !r (e(!randu(t%ere!& e in *ritin#' and ucried ) t%e$art) c%ar#ed' !r ) %i a#entD e"idence't%ere&!re' !& t%e a#ree(ent cann!t e recei"ed*it%!ut t%e *ritin#' !r a ec!ndar) e"idence !&it c!ntent.

It need n!t a$$ear in a $ulic d!cu(ent.

4uaranty Strict'y Construe&

Strictl) c!ntrued a#aint t%e credit!r in &a"!r !& t%e #uarant!rand i n!t e e1tended e)!nd it ter( !r $eci&ied li(it.

I& t%ere i an) d!ut !n t%e ter( and c!nditi!n !& t%e#uarant) !r uret) a#ree(ent' t%e d!ut %!uld e re!l"edin &a"!r !& t%e #uarant!r !r uret).

. Lia)i'ity ,or o)'i-ation sti*u'ate& ; #uarant!r i liale!nl) &!r t%e !li#ati!n !& t%e det!r ti$ulated u$!n'and n!t t! !li#ati!n au(ed $re"i!u t! t%ee1ecuti!n !& t%e #uarant) unle an intent t! e !liale i clearl) indicated.

2. Lia)i'ity o, surety 'i.ite& to a ,i0e& *erio& ; t%euret) (ut !nl) e !und in t%e (anner and t! t%ee1tent' and under t%e circu(tance *%ic% are et&!rt% !r *%ic% (a) e in&erred &r!( t%e c!ntract !uarant) !r uret)%i$' and n! &art%er.

4. Lia)i'ity o, surety to e0*ire on .aturity o, *rinci*a'o)'i-ation ; uc% ti$ulati!n i un&air andunrea!nale &!r it $racticall) nulli&ie t%e nature !& t%eundertain# it %ad au(ed.



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Reason: T%e liailit) !& t%e uret)attac%e a !!n a t%e $rinci$al det!r de&ault' andn!tice t%ere!& i #i"en t%e uret) *it%in a rea!naleti(e t! enale it t! tae te$ t! $r!tect it interet.

Re.e&y o, surety: G!recl!e t%e c!unter!nd $ut u$ ) t%e$rinci$al det!r +i& t%ere i an),

4UARANTY DISTIN4UIS#ED FRO WARRANTY

8UARANT? WARRANT?

C!ntract ) *%ic% a $er!n i!und t! an!t%er &!r t%e

&ul&ill(ent !& a $r!(ie !ren#a#e(ent !& a t%ird $art)

An undertain# t%at t%e title'ualit)' !r uantit) !& t%e

u9ect (atter !& a c!ntract i*%at it %a een re$reentedt! e' and relate t! !(ea#ree(ent (ade !rdinaril) )t%e $art) *%! (ae t%e*arrant)

4UARANTY DISTIN4UIS#ED FRO SURETYS#IP

8UARANT? SURET?SIP

Liailit) de$end u$!n aninde$endent a#ree(ent t!$a) t%e !li#ati!n i& t%e$ri(ar) det!r &ail t! d! !

Au(e liailit) a a re#ular$art) t! t%e undertain#

En#a#e(ent i a c!llateralundertain#

C%ar#ed a an !ri#inal$r!(i!r

Sec!ndaril) liale / %ec!ntract t! $a) i&' ) t%e

Pri(aril) liale / undertaedirectl) &!r t%e $a)(ent

ue !& due dili#ence' t%edent cann!t e $aid

*it%!ut re&erence t! t%e!l"enc) !& t%e $rinci$al' and

i ! re$!nile at !nce t%elatter (ae de&ault' *it%!utan) de(and ) t%e credit!ru$!n t%e $rinci$al *%at!e"er!r an) n!tice !& de&ault

Onl) ind %i(el& t! $a) i&t%e $rinci$al cann!t !runale t! $a)

Undertae t! $a) i& t%e$rinci$al d!e n!t $a)'*it%!ut re#ard t! %i ailit) t!d! !

Inurer !& t%e !l"enc) !& t%e

det!r

Inurer !& t%e det

7!e n!t c!ntract t%at t%e$rinci$al *ill $a)' ut i($l)t%at %e i ale t! d! !

