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(Adopted
at the 14th Meeting of the Standing Committee of the Eighth National
People's Congress on June 30, 1995, and effective as of October
1, 1995)
Chapter
I General Provisions
Article
1
This
Law is enacted for purposes of promoting capital accommodation and
commodity circulation, ensuring the realization of creditors' rights
and developing socialist market economy.
Article
2
In
such economic activities as debit and credit, buying and selling,
carriage of goods and contracting for processing, a creditor who
needs to ensure the realization of his rights in the form of guarantee,
may establish guarantee subject to the provisions of this Law. The
forms of guarantee provided in this law include guarantee, mortgage,
pledge, lien and earnest.
Article
3
Guarantee
activities shall be in conformity to the principle of equality,
voluntariness, fairness, honesty and trustworthiness. This law also
applies to courter-guarantee.
Article
4
A
third person, at the time of tendering guarantee to a creditor for
a debtor, may require the debtor to tender counter guarantee.
Article
5
A
guarantee contract is an accessory contract to a principal contract.
If the principal contract is invalid, the guarantee contract shall
be invalid. Where the guarantee contract stipulates otherwise, such
stipulations shall apply. Where a guarantee contract is confirmed
as invalid and void, the debtor, the guarantor or the creditor,
who commits some mistake, shall, based on his respective mistake,
bear corresponding civil liability.
Chapter
II Guarantee
Section
1 Guarantee and Guarantor
Article
6
"Guarantee"
as the term is used in this Law means an act under which, according
to an agreement between a guarantor and a creditor, the guarantor
shall perform a bebt or bear responsibility as contracted if the
debtor fails to pay the debt.
Article
7
A
legal person, any other organization or a citizen, that has the
ability of discharge of a debt may act as a guarantor.
Article
8
Any
state organ may not act as a guarantor, however, upon approval by
the State Council, those which conduct subloans for the purpose
of using loans from foreign governments or international economic
organizations shall be excluded.
Article
9
Any
institution or social organization of public interests, such as
schools, kindergartens and hospitals, may not act as a guarantor.
Article
10
Any
branch or functionary department of an enterprise as legal person
may not act as a guarantor. A branch of an enterprise as legal person,
which has the power of attorney in writing from the legal person,
may tender guarantee within the authorized limits.
Article
11
No
unit or individual may force financial institutions such as banks
or enterprises to tender guarantee for others. Financial institutions
such as banks or enterprises have the right to refuse any acts forcing
them to tender guarantee for others.
Article
12
In
the case of two or more guarantors to a debt, each guarantor shall
bear guarantee responsibility in proportion to his proper share
of the guarantee as contracted. If no share of guarantee is agreed
upon, the guarantor shall bear joint and several liability; the
creditor may require any of the guarantors to bear full guarantee
responsibility, and each guarantor shall be liable to guarantee
the full realization of creditor's rights. The guarantor who has
already borne guarantee responsibility shall have the right to recover
compensation from the debtor, or require other guarantors who bear
joint and several liability to pay the shares they ought to bear.
Section
2 Guarantee Contract and Guarantee Mode
Article
13
A
guarantor and a creditor shall conclude a guarantee contract in
the form of writing.
Article
14
A
guarantor and a creditor may conclude a separate guarantee contract
relating to a specific principal contract, and also may, within
the maximum amount of claim and through negotiation, conclude one
guarantee contract relating to loan contracts or trade contracts
of a particular commodity, which occur consecutively in a certain
period of time.
Article
15
A
guarantee contract shall include the following particulars:
1.
the category and amount of the principal creditor's right to be
guaranteed;
2.
time limit for the debtor to perform his debt;
3.
mode of guarantee;
4.
scope of guarantee;
5.
duration of guarantee; and
6.
other matters deemed as necessary to be agreed upon by both parties.
A
guarantee contract which does not completely include the particulars
provided in the preceding paragraph, may be added and amended.
