Definition of Pledge
Pledge refers to a type of security agreement where a debtor (referred to as the pledgor) provides a lender (referred to as the pledgee) with possession of a specific personal property as collateral for a loan or other obligation. The personal property pledged is also referred to as the pledge or the security.
Scope of Pledge
The scope of pledge is wide and can include various types of personal property such as jewelry, stocks, bonds, shares, or any other movable asset that has value. Pledge can be used in various contexts, such as securing loans, credit facilities, or other obligations.
The basic idea behind a pledge is that the pledgor is providing the pledgee with security for the performance of a particular obligation. If the pledgor defaults on the obligation, the pledgee has the right to sell the pledged property to recover the amount owed. The sale proceeds are then used to satisfy the debt, and any surplus is returned to the pledgor.
Pledge is a type of security interest and is governed by various laws and regulations, such as the Uniform Commercial Code in the United States. The rights and obligations of the pledgor and pledgee are set forth in the pledge agreement, which typically includes provisions regarding the value of the property, the repayment terms, and the conditions for default and sale of the property.
Here are some examples of the scope of pledge:
- Collateral for a loan: A borrower may pledge personal property, such as jewelry, stocks or bonds, as collateral for a loan. The lender becomes the pledgee and holds the property as security until the borrower repays the loan. If the borrower defaults, the pledgee may sell the property to recover the amount owed.
- Security for a purchase: A buyer may pledge personal property as security for a purchase, such as a car or a home. The seller becomes the pledgee and holds the property as security until the buyer pays off the purchase price. If the buyer defaults, the seller may sell the property to recover the amount owed.