Pa) t%e credit!r *it%!utuali&icati!n i& t%e $rinci$aldet!r d!e n!t $a). ence't%e re$!niilit) !r !li#ati!nau(ed ) t%e uret) i#reater !r (!re !ner!u t%ant%at !& a #uarant!r

HUALIFICATIONS OF 4UARANTOR 52=?2=?76

. e $!ee inte-rityG2. e %a ca*acity to )in& +i.se',D4. e %a su,,icient *ro*erty to ans3er ,or t+e

o)'i-ation *%ic% %e #uarantee.Exception:T%e credit!r *ai"e t%e reuire(ent

E,,ect o, Su)seuent Loss o, Reuire& Hua'i,ications: T%euali&icati!n need !nl) e $reent at t+e ti.e o, t+e*er,ection o, t+e contract% T%e ueuent l! !& inte#rit)



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!r $r!$ert) !r u$er"enin# inca$acit) !& t%e#uarant!r *!uld n!t !$erate t! e1!nerate t%e #uarant!r !& t%ee"entual liailit) %e %a c!ntracted' and t%e c!ntract !uarant) c!ntinue.

Re.e&y o, cre&itor: 7e(and an!t%er #uarant!r *it% t%e$r!$er uali&icati!n

E0ce*tion: Credit!r (a) *ai"e it i& %e c%!!e and %!ld t%e#uarant!r t! %i ar#ain.

Artic'e 2=?7:

. Reuire c!n"icti!n in t%e &irt intance !& a cri(ein"!l"in# di%!net) t! %a"e t%e ri#%t t! de(andan!t%er.

2. Hudicial declarati!n !& in!l"enc) i n!t necear) in!rder &!r t%e credit!r t! %a"e a ri#%t t! de(and an!t%er#uarant!r.

Se'ection o, 4uarantor:

. S*eci,ie& *erson sti*u'ate& as -uarantor:Sutituti!n !& #uarant!r (a) n!t e de(andedReason: T%e electi!n !& t%e #uarant!r i5

a. Ter( !& t%e a#ree(entD

. A a $art)' t%e credit!r i' t%ere&!re' !undt%ere).

2. 4uarantor se'ecte& )y t+e *rinci*a' &e)tor: 7et!ran*er &!r t%e inte#rit)' ca$acit)' and !l"enc) !& t%e#uarant!r.

4. 4uarantor *ersona''y &esi-nate& )y t+e cre&itor:Re$!niilit) !& t%e electi!n %!uld &all u$!n t%ecredit!r ecaue %e c!nidered t%e #uarant!r t! %a"et%e uali&icati!n &!r t%e $ur$!e.

EFFECTS OF 4UARANTY

A% BETWEEN T#E 4UARANTOR AND T#E CREDITOR

RI4#T OF 4UARANTOR TO BENEFIT OF EJCUSSION OREJ#AUSTION 52=?86

Reasons:

. 4uarantor on'y secon&ari'y 'ia)'e ; t%e #uarant!rind %i(el& t! t%e credit!r t! &ul&ill t%e !li#ati!n !&t%e $rinci$al det!r !nl) in cae t%e latter %!uld &ail t!d! !. I& t%e $rinci$al det!r &ul&ill t%e !li#ati!n#uaranteed' t%e #uarant!r i dic%ar#ed &r!( an)re$!niilit).

2. A'' 'e-a' re.e&ies a-ainst t+e &e)tor to )e ,irste0+auste& ; t! *arrant rec!ure a#aint t%e #uarant!r&!r $a)(ent' it (a) n!t e u&&icient t%at t%e det!ra$$ear in!l"ent. Suc% in!l"enc) (a) e i(ulated.

Ri-+t o, Cre&itor to Secure u&-.ent a-ainst 4uarantor*rior to E0+austion

4R: An !rdinar) $er!nal #uarant!r +NOT a $led#!r !r(!rt#a#!r,' (a) de(and e1%auti!n !& all t%e $r!$ert) !& t%edet!r e&!re %e can e c!($elled t! $a).