Article
16
The
modes of guarantee include:
1.
general guarantee; and
2.
joint and several liability guarantee.
Article
17
A
general guarantee means that, as agreed upon in guarantee contract
by the parties concerned, the guarantor shall bear guarantee responsibility
if the debtor fails to perform his debt.
The
guarantor of a general guarantee may, prior to court proceedings
or arbitration over a dispute concerning the principal contract
and a failure again to pay a debt after a compulsory enforcement
over the debtor's property according to law, refuse to bear guarantee
responsibility to a creditor.
A
guarantor may not execute the right provided in the preceding paragraph
under any of the following circumstances:
1.
in a case of which the change of debtor's address has caused serious
difficulty to the creditor in requiring the debtor to pay his debt;
2.
in a case of which a people's court accepts the debtor's bankruptcy
case and the execution procedures are abated; or
3.
in a case of which the guarantor waives, in written form, his right
provided in the preceding paragraph.
Article
18
A
joint and several liability guarantee means that, as agreed upon
in a guarantee contract by the parties concerned, the guarantor
and the debtor shall bear joint and several liability over a debt.
If the debtor of a joint and several liability guarantee fails to
pay his debt at the expiry of term for execution as stipulated by
the principal contract, the creditor may require the debtor to pay
his debt and also may require the guarantor to bear guarantee responsibility
within the limit of his guarantee.
Article
19
The
parties concerned who make no agreement on the mode of guarantee
or make an ambiguous agreement thereon shall bear guarantee responsibility
in accordance with the mode of a joint and several liability guarantee.
Article
20
Guarantors
of general guarantee or joint and several liability guarantee enjoy
the right of demur of the debtors. If a debtor waives his right
of demur over a debt, the guarantor still has the right to demur.
The right of demur means such right under which the debtor may,
according to legal causes, challenge the claim by the creditor when
the creditor executes his rights.
Section
3 Guarantee Responsibility
Article
21
The
scope of guarantee includes the principal creditor's right as well
as interests, fines for breach of agreement, compensation for loss
and damage and expenses for the realization of creditor's rights.
Where a guarantee contract has otherwise stipulations, such stipulations
shall apply. If the parties make no agreement on the scope of guarantee
or make an ambiguous agreement thereon, the guarantor shall bear
responsibility for all the debts.
Article
22
If,
within the duration of guarantee, a creditor transfers his principal
right to third person according to law, the guarantor shall continue
to bear guarantee responsibility within the original scope of guarantee.
Where a guarantee contract has otherwise stipulations, such stipulations
shall apply.
Article
23
If,
within the duration of guarantee, a creditor allows his debtor to
transfer his debt, the guarantor's consent in writing shall be obtained,
and the guarantor will no longer bear the guarantee responsibility
over those debts transferred without his consent.
Article
24
A
creditor and debtor who agree to modify a principal contract shall
obtain the guarantor's consent in writing. Without his consent in
writing, the guarantor will no longer bear the guarantee responsibility.
If the guarantee contract has otherwise stipulations, such stipulations
shall apply.
Article
25
In
case the guarantor and the creditor of a general guarantee fails
to stipulate the duration of guarantee, the duration of guarantee
shall be six months from the date on which the term for performance
of the principal debt expires. Where, within the duration of guarantee
as contracted and the duration of guarantee as provided in the preceding
paragraph, a creditor did not initiate legal proceedings against
the debtor or apply for arbitration, the guarantor shall be exemption
from his guarantee responsibility; if the creditor has initiated
legal proceedings or applied for arbitration, the provisions concerning
the discontinuance of the limitation of action shall apply to the
duration of guarantee.
Article
26
In
case the guarantor and the creditor of a joint and several liability
guarantee fails to stipulate the duration of guarantee, the creditor
shall have the right to require the guarantor to bear guarantee
responsibility within six months from the date on which the term
for performance of the principal debt expires. Where, within the
duration of guarantee as contracted and the duration of guarantee
as provided in the preceding paragraph, a creditor did not require
the guarantor to bear guarantee responsibility, the guarantor shall
be exemption from his guarantee responsibility.
