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Guarantee Law of the People's Republic of China
2004-10-27

Adopted at the 14th Meeting of the Standing Committee of the Eighth National People's Congress on June 30, 1995, promulgated by Order No.50 of the President of the People's Republic of China on June 30, 1995, and effective as of October 1, 1995


Contents
Chapter I General Provisions
Chapter II Guaranty
Section 1 Guaranty and Guarantor
Section 2 Contract of Guaranty and Mode of Guaranty
Section 3 Liability of Guaranty
Chapter III Mortgage
Section 1 Mortgage and Gage
Section 2 Contract of Mortgage and Mortgage Registration
Section 3 Effect of Mortgage
Section 4 Realization of Mortgage
Section 5 Mortgage of Maximum Amount
Chapter IV Pledge
Section 1 Pledge of Movables
Section 2 Pledge of Rights
Chapter V Lien
Chapter VI Deposit
Chapter VII Supplementary Provisions


Chapter I General Provisions

Article 1 This Law is formulated for the purpose of promoting the capital
flow and commodity circulation, safeguarding the realization of obligatory
right, and developing the socialist market economy.

Article 2 In such economic activities as loans, sales, goods freight and
hire of processing work, etc., where the creditor needs to safeguard the
realization of his obligatory right by the way of guarantee, a guarantee may be
established in accordance with the provisions of this Law.
The modes of guarantee provided for in this Law shall be guaranty, mortgage,
pledge, lien and deposit.

Article 3 In activities of guarantee, the principle of equality,
voluntariness, fairness and good faith shall be complied with.

Article 4 When a third party offers the creditor a guarantee on behalf of
the debtor, he may require the debtor to offer a counterguarantee.
The provisions on guarantee of this Law shall be applicable to
counter-guarantee.

Article 5 A guarantee contract shall be an accessory contract to the master
contract. Where the master contract is invalid, the guarantee contract shall
also be invalid. Where an agreement is otherwise reached in the guarantee
contract, that agreement shall prevail.
Where a guarantee contract is affirmed to be invalid, the debtor, surety or
creditor is in fault, they shall respectively bear the relevant civil liability
according to their own faults.GO TO TOP


Chapter II Guaranty

Section 1 Guaranty and Guarantor

Article 6 In this Law, guaranty means that the guarantor and the creditor
agree that, when the debtor fails to perform his debt, the guarantor will
perform the debt or bear the liability in accordance with the agreement.

Article 7 A guarantor may be a legal person, other organization or a
citizen who has ability to discharge of debts on behalf of others.

Article 8 The state administrative departments shall not be a guarantor,
unless they, with the approval of the State Council, transfer loans for the
purpose of using the loans of foreign governments or international
organizations.

Article 9 Such institutions and social organizations as schools,
kindergartens and hospitals, etc., which are established for the purpose of
public interest shall not be a guarantor.

Article 10 A branch or functional department of an enterprise as legal
person shall not be a guarantor.
If a branch of an enterprise as legal person has been delegated in writing
by the legal person, it may offer the guaranty within the delegation extent.

Article 11 No organization or individual may oblige enterprises or
financial institutions such as a bank to offer guaranty for others; enterprises
and financial institutions such as a bank shall have the right to refuse to
offer guaranty for others when they are obliged to.

Article 12 Where there are two or more guarantors for the same debt, the
guarantors shall, according to their own guaranty shares agreed in the guaranty
contract, bear the guaranty liability. In case of no agreement on the guaranty
shares, the guarantors shall bear the joint liability. Thus the creditor may
demand any of the guarantors to bear the entire guaranty liability, and any of
the guarantors shall bear the obligation to guarantee the entire realization of
the obligatory right. The guarantor who has borne the guaranty liability shall
be entitled to claim repayment from the debtor, or to demand other guarantors
bearing the joint liability to satisfy him their shares that they shall bear.

Section 2 Guaranty Contract and Guaranty Mode

Article 13 The guarantor and creditor shall enter into a guaranty contract
in written form.

Article 14 The guarantor and creditor may enter into a guaranty contract
respectively as for a single master contract, and may also, within the maximum
obligatory right amount as for a loan contract occurred continuously during a
certain period or a commodity trade contract, enter into a guaranty contract.

Article 15 A guaranty contract shall contain the following contents:
1. the categories and amount of a master obligatory right guaranteed;
2. the time limitation to perform the debt by the debtor;
3. the guaranty mode;
4. the scope guaranteed by the guaranty;
5. the time period of guaranty; and
6. other items which the two parties consider necessary to agree.
If a guaranty contract has the contents prescribed in the proceeding
paragraph incomplete, it may be supplemented.

Article 16 The guaranty mode contains:
1. the general guaranty; and
2. the joint liability guaranty.