Exception:T%e credit!r (a)' $ri!r t%eret!' ecure a 9ud#(enta#aint t%e #uarant!r' *%! %all e entitled' %!*e"er' t! ade&er(ent !& t%e e1ecuti!n !& aid 9ud#(ent a#aint %i(' untila&ter t%e $r!$ertie !& t%e $rinci$al det!r %all %a"e eene1%auted' t! ati&) t%e latter> !li#ati!n.

EJCEPTIONS TO T#E BENEFIT OF EJ#AUSTION 52=?>6

T+e -uarantor is not entit'e& to t+e )ene,it o, e0cussion:



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$% As *ro(i&e& in Art% 2=?>:a. I, t+e -uarantor +as e0*ress'y renounce& it

; Wai"eri. Wai"er i "alid ut it (ut e (ade in

e1$re ter(.. I, +e +as )oun& +i.se', so'i&ari'y 3it+ t+e

&e)tor ; liailit) au(ed t%at !& a uret)i. 8uarant!r ec!(e $ri(ar) liale a a

!lidar) c!-det!r. In e&&ect' %eren!unce in t%e c!ntract itel& t%eene&it !& e1%auti!n.

c. In case o, inso'(ency o, t+e &e)tor ;#uarant!r #uarantee t%e !l"enc) !& t%edet!r

i. I& t%e det!r ec!(e in!l"ent' t%eliailit) !& t%e #uarant!r a t%e det!rcann!t &ul&ill %i !li#ati!n

d. W+en +e 5&e)tor6 +as a)scon&e&/ or cannot)e sue& 3it+in t+e P+i'i**ines ; t%e credit!ri n!t reuired t! #! a&ter a det!r *%! i %idin#!r cann!t e ued in !ur c!urt' and t! incur t%edela) and e1$ene incident t%eret!.E0ce*tion: 7et!r %a le&t a (ana#er !rre$reentati"eD

e. I, it .ay )e *resu.e& t+at an e0ecution ont+e *ro*erty o, t+e *rinci*a' &e)tor 3ou'&not resu't in t+e satis,action o, t+eo)'i-ation ; i& uc% 9udicial acti!n includin#e1ecuti!n *!uld n!t ati&) t%e !li#ati!n' t%e#uarant!r can n! l!n#er reuire t%e credit!r t!re!rt t! all uc% re(edie a#aint t%e det!ra t%e a(e *!uld e ut a uele &!r(alit). It

i n!t necear) t%at t%e det!r e 9udiciall)declared in!l"ent.

2. I, +e &oes not co.*'y 3it+ Art% 2==: In !rder t%att%e #uarant!r (a) (ae ue !& t%e ene&it !&e1cui!n' %e (ut5

a. Set it u$ a#aint t%e credit!r u$!n t%e latter>de(and &!r $a)(ent &r!( %i(D

. P!int !ut t! t%e credit!r5i. A(ai'a)'e *ro*erty o, t+e &e)tor ; t%e

#uarant!r %!uld &acilitate t%e realiati!n!& t%e e1cui!n ince %e i t%e (!tintereted in it ene&it.

ii. Wit+in t+e P+i'i**ine territory /e1cui!n !& $r!$ert) l!cated ar!ad*!uld e a len#t%) and e1tre(el)di&&icult $r!ceedin# and *!uld n!tc!n&!r( *it% t%e $ur$!e !& t%e#uarant) t! $r!"ide t%e credit!r *it% t%e(ean !& !tainin# t%e &ul&ill(ent !& t%e!li#ati!n.

iii. Su,,icient to co(er t+e a.ount o, t+e&e)t.

% I, +e is a @u&icia' )on&s.an an& su)surety 52=8969% W+ere a *'e&-e or .ort-a-e +as )een -i(en )y +i.

as a s*ecia' security%?% I, +e ,ai's to inter*ose it as a &e,ense )e,ore

@u&-.ent is ren&ere& a-ainst +i.%

DUTY OF CREDITOR TO A!E PRIOR DEAND FORPAYENT FRO 4UARANTOR 52==6

. W+en &e.an& to )e .a&e ; !nl) a&ter 9ud#(ent !nt%e det &!r !"i!ul) t%e e1%auti!n !& t%e $rinci$al>



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$r!$ert) cann!t e"en e#in t! tae$lace e&!re 9ud#(ent %a een !tained.

