Surety(ship): It is a type of security provided by a third party to guarantee the performance of obligations or repayment of debt by the debtor. In this arrangement, the third party, known as the surety, agrees to be liable for the debt or obligation if the debtor fails to fulfill their responsibilities.
Mortgage: It is a type of loan secured by real estate property. The borrower (mortgagor) pledges their property as collateral to the lender (mortgagee) until the loan is fully repaid. If the borrower defaults on the loan, the lender has the right to foreclose the property and sell it to recover the outstanding debt.
Pledge: It is a type of security where movable assets like goods, stocks, or bonds are placed as collateral for a loan. The borrower (pledgor) transfers the possession of the assets to the lender (pledgee) until the loan is repaid. If the borrower defaults, the lender has the right to sell the pledged assets to recover the debt.
Hypothec: It is similar to a mortgage but applies to movable properties instead of real estate. The borrower (hypothecator) pledges movable assets as security to the lender (hypothecatee). If the borrower fails to repay the loan, the lender can sell the pledged assets to settle the debt.
Lien: It is a legal claim or right granted to a creditor over a debtor's property as security for a loan or debt. A lien gives the creditor the right to seize the property and sell it if the debtor defaults on the debt. The creditor has the first right to the proceeds from the sale of the property to satisfy the debt.
Explain the difference between the following:
Surety(ship);
Mortgage;
Pledge;
Hypothec; and
Lien. (5X2=10 marks)
1 answer
1 answer