Article
27
In
the absence of the duration of guarantee, a guarantor who, subject
to the provisions of Article 14 of this Law, tenders guarantee over
creditor's rights occurring consecutively may, at any time, notify
in writing the creditor to terminate the guarantee contract, however,
the guarantor shall bear guarantee responsibility over those rights
occurred prior to the time at which the notification in writing
is delivered to the creditor.
Article
28
Where
there are both guarantee and things guaranteed over one creditor's
right, the guarantor shall bear guarantee responsibility over those
rights beyond the things guaranteed. If the creditor surrenders
the guarantee by things, the guarantor shall be exemption from his
guarantee responsibility within the scope of the creditor's surrender.
Article
29
Where,
without authorization in writhing by the legal person or beyond
the authorized scope, a branch of an enterprise as legal person
concludes a guarantee contract with a creditor, such a contract
shall not be binding or that part beyond the authorized scope shall
not be binding, if the creditor and the enterprise as legal person
have some mistake, they shall bear their corresponding civil liability
according to their respective mistake; if the creditor has no mistake,
the enterprise as legal person shall bear civil liability.
Article
30
Under
one of the following circumstances, the guarantor shall not bear
civil liability: 1. in a case of which the parties to a principal
contract maliciously collude so as to cheat the guarantor to tender
guarantee; or 2. in a case of which the creditor of a principal
contract resorts to such means as deceit and compulsion in making
the guarantor to tender guarantee under the condition against his
true intention.
Article
31
A
guarantor, after bearing his guarantee responsibility, shall have
the right to recover compensation from the debtor.
Article
32
If,
after a people's court takes cognizance of a bankruptcy case filed
by a debtor, a creditor fails to declare his rights, the guarantor
may participate the distribution of bankruptcy property and execute
the right of recourse in priority.
Chapter
III Mortgage
Section
1 Mortgage and Things Mortgaged
Article
33
"Mortgage"
as the term is used in this Law means guarantee under which a debtor
or a third person, without transferring the possession over the
property listed in Article 34 of this Law, places such property
as creditor's rights. When the debtor fails to pay his debt, the
creditor shall have the right, in accordance with the provisions
of this law, to get in priority compensation from the money received
from converting or auctioning and selling of the property. In the
preceding paragraph, the debtor or the third person is the mortgager,
the creditor is the mortgagee and the property served as guarantee
is the things mortgaged.
Article
34
The
following property may be mortgaged:
1.
buildings and other objects fixed on land, which are owned by the
mortgager;
2.
machines, means of transport and other property, which are owned
by the mortgager;
3.
use-right of state -owned land, buildings and other objects fixed
on land, which the mortgager has the right to dispose according
to law;
4.
state-owned machines, means of transport and other property, which
the mortgager has the right to dispose according to law;
5.
the land use-rights of barren mountains, barren valleys, waste hills
and waste sands, which the mortgager has contracted according to
law and the contract offering party agrees on the mortgage;
6.
other property which may be mortgaged according to law.
A
mortgager may mortgage the properties listed in the preceding paragraph
concurrently.
Article
35
The
creditor's rights guaranteed by a mortgager may not exceed the value
of the things mortgaged. If the value of a piece of property, after
being mortgaged, is higher than the creditor's rights guaranteed,
the remaining part may be mortgaged again, however, the remaining
part may not be exceeded.
Article
36
If
a building on the state-owned land acquired according to law is
mortgaged, the use-right of the state-owned land occupied by the
said building shall be mortgaged together. If the use-right of the
state-owned land acquired in the form of leasing is mortgaged, the
buildings on the said state-owned land shall be mortgaged together.