2. Actua' &e.an& to )e .a&e ;9!inin# t%e #uarant!r int%e uit a#aint t%e $rinci$al det!r i n!t t%e de(andintended ) la*

DUTY OF T#E 4UARANTOR TO SET UP BENEFIT OFEJCUSSION 52==6

A !!n a %e i reuired t! $a)' #uarant!r (ut al! $!int !utt! t%e credit!r a"ailale $r!$ert) +n!t in liti#ati!n !rencu(ered, !& t%e det!r *it%in t%e P%ili$$ine.

DUTY OF T#E CREDITOR TO RESORT TO ALL LE4ALREEDIES 52=$6

. A&ter t%e #uarant!r %a &ul&illed t%e c!nditi!n reuired&!r (ain# ue !& t%e ene&it !& e1%auti!n' it ec!(et%e &uty o, t+e cre&itor to:

2. E1%aut all t%e $r!$ert) !& t%e det!r $!inted !ut )t%e #uarant!rD

4. I& %e &ail t! d! !' %e %all u&&er t%e l! ut !nl) t!t%e e1tent !& t%e "alue !& t%e aid $r!$ert)' &!r t%ein!l"enc) !& t%e det!r.

oin&er o, 4uarantor an& Princi*a' as Parties De,en&ant4R: T%e #uarant!r' n!t ein# a 9!int c!ntract!r *it% %i$rinci$al' cann!t e ued *it% %i $rinci$al.

Exception:W%ere it *!uld er"e (erel) t! dela) t%e ulti(ateacc!untin# !& t%e #uarant!r !r i& n! di&&erent reult *!uld eattained i& t%e $lainti&& *ere &!rced t! intitute e$arate acti!na#aint t%e $rinci$al and t%e #uarant!r.

PROCEDURE W#EN CREDITOR SUES 52=26

. Sent a-ainst t+e *rinci*a' ; a a rule' t%e credit!r(a) %!ld t%e #uarant!r !nl) a&ter 9ud#(ent %a een!tained a#aint t%e $rinci$al det!r and t%e latter iunale t! $a).

2. Notice to -uarantor o, t+e action ; #uarant!r (ute n!ti&ied ! t%at %e (a) a$$ear' i& %e ! deire' andet u$ de&ene %e (a) *ant t! !&&er

a. 4uaranty a**ears ; "!luntar) a$$earanced!e n!t c!ntitute a renunciati!n !& %i ri#%t t!e1cui!n.

. 4uaranty &oes not a**ear ;

i. e cann!t et u$ t%e de&ene *%ic%') a$$earin# are all!*ed t! %i( ) la*Dand

ii. It (a) n! l!n#er e $!ile &!r %i( t!ueti!n t%e "alidit) !& t%e 9ud#(entrendered a#aint t%e det!r

4. #earin- )e,ore e0ecution can )e issue& a-ainst t+e-uarantor ; a #uarant!r i entitled t! e %eard e&!rean e1ecuti!n can e iued a#aint %i( *%ere %e in!t a $art) in t%e cae in"!l"in# %i $rinci$al.

EFFECTS OF COPROISE 52=6

Co.*ro.ise ; a c!ntract *%ere) t%e $artie' ) (ain#reci$r!cal c!ncei!n' a"!id a liti#ati!n !r $ut an end t! !nealread) c!((enced.

. C!($r!(ie et*een credit!r and $rinci$al det!rene&it t%e #uarant!r ut d!e n!t $re9udice %i(.

2. C!($r!(ie et*een #uarant!r and t%e credit!rene&it ut d!e n!t $re9udice t%e $rinci$al det!r.



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SUB4UARANTORS RI4#T TO EJCUSSION 52=96

Su)-uarantor en@oys t+e )ene,it o, e0cussion 3it+res*ect to:

. Princi$al det!rD and2. 8uarant!r

Reason: e tand *it% re$ect t! t%e #uarant!r !n t%ea(e &!!tin# a t%e latter d!e *it% re$ect t! t%e $rinci$aldet!r

BENEFIT OF DIISION AON4 SEERAL 4UARANTORS

52=?6$% In 3+ose ,a(or a**'ica)'e ;

a. Se"eral #uarant!rD. Onl) !ne det!rDc. G!r t%e a(e det

Cannot )e a(ai'e& o, i, t+ere are:

a. T*! !r (!re det!r !& !ne det' e"en i& t%e)e !und !lidaril)' eac% *it% di&&erent#uarant!rD !r

. T*! !r (!re #uarant!r !& t%e a(e det!r ut

n!t !nl) &!r t%e a(e detc. I& an) !& t%e circu(tance enu(erated in Art.