Article 17 That the parties in a guaranty contract agree that, when the
debtor cannot perform the debt, the guaranty liability is to be borne by the
guarantor, is the general guaranty.
The guarantor of a general guaranty may, without trial or arbitration on the
disputes of a master contract, and before the debt cannot be performed yet with
compulsory enforcement on the debtors' property according to the law, refuse to
bear the guaranty liability for the creditor.
When there is any one of the following circumstances, the guarantor shall
not exercise the right prescribed in the proceeding paragraph:
1. the address of the debtor has changed, so that it becomes a major
difficulty for the creditor to demand him to perform the debt;
2. the people's court accepting a debtor's bankruptcy case, orders
suspension of execution procedure; or
3. the guarantor abandons the right described in the proceeding paragraph in
written form.

Article 18 That the parties in a guaranty contract agree that the guarantor
and debtor bear the joint liability on a debt, is the joint liability guaranty.
If the debtor of a joint liability guaranty cannot perform the debt at the
date of expiration of the debt performance time limitation prescribed in the
master contract, the creditor may demand the debtor to perform the debt, and may
also demand the guarantor to bear the guaranty liability within the extent of
guaranty.

Article 19 If no agreement or the agreement is not clear on the guaranty
mode by the parties, the guaranty liability shall be borne according to the
joint liability guaranty.

Article 20 The guarantor of a general guaranty and joint liability guaranty
shall be entitled to have the counterplead right of the debtor. If the debtor
abandons his counterplead right, the guarantor shall still be entitled to have
right to counterplead.
The counterplead right means that the right of, when the creditor exercises
his obligatory right, the debtor according to legal reasons executing the
petition right against the creditor.

Section 3 Guaranty Liability

Article 21 The guaranteed scope of a guaranty concludes the master
obligatory right and its interest, contractual fine, damage compensation and
expense of credit realization. If there is an agreement otherwise in the
guaranty contract, it shall be complied with.
If no agreement or the agreement is not clear on the guaranteed scope of a
guaranty by the parties, the guarantor shall bear the liability to the entire
debt.

Article 22 During the time period of guaranty, where the creditor assigns
the master obligatory right to a third party according to the law, the guarantor
continues to bear the guaranty liability within the original guaranteed scope of
the guaranty. If there is an agreement otherwise in the guaranty contract, it
shall be complied with.

Article 23 During the time period of guaranty, if the creditor wants to
permit the debtor to assign the debt, he shall get the written consent from the
guarantor, the guarantor bears no guaranty liability on the debt assigned
without his consent.

Article 24 If the creditor and debtor agree to change the master contract,
they shall get the written consent from the guarantor, without this written
consent, the guarantor bears no longer guaranty liability. If there is an
agreement otherwise in the guaranty contract, it shall be complied with.

Article 25 If no agreement on guaranty period between the guarantor and
creditor of a general guaranty, the guaranty period shall be 6 months from the
date of expiration of the master debt performance time limitation.
During the guaranty period agreed in the contract or described in the
proceeding paragraph, if the creditor has not filed a case against the debtor or
applied for the arbitration, the guarantor shall be exempted from the guaranty
liability; if the creditor has filed a case or applied for the arbitration, the
guaranty period shall be applied to the provisions on the discontinuance of
limitation of action.

Article 26 If no agreement on a guaranty period between the guarantor and
creditor of a joint liability guaranty, the creditor shall be entitled to have
the right within 6 months from the date of expiration of the master debt
performance time limitation to demand the guarantor to bear the guaranty
liability.
During the guaranty period agreed in the contract or described in the
proceeding paragraph, if the creditor has not demanded the guarantor to bear
guaranty liability, the guarantor shall be exempted from the guaranty liability.

Article 27 The guarantor shall make a guaranty on a credit occurred
continuously according to the provisions of Article 14 in this law, if no
agreement on guaranty time period, the guarantor may at all times inform the
creditor in written form to terminate the guaranty contract, however the
guarantor shall, as for the credit occurred before having informed the creditor,
bear guaranty liability.

Article 28 Where there are both a guaranty and a guarantee of real right on
a same obligatory right, the guarantor shall bear the guaranty liability on the
obligatory right except the guarantee of real right.
If the creditor abandons the guarantee of real right, the guarantor shall,
within the scope of right abandoned by the creditor, be exempted from the
guaranty liability.

Article 29 Where a branch of an enterprise as a legal person enters into a
guaranty contract with the creditor without written delegation from the
enterprise as legal person or exceeding the extent of delegation, this contract
shall be invalid or the part exceeding the extent of delegation shall be
invalid; if the creditor and the enterprise as legal person has default, they
shall bear the relevant civil liability according to their fault respectively;
if the creditor has no default, the civil liability shall be borne by the
enterprise as legal person.