The Land-use right of town (township) and village enterprises may
not be mortgaged individually. If the construction structures such
as workshops of town (township) and village enterprises are mortgaged,
the use-right for the land occupied by such structures shall be
mortgaged together.
Article
37
The
following property may not be mortgaged;
1.
land ownership;
2.
use-rights of such collectively-owned land as farmland, homestead,
land allotted for personal needs and hilly land allotted for private
use, however, those provided in Item 5 of Article 34 and Paragraph
3 of Article 36 of this Law shall be excluded;
3.
education facilities, medical and public health facilities and other
facilities for public interests of such institutions and social
organizations as schools, kindergartens and hospitals;
4.
property with unclear ownership and use-right or dispute;
5.
property which is attached, arrested or supervised and controlled
according to law; or
6.
other property which may not be mortgaged according to law.
Section
2 Mortgage Contract and Registration of Things Mortgaged
Article
38
A
mortgager and a mortgagee shall conclude a mortgage contract in
the form of writing.
Article
39
A
mortgage contract shall include the following particulars:
1.
the category and amount of the principal creditor's right to be
guaranteed;
2.
the term for the debtor to pay his debt;
3.
designation, amount, quality condition, location, status of ownership
and status of use-rights of the things mortgaged;
4.
scope of guarantee; and
5.
other matters and items which the parties deem as necessary to be
included.
A
mortgage contract which fails to include completely the particulars
provided in the preceding paragraph may be added and amended.
Article
40
In
making a mortgage contract, the mortgagee and mortgager may not
stipulate in the contract that the ownership over the things mortgaged
would be transferred to be owned by the creditor if the mortgagee
was not paid after the expiry of the term for performance of the
debt.
Article
41
A
party which uses the property listed in Article 42 of this Law as
mortgage shall complete registration of things mortgaged, the mortgage
contract shall enter into force from the date of registration.
Article
42
The
departments which handle registration of things mortgaged are as
follows:
1.
where the use-right of land on which there is no immovable object
is mortgaged, it is the land administration department which issues
the land use-right certificate;
2.
where urban real estate or construction structures such as workshops
of town (township) and village enterprises are mortgaged, it is
the department designated by the local people's government at or
above the county level;
3.
where forest and trees are mortgaged, it is the competent forestry
administrative department at or above the county level;
4.
where aircraft, ship or transport vehicle is mortgaged, it is the
registration department of such means of transport; and
5.
where equipment or other movables of enterprises is mortgaged, it
is the administrative department for industry and commerce in the
place where such property is located.
Article
43
Where
the parties concerned use other property as mortgage, registration
of things mortgaged may voluntarily be completed, and in this case,
the mortgage contract shall come into force on the date of signing.
Parties concerned who fail to complete registration of things mortgaged
may not challenge the third person. Where the parties apply for
registration of things mortgaged, the registration department is
the notary department in the place where the mortgagor is located.
Article
44
At
the time of applying for registration of things mortgaged, the following
documents or their photocopies shall be submitted to the registration
department; 1. The principal contract and mortgage contract; and
2. certificate of ownership or use-right over the things to be mortgaged.
Article
45
The
materials registered by the registration departments shall be allowed
to be consulted, taken note of or photocopied.
Section
3 The Effect of Mortgage
Article
46
The
scope of a guarantee by mortgage includes the principal creditor's
right as well as interests, fines for breach of agreement, compensations
for loss and damage and expenses for the realization of mortgage.
Where a mortgage contract has otherwise stipulations, such stipulations
shall apply.
Article
47
Where,
upon the expiration of the term for performance of the debt, the
things mortgaged are arrested by a people's court according to law
due to the failure of the debtor in performing his debt, the mortgagee
shall have the right, from the date of arrest, to collect naturally
accrued yields arising from the things mortgaged as well as the
statutory accrued interests which the mortgager may collect from
the things mortgaged. If the mortgagee fails to notify the genuine
facts of arresting the things mortgaged to the liable person who
shall pay the statutory accrued interests, the force of mortgage
shall not be extended to such naturally accrued yields. The naturally
accrued yields mentioned in the preceding paragraph shall be used
to write off the expenses for collecting such naturally accrued
yields in priority.