20=@ %!uld tae $lace' a *!uld t%e ene&it !&e1%auti!n !& t%e det!r> $r!$ert).

2. E0tent o, 'ia)i'ity o, se(era' -uarantors ; @ointo)'i-ation: t%e !li#ati!n t! an*er &!r t%e det idi"ided a(!n# all !& t%e(. T%e #uarant!r are n!tliale t! t%e credit!r e)!nd t%e %are *%ic% t%e) arere$ecti"el) !und t! $a).

E0ce*tions: W%en !lidaril) %a een e1$rel)ti$ulated

Bene,it o, E0cussion a.on- Se(era' 4uarantors:

In !rder t%at t%e #uarant!r (a) e entitled t! t%e ene&it !&di"ii!n' it i n!t reuired t%at %e $!int !ut t%e $r!$ert) !& %ic!-#uarant!r.

Reason: Oli#ati!n !& t%e #uarant!r *it% re$ect t! %i c!-#uarant!r i n!t uidiar) ut direct and d!e n!t de$end at! it !ri#in !n t%e !l"enc) !r in!l"enc) !& t%e latter.

4UARANTORS RI4#T TO SUBRO4ATION 52=76

SUBRO4ATION ; tran&er t! t%e $er!n ur!#ated' t%ecredit *it% all t%e ri#%t t%eret! a$$ertainin# eit%er a#aint t%edet!r !r a#aint t%ird $er!n' e t%e) #uarant!r !r$!e!r !& (!rt#a#e' u9ect t! ti$ulati!n in c!n"enti!nalur!#ati!n.

. Accrua'/ )asis/ an& nature o, ri-+t ; ri#%t !&ur!#ati!n i necear) t! enale t%e #uarant!r t!en&!rce t%e inde(nit) #i"en in Art. 2066

a. Arie ) !$erati!n !& la* u$!n $a)(ent ) t%e

#uarant!r. It i n!t a c!ntractual ri#%tc. T%e #uarant!r i ur!#ated' ) "irtue !& t%e

$a)(ent' t! t%e ri#%t !& t%e credit!r' n!t t%!e!& t%e det!r.

2. W+en ri-+t not a(ai'a)'e ;ince ur!#ati!n i t%e(ean !& e&&ectuatin# t%e ri#%t !& t%e #uarant!r t! erei(ured. It cannot t+ere,ore )e in(o1e& in t+ose



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cases 3+ere t+e -uarantor +as nori-+t to )e rei.)urse&%

EFFECT OF PAYENT BY 4UARANTOR WIT#OUTNOTICE TO DEBTOR 52=86

I& t%e det!r %a alread) $aid t%e credit!r' *%en t%e #uarant!r$a)' t%e det!r can et u$ a#aint t%e #uarant!r t%e de&ene!& $re"i!u e1tin#ui%(ent !& t%e !li#ati!n ) $a)(ent.ence' #uarant!r (ut n!ti&) t%e det!r e&!re (ain#$a)(ent.

Reason: T%e #uarant!r cann!t e all!*ed' t%r!u#% %i !*n&ault !r ne#li#ence t! $re9udice !r i($air t%e ri#%t !r interet

!& t%e det!r.

EFFECT OF PAYENT BY 4UARANTOR BEFOREATURITY 52=>6

De)tors o)'i-ation 3it+ a *erio& ; de(andale !nl) *%ent%e da) &i1ed c!(e.

. T%e #uarant!r *%! $a) e&!re (aturit) i n!t entitledt! rei(ure(ent ince t%ere i n! neceit) &!racceleratin# $a)(ent.

