a) Define a “pledge‟ and distinguish a pledge from a mortgage
b) Explain the main characteristics of a pledge
ANSWER
a) Distinguishing a pledge from a mortgage
| Pledge | Mortgage |
| This is a pawn | Mortgage is the conveyance of land or assignment of a chattel as security for the payment of debt or the discharge of some other obligation for which it is given. |
| It is the delivery of goods a debtor to a creditor as a security for the amount borrowed or advanced to the debtor | Mortgage involves the use of land as security for a loan. |
| Its salient feature is delivery of possession | There is conveyance of the land to the mortgagee. |
| The creditor acquires possession while the debtor retains ownership | The mortgagor’s right of redemption is a critical component of a mortgage. |
b) Characteristic of a pledge;
- There is delivery of possession from the Pawnor to the Pawnee.
- The right of ownership is the goods pledged as a security remains in the pawnor.
- A pledge is redeemable within six months, with seven days of grace olded.
- If the pledge is destroyed fire, the pawn broker is bound to pay the value of the pledge after deducting the amount of the loan and interest.