Article
48
A
mortgager who gives his property already leased out as mortgages
shall advise the leasee thereof in writing, and the original leasing
contract shall continue to be valid.
Article
49
A
mortgager who, in the course of mortgage, assigns the things mortgaged
which are registered shall advise the mortgagee and inform the assignee
on the condition that the assigned things have already been mortgaged;
if the mortgager fails to advise the mortgagee or fails to inform
the assignee, the act of assignment shall be invalid and void. Where
the price money of things mortgaged assigned is apparently lower
than their value, the mortgagee may require the mortgager to tender
corresponding guarantee; If the mortgager fails to tender, the things
mortgaged may not be assigned. The money received by the mortgager
from assignment of the things mortgaged shall compensate in priority
the creditor's rights guaranteed to the mortgagee or be deposited
at the third person agreed with the mortgagee, that part in excess
of the creditor's rights is owned by the mortgager, and the part
in shortage shall be paid by the debtor.
Article
50
A
mortgage may not be separated from the creditor's rights and transferred
individually, or act as guarantee for other creditor's rights.
Article
51
Where
the act of a mortgager is sufficient to make the value of the things
mortgaged decrease, the mortgagee has the right to require the mortgager
to stop his act. When the value of things mortgaged decreases, the
mortgagee has the right to require the mortgager to restore the
value of the things mortgaged, or to tender guarantee which matches
the decreased value. If the mortgager is not to blame for the value
decrease of things mortgaged, the mortgagee could require the mortgager
to tender guarantee only within the scope of the compensation obtained
for loss and damage. The part of value not decreased shall continue
to act as the guarantee for the creditor's rights.
Article
52
A
mortgage exists concurrently with the creditor's rights so guaranteed,
and if the creditor's rights cease to exist, so cease to exist the
mortgage.
Section
4 Realization of Mortgage
Article
53
A
mortgagee who is not compensated upon the expiration of the term
for performance of the debt may, through agreement with the mortgager,
be compensated from the money received from converting the things
mortgaged into cash or from auctioning and selling of the things
mortgaged, and if no agreement is reached, the mortgagee may file
a suit in a people's court. After the things mortgaged are converted
into cash or auctioned or sold the money in excess of the amount
of creditor's rights shall be owned by the mortgager, and the part
in shortage shall be paid by the debtor.
Article
54
Where
one piece of property is mortgaged to two or more creditors, the
money received from auction or sale of the things mortgaged shall
be used for compensation according to the following provisions:
1.
where the mortgage contracts come into force through registration,
it shall be distributed according to the registration order of the
things mortgaged; if the order is the same, it shall be distributed
according to the percentage of creditor's rights; and
2.
where the mortgage contracts come into force on the date of signing,
if the things mortgaged have been registered, it shall be distributed
according to the provisions of Item 1 of this Article; if such things
are not registered, it shall be distributed according to the time
order of the entry into force of these contracts, if the order is
the same, it shall be distributed according to the percentage of
creditor's rights. Those that the things mortgaged are already registered
shall have the priority in getting compensation than those not registered.
Article
55
After
a mortgage contract of urban real estate is signed, the newly constructed
buildings on this land do not fall within the things mortgaged.
When the mortgaged real estate needs to be auctioned, such newly
constructed buildings may be auctioned together with the things
mortgaged, however, the mortgagee shall not have the priority in
getting compensation from the money received from auction of such
newly constructed buildings. If the use-right of a contracted waste
land is mortgaged according to the provisions of this Law or the
use-right of the land occupied by construction structures such as
workshops of town (township) and village enterprises are mortgaged,
after the realization of mortgage, the collective ownership and
usage purpose of the land may not be changed without going through
legal procedures.