2. A c!ntract !& #uarant) ein# uidiar) in c%aracter't%e #uarant!r i n!t liale &!r t%e det e&!re itec!(e due.

E0ce*tion: T%e det!r *ill e liale i& t%e $a)(ent *a(ade5

a, Wit% %i c!nentD !r, Sueuentl) rati&ied ) %i( +rati&icati!n (a) e

e1$re !r i($lied,

RI4#T OF 4UARANTOR TO PROCEED A4AINST DEBTORBEFORE PAYENT 52=7$6

4enera' ru'e: 8uarant!r %a n! caue !& acti!n a#aint t%edet!r until a&ter t%e &!r(er %a $aid t%e !li#ati!n.

Exceptions:20 enu(erate intance *%en t%e #uarant!r(a) $r!ceed a#aint t%e det!r e"en e&!re t%e $a)(ent.

. W%en %e i ued &!r t%e $a)(entD2. In cae !& in!l"enc) !& t%e $rinci$al det!rD4. W%en t%e det!r %a !und %i(el& t! relie"e %i( &r!(

t%e #uarant) *it%in a $eci&ied $eri!d' and t%i $eri!d%a e1$iredD


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a. An) $r!ceedin# ) t%ecredit!rD and

. A#aint t%e in!l"enc) !& t%e det!r.8uarant!r> re(edie are alternati"e. e %a t%e ri#%t t!c%!!e t%e acti!n t! rin#.

Suit )y 4uarantor a-ainst Cre&itor )e,ore Pay.ent

T%e #uarant)> !r uret)> acti!n &!r releae can !nl) ee1ercied a#aint t%e $rinci$al det!r and n!t a#aint t%ecredit!r.

Reason: Releae !& t%e #uarant!r i($!rt an e1tincti!n in t%e!li#ati!n t! t%e credit!rD it c!nn!te t%ere&!re' eit%er are(ii!n !r n!"ati!n ) ur!#ati!n' and eit%er !$erati!n

reuire t%e credit!r> aent &!r it "alidit).

2= an& 2=7$ Distin-uis+e&

2=

+Ri#%t !& 8uarant!r t!Rei(ure(ent a&ter

Pa)(ent,

2=7$

+Ri#%t !& 8uarant!r t!Pr!ceed a#aint 7et!r e"en

e&!re $a)(ent,

Pr!"ide &!r t%e en&!rce(ent!& t%e ri#%t !& t%e #uarant!r

a#aint t%e det!r a&ter %e %a$aid t%e det / #i"e a ri#%t !&acti!n a&ter $a)(ent

Pr!"ide &!r t%e $r!tecti!ne&!re %e %a $aid ut a&ter

%e %a ec!(e liale / #i"ea $r!tecti"e re(ed) e&!re$a)(ent

Sutanti"e ri#%t Preli(inar) re(ed)

8i"e a ri#%t !& acti!n' *%ic%'*it%!ut t%e $r!"ii!n !& t%e!t%er (i#%t e *!rt%le

Re(ed) #i"en ee t!!tain &r!( t%e #uarant!r:releae &r!( t%e #uarant) !rt! de(and a ecurit) t%at

%all $r!tect %i( &r!( an)$r!ceedin# ) t%e credit!rand &r!( t%e dan#er !&in!l"enc) !& t%e det!r.;

Reco(ery o, Surety a-ainst In&e.nitor e(en )e,orePay.ent

. In&e.nity a-ree.ent ,or t+e )ene,it o, surety ;inde(nit) a#ree(ent i n!t &!r t%e ene&it !& t%ecredit!r ut &!r t%e ene&it !& t%e uret).

2. In&e.nity a-ree.ent .ay )e a-ainst actua' 'oss as3e'' as 'ia)i'ity ;uc% a#ree(ent i en&!rceale and

n!t "i!lati"e !& an) $ulic $!lic)a. In&e.nity a-ainst 'oss ; inde(nit!r *ill n!t

e liale until t%e $er!n t! e inde(ni&ied(ae $a)(ent !r utain l!D

. In&e.nity a-ainst 'ia)i'ity ; inde(nit!r>liailit) arie a !!n a t%e liailit) !& t%e$er!n t! e inde(ni&ied %a arien *it%!utre#ard t! *%et%er !r n!t %e %a u&&ered actuall!.

W%ere t%e $rinci$al det!r are i(ultane!ul) t%ea(e $er!n *%! e1ecuted t%e inde(nit) a#ree(ent'

t%e $!iti!n !ccu$ied ) t%e( i t%at !& a $rinci$aldet!r and inde(nit!r at t%e a(e' and t%eir liailit)ein# 9!int and e"eral.

4UARANTOR OF A T#IRD PERSON AT REHUEST OFANOT#ER 52=726



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T%e #uarant!r *%! #uarantee t%e det !& anaentee at t%e reuet !& an!t%er %a a ri-+t to c'ai.rei.)urse.ent' a&ter ati&)in# t%e det &r!(5

. T%e $er!n *%! reueted %i( t! e a #uarant!rD2. T%e det!r

B% BETWEEN CO4UARANTORS

RI4#T TO CONTRIBUTION OF 4UARANTOR W#O PAYS52=76

Presu.*tion o, @oint 'ia)i'ity o, se(era' -uarantors 3+ent+ere are:

. T*! !r (!re #uarant!rD2. Sa(e det!rD4. Sa(e det

E,,ect: Eac% i !und t! $a) !nl) %i $r!$!rti!nate %are.

W+en Art% 2=7 A**'ica)'e:

. W%en !ne #uarant!r %a $aid t%e det t! t%e credit!rD2. Pa)(ent ) uc% #uarant!r (ut %a"e een (ade5

a. B) "irtue !& a 9udicial de(andD !r. Becaue t%e $rinci$al det!r i in!l"entD

4. 8uarant!r *%! $aid i eein# rei(ure(ent &r!(eac% !& %i c!-#uarant!r t%e %are *%ic% i$r!$!rti!natel) !*in# %i(.

E,,ect o, Inso'(ency o, Any 4uarantor:

Fo''o3s t+e ru'e on so'i&ary o)'i-ations :T%e %are !& t%ein!l"ent #uarant!r %all e !rne ) t%e !t%er includin# t%e$a)in# #uarant!r in t%e a(e 9!int $r!$!rti!n.

Accrua' an& Basis o, Ri-+t:

T%e ri#%t !& rei(ure(ent i acuired i$! 9ure *it%!ut need!& an) $ri!r cei!n &r!( t%e credit!r ) t%e #uarant!r.

DEFENSES AAILABLE TO CO4UARANTORS 52=796

4enera' ru'e: All de&ene *%ic% t%e det!r *!uld %a"einter$!ed a#aint t%e credit!r.

Exception: T%!e *%ic% cann!t e tran(itted &!r ein#$urel) $er!nal t! t%e det!r.

LIABILITY OF SUB4UARANTOR IN CASE OFINSOLENCY OF 4UARANTOR 52=7?6

Su-#uarant!r i liale t! t%e c!-#uarant!r in t%e a(e(anner a t%e #uarant!r *%!( %e #uaranteed in cae !& t%ein!l"enc) !& t%e #uarant!r &!r *%!( %e !und %i(el& au-#uarant!r.

CAUSES OF EJTIN4UIS#ENT OF 4UARANTY 52=76

4enera' ru'e: 8uarant) ein# acce!r)' it i e1tin#ui%ed*%en $rinci$al !li#ati!n i e1tin#ui%ed' t%e caue !& *%ic%are5

. Pa)(ent !r $er&!r(anceD2. L! !& t%e t%in# dueD4. C!nd!nati!n !r re(ii!n !& t%e detD


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a. Annul(entD. Recii!nDc. Gul&ill(ent !& a re!lut!r) c!nditi!nD andd. Precri$ti!n

Exception: T%e #uarant) itel& (a) e directl) e1tin#ui%edalt%!u#% t%e $rinci$al !li#ati!n till re(ain uc% a in t%ecae !& t%e releae !& t%e #uarant!r (ade ) t%e credit!r.

ateria' A'teration o, Princi*a' Contract ; an) a#ree(entet*een t%e credit!r and t%e $rinci$al det!r *%ic% eentiall)"arie t%e ter( !& t%e $rinci$al c!ntract *it%!ut t%e c!nent !&t%e uret)' *ill releae t%e uret) &r!( liailit).