Article
56
The
mortgagee shall have the right of priority for compensation from
the money received from auctioning of the use-right of allotted
state-owned land after payment equivalent to the amount payable
as the transfer of land use-right according to law.
Article
57
A
third person who guarantees by mortgage for a debtor shall have
the right over the debtor for compensation after the realization
of mortgage.
Article
58
A
mortgage shall cease to exist with the disappearance of the things
mortgaged, however, compensation received from the disappearance
thereof shall be served as mortgaged property.
Section
5 Mortgage of Maximum Amount
Article
59
Mortgage
of maximum amount as the term is used in this Law means that, as
agreed upon by a mortgager and a mortgagee and within the maximum
amount of creditor's rights, the things mortgaged are served as
guarantee to creditor's rights occurring consecutively within a
certain period of time.
Article
60
A
borrowing contract may be accompanied by a mortgage contract of
maximum amount. A contract signed by a creditor and a debtor on
a particular commodity occurring transactions consecutively in a
certain period of time may be accompanied by a mortgage contract
of maximum amount.
Article
61
Creditor's
rights of a principal contract with mortgage of maximum amount may
not be transferred.
Article
62
Apart
from the provisions of this section, other provisions of this Chapter
shall also apply to mortgage of maximum amount.
Chapter
IV Pledge
Section
1 Pledge of Movables
Article
63
Pledge
of movables as the term is used in this Law means guarantee under
which the debtor or a third person transfers his movables to be
possessed by the creditor, and uses such movables as creditor's
rights. If the debtor fails to pay the debt, the creditor has the
right, in accordance with the provisions of this Law, to get compensation
in priority from the money received from converting such movables
into cash or from auctioning and selling such movables. Subject
to the provisions in the preceding paragraph, the debtor or the
third person is a pledger, the creditor is a pledger, and the movables
so transferred are the things pledged.
Article
64
A
pledger and a pledgee shall conclude a pledge contract in a written
form. A pledge contract shall enter into force from the time when
the things pledged are transferred to be possessed by the pledgee.
Article
65
A
pledge contract shall include the following particulars:
1.
category and amount of the principal creditor's right to be guaranteed;
2.
time limit for the debtor to pay his debt;
3.
name, quantity, quality and descriptions of the things pledged;
4.
scope of the guarantee;
5.
time for the transfer and delivery of the things pledged; and
6.
other matters and items deemed by the parties as necessary to be
included.
A
pledge contract which fails to completely include the particulars
provided in the preceding paragraph may be added and amended.
Article
66
A
pledger and a pledgee may not stipulate in their contract that the
ownership over the things pledged would be transferred to the pledgee
if the pledgee is not fully compensated and paid upon the expiration
of the term for performance of the debt.
Article
67
The
scope of guarantee by pledge includes the principal creditor's right
as well as interests, fine for breach of agreement, compensation
for loss and damage, maintenance costs of the things pledged and
expenses for the realization of the pledge. Where a pledge contract
has otherwise stipulations, such stipulations shall apply.
Article
68
A
pledgee has the right to collect the derivatives of the hypothecated
assets. Should there be other arrangements in the hypothecation
contract, those arrangements shall be followed instead. The derivative
refferred to in the preceding paragraph shall first be used to write
off the expenses for collecting the derivatives.
Article
69
A
pledgee shall be liable to properly keep and maintain the things
pledged. If the things pledged are lost or damaged due to improper
maintenance, the pledgee shall bear civil liability. If a pledgee
can not properly keep and maintain the things pledged, which might
cause disappearance of or damage to them, the pledger may require
the pledgee to deposit the things pledged, or require to clear off
the creditor's rights in advance and to return the things pledged.
Article
70
Where
the things pledged exist the probability of loss, damage or apparent
decrease in value, which is sufficient to harm the rights of the
pledgee, the pledgee may require the pledger to tender corresponding
guarantee. If the pledger fails to tender, the pledgee may auction
or sell the things pledged, and make a agreement with the pledger
that the money received from auction or sale shall be used to pay
in advance the creditor's rights so guarantee or deposit at the
third person agreed upon with the pledger.
Article
71
Where
the debtor performs his debt at the expiration of the term for performance
of the debt or the pledger pays in advance the creditor's rights
so guaranteed, the pledgee, shall return the things pledged. A pledgee
who is not paid at the expiration of the term for performance of
the debt may, by agreement with the pledger, convert the things
pledged into cash or auction or sell the things pledged. After the
things pledged are converted into cash or auctioned off or sold,
the proportion of the money in excess of the amount of creditor's
rights shall be owned by the pledger, and the proportion in shortage
shall be paid by the debtor.
Article
72
A
third person who tenders guarantee by pledge for the debtor shall,
after the pledgee has realized his rights of pledge, have the right
to get compensation from the debtor.
Article
73
A
pledge shall cease to exist along with the disappearance of the
things pledged. The compensation received from such disappearance
shall be served as pledged property.
Article
74
A
pledge exists together with creditor's rights guaranteed. At the
time the creditor's rights cease to exist, the pledge shall also
cease to exist.
Section
2 Pledge of Rights
Article
75
The
following rights may be pledged:
1.
draft, cheque, promissory notes, bonds, deposit certificates, warehouse
receipt and bills of lading;
2.
shares and stocks, which are duly transferable according to law;
3.
property rights in the exclusive use right of trademark, patent
right and the copyrights, which are transferable according to law;
and
4.
other rights which may be pledged according to law.
Article
76
Where
drafts, cheques, promissory notes, bonds, deposit certificates,
warehouse receipts or bills of lading are used as pledge, the certificates
of right shall be delivered to the pledgee within the time limit
as contracted. The pledge contract shall come into force on the
date of delivery of such certificates.
Article
77
Where
drafts, promissory notes, cheques bonds, deposit certificates, warehouse
receipts or bills of lading, on which the date of cashing or taking
delivery of goods is marked, are used as pledge, and if such date
of cashing or taking delivery of goods of such drafts, promissory
notes, cheuqes, bonds, deposit certificates, warehouse receipts
or bills of lading is earlier than the time limit for performance
of the debt, the pledgee may cash or taking delivery of goods prior
to the expiration of the time limit for performance of the debt,
and by agreement with the pledger, use the amount so cashed or goods
taken delivery of to pay in advance the creditor's rights guaranteed
or deposit at the third person agreed upon with the pledger.
Article
78
Where
stocks which are transferable according to law are used as pledge,
the pledger and the pledgee shall conclude a written contract and
complete pledge registration with the securities registration organization.
A pledge contract shall come into force on the date of registration.
Stocks, once used as pledge, may not be transferred, however, those
consented through negotiation by the pledger and the pledgee may
be transferred, the money received from such transfer by the pledger
shall be used to pay in priority the creditor's rights so guaranteed
to the pledgee or be deposited at the third person agreed upon with
the pledgee. Where shares of limited liability companies are used
as pledge, the relevant provisions concerning shares transfer of
the Company Law shall apply thereto. The pledge contract shall come
into force from the date on which the shares pledge is recorded
in the name list of shareholders.
Article
79
Where
the property right in the exclusive use rights of trademarks, the
patent rights or the copyrights, which is transferable according
to law, is used as pledge, the pledger and the pledgee shall conclude
a written contract and complete pledge registration with their respective
adminstrative department. The pledge contract shall come into force
on the date of registration.
Article
80
After
the right provided in Article 79 of this Law is used as pledge,
the pledger may not transfer or license others to use them, however,
those consented through negotiation by the pledger and the pledgee
may transferred or licensed to others for use. The transfer remuneration
and royalties received by the pledger shall be used to pay in advance
the creditor's rights so guaranteed to the pledgee or be deposited
at the third person agreed upon with the pledgee.