Suc% (aterial alterati!n *!uld c!ntitute a no(ation orc+an-e o, t+e *rinci*a' contract/ 3+ic+ i c!neuentl)e1tin#ui%ed. U$!n uc% e1tin#ui%(ent' t%e acce!r)c!ntract t! #uarant) i al! ter(inat!r and t%e #uarant!rcann!t e %eld liale !n t%e ne* c!ntract t! *%ic% %e %a n!t#i"en %i c!nent.

W+en A'teration ateria' ; *%ere uc% c%an#e *ill %a"e t%ee&&ect !& (ain# t%e !li#ati!n (!re !ner!u.

I($!e a ne* !li#ati!n !r added urden !n t%e $art)$r!(iin#D !r

. Tae a*a) !(e !li#ati!n alread) i($!ed'

c%an#in# t%e le#al e&&ect !& t%e !ri#inal c!ntract andn!t (erel) t%e &!r( t%ere!&.

RELEASE BY CONEYANCE OF PROPERTY 52=776

4enera' ru'e: Pa)(ent i (ade in (!ne).

Exception:An) utitute $aid in lieu !& (!ne) *%ic% iacce*te& )y t+e cre&itor e1tin#ui%e t%e !li#ati!n and inc!neuence' t%e #uarant).

In case o, e(iction: E"icti!n re"i"e t%e $rinci$al !li#ati!nut n!t t%e #uarant).

Reason: T%e credit!r> acti!n a#aint t%e det!r i &!r e"icti!nand t%i i di&&erent &r!( *%at t%e #uarant!r #uaranteed.

RELEASE OF 4UARANTOR WIT#OUT CONSENT OFOT#ERS 52=786

E,,ect: T%e releae ene&it all t! t%e e1tent !& t%e %are !&t%e #uarant!r releaed.

Reason:A releae (ade ) t%e credit!r in &a"!r !& !ne !& t%e#uarant!r *it%!ut t%e c!nent !& t%e !t%er (a) $re9udice t%e

!t%er %!uld a #uarant!r ec!(e in!l"ent.

RELEASE BY EJTENSION OF TER 4RANTED BYCREDITOR TO DEBTOR 52=7>6

Re'ease Wit+out Consent o, 4uarantor: Credit!r #rant ane1teni!n !& ti(e t! t%e det!r *it%!ut t%e c!nent !& t%e#uarant!r.

E,,ect: 8uarant!r i dic%ar#ed &r!( %i undertain#.

Reason: Neceit) !& a"!idin# !& $re9udice t! t%e #uarant!r.

T%e det!r (a) ec!(e in!l"ent durin# t%e e1teni!n' t%ude$ri"in# t%e #uarant!r !& %i ri#%t t! rei(ure(ent.

It i uni($!rtant *%et%er t%e e1teni!n #i"en %a actuall)$r!"ed $re9udicial !r n!t t! t%e #uarant!r !r uret). N!r d!e it(atter &!r %!* %!rt a $eri!d t%e ti(e !& $a)(ent %a eene1tended.



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E1teni!n (ut e aed !n !(e ne*a#ree(ent et*een t%e credit!r and t%e $rinci$al det!r )"irtue !& *%ic% t%e credit!r de$ri"e %i( !& %i clai(.

. W+ere o)'i-ation *aya)'e in insta''.ents: *%ere a#uarant!r i liale &!r di&&erent $a)(ent54enera' ru'e:An e0tension o, ti.e to one ore .ore*ill n!t a&&ect t%e liailit) !& t%e uret) &!r t%e !t%er.

Exception: W%en t%e un$aid alance %a ec!(eaut!(aticall) due ) "irtue !& an accelerati!n claue&!r &ailure t! $a) an intall(ent.

E,,ect o, e0ce*tion: T%e act !& t%e credit!r e1tendin#t%e $a)(ent !& aid intall(ent' *it%!ut t%e #uarant!r>

c!nent' dic%ar#e t%e

Documents

Security Transactions 2006