Article
81
Apart
from the provisions of this Section, the provisions of Section 1
of this Chapter shall apply to the pledge of rights.
Chapter
V Lien
Article
82
"Lien"
as the term is used in this Law means that, subject to the provisions
of Article 84 of this law, a creditor possesses the movables of
the debtor as contracted, and if the debtor fails to pay his debt
within the term as contracted, the creditor shall have the right
to keep lien of such property in accordance with the provisions
of this Law, and take the priority in compensation from the money
received from converting such property into cash or from auctioning
off and selling such property.
Article
83
The
scope of guarantee by lien covers the principal creditor's right,
as well as interests, fines for breach of agreement, compensation
for loss and damage, maintenance costs of things under lien and
expenses for the realization of the lien.
Article
84
With
respect to the creditor's rights arising from maintenance contract,
transport contract, processing and consignment contract, if the
debtor fails to pay his debt, the creditor shall have the right
of lien.
The
provisions of the preceding paragraph shall apply to other contracts
which are subject to liens as provided by law.
The
parties may stipulate in the contract the things which may not be
under lien.
Article
85
If
a piece of property under lien is divisible thing, the value of
the thing under lien shall be equivalent to the amount of a debt.
Article
86
The
lienor shall be liable to properly maintain and keep the things
under lien. If the loss of or damage to the things under lien is
caused due to improper maintenance and storage, the lienor shall
bear civil liability.
Article
87
A
creditor and a debtor shall stipulate in a contract that, after
the creditor takes lien of property, the debtor shall perform his
debt within a term not less than two months. If the creditor and
the debtor fail to make such stipulations in the contract, the creditor
shall, after taking lien of the debtor's property, determine a term
longer than two months and notify the debtor to perform his debt
in that term.
If
the debtor fails to perform his debt as scheduled, the creditor
may, by agreement with the debtor, convert the things under lien
into cash or auction off and sell the things under lien.
After
the conversion into cash of the things under lien or auction and
sale of such things, the proportion of money in excess of the creditor's
right shall be owned by the debtor, the proportion in shortage shall
be paid by the debtor.
Article
88
A
right of lien ceases to exist under the following reasons:
1.
where the creditor's right ceases to exist; or
2.
where the debtor tenders separate guarantee which is accepted by
the creditor.
Chapter
VI Earnest
Article
89
The
parties concerned may stipulate that one party pays earnest as a
guarantee for the creditor's rights to the other party. After the
debtor pays his debt, such earnest shall be converted as the amount
of price or be returned. The party which pays such earnest shall,
if failing to perform his debt as contracted, have no right to require
for the return of the earnest; and the party which accepts earnest
shall, if failing to perform his debt as contracted, return two
times of the earnest.
Article
90
Earnest
shall be stipulated in a written form. The parties concerned shall
also stipulate in the earnest contract the term for payment of earnest.
An earnest contract shall come into force from the date on which
the earnest is actually paid.
Article
91
The
amount of earnest shall be stipulated by the parties, but may not
exceed 20 percent of the amount of the subject-matter of the principal
contract.
Chapter
VII Supplementary Provisions
Article
92
"Immovables"
as the term is used in this Law means land as well as the things
fixed on the land such as buildings and forest and trees.
"Movables"
as the term is used in this Law means the things other than the
immovables.
Article
93
For
the purpose of this Law, guarantee contract, mortgage contract,
pledge contract or earnest contract may be a written contract which
is separately concluded, including letters and mail and facsimiles
of guarantee nature among the parties concerned, and also may be
the guarantee clauses in the principal contract.
Article
94
To
convert into cash or sell the things mortgaged, things pledged or
things under lien, the market price shall be taken as a reference.
Article
95
This
Law shall enter into force on October 1, 1995.
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