Article 30 If there is any one of the following circumstances, the
guarantor shall not bear the civil liability:
1. the parties of the master contract collude to defraud the guarantor to
offer a guaranty; or
2. the creditor of the master contract take means of fraud or coercion to
force the guarantor to offer a guaranty against his true intention.

Article 31 After the guarantor has borne the guaranty liability, he shall
be entitled to claim repayment from the debtor.

Article 32 After the people's court accepts a debtor's bankruptcy case, if
the creditor does not declare his obligatory rights, the guarantor may take part
in the bankrupted property distribution, exercise the right to claim repayment
in advance.GO TO TOP


Chapter III Mortgage

Section 1 Mortgage and Gage

Article 33 The mortgage prescribed in this Law, means a guarantee that a
debtor or a third party does not transfer the possession of the property listed
in Article 34 in this Law, make the said property as obligatory right. When the
debtor does not perform the debt, the creditor shall be entitled to have right
to keep the said property to offset the debt or have priority in satisfying his
claim out of proceeds from the auction, sale of the said property pursuant to
the provisions of this Law.
The debtor or third party prescribed in the proceeding paragraph shall be
the mortgagor, the creditor shall be the mortgagee, the property offered to
guarantee shall be the gage.

Article 34 The following properties may be mortgaged:
1. the house and other land fixtures owned by the mortgagor;
2. the machine, transportation means and other property owned by the
mortgagor;
3. the state-owned right to the use of land, house and other land fixtures
which the mortgagor is entitled to dispose of pursuant to the law;
4. the state-owned machine, transportation means and other property which
the mortgagor is entitled to dispose of pursuant to the law;
5. the right to the use of land on the unreclaimed land such as unreclaimed
mountains, unreclaimed valleys, unclaimed hills or unreclaimed beaches which is
contracted for management by the mortgagor in accordance with law and is agreed
to mortgage by the contractee; or
6. other property which may be mortgaged in accordance with the law.
The mortgagor may mortgage the properties listed in the proceeding paragraph
all together.

Article 35 The obligatory right guaranteed by the mortgagor shall not
exceed the value of the gage.
After the property is mortgaged, the surplus part that the said property is
more than the obligatory right guaranteed, may be mortgaged once more, but shall
not exceed the surplus part.

Article 36 If the house upon the state-owned land obtained according to the
law is to be mortgaged, the right to the use of the state-owned land within the
scope the house occupies shall be mortgaged at the same time.
If the right to the use of state-owned land obtained by way of transfer
according to the law, when mortgaged the house upon the said state-owned land
shall be mortgaged at the same time.
The right to the use of land of enterprises of a township (town) or village
shall not be mortgaged separately. If the buildings of enterprises of township
(town) or village such as a plant is to be mortgaged, the right to the use of
the land within the scope it occupies shall be mortgaged at the same time.

Article 37 the following properties shall not be mortgaged:
1. the ownership of land;
2. the ownership of the lands owned by collectives such as cultivated land,
house sites, private plots of cropland and hilly land shall not be mortgaged,
except that prescribed in item 5 of Article 34, paragraph 3 of Article 36 of
this Law;
3. the facilities for education, the facilities for public health and
medicine and other facilities for social benefit of the institutions or social
units for purpose of public interest such as schools, kindergartens or
hospitals;
4. the properties whose ownership or right to use is uncertain or in
dispute;
5. the properties sealed up, distrained or regulated; or
6. other properties which shall not be mortgaged pursuant to law.

Section 2 Mortgage Contract and Gage Registration

Article 38 The mortgagor and the mortgagee shall enter into a mortgage
contract in written form.

Article 39 A mortgage contract shall contain the following contents:
1. the categories and amount of master obligatory right guaranteed;
2. the time limitation to perform the debt by the debtor;
3. the name, quantity, quality, situation, address, ownership or right to
the use of the gage;
4. the extent guaranteed by the mortgage; and
5. other items the parties consider necessary to agree.
If a mortgage contract has the contents prescribed in the proceeding
paragraph incomplete, it may be supplemented.

Article 40 When entering into a mortgage contract, the mortgagor and the
mortgagee shall not agree that, when the mortgagee is not satisfied at date of
expiration of the time limitation for the debt performance, the ownership of the
gage is to be transferred to the creditor.

Article 41 Where the parties take the properties prescribed in Article 42
of this Law to mortgage, he shall go through the gage registration, the mortgage
contract shall be effective as the date of registration.

Article 42 The departments handling the gage registration are as follows:
1. in case that the right to the use of land without fixtures upon the land
is to be mortgaged, it shall be the land administration departments which upon
verification issue certificates for the right to the use of land;
2. in case that the city real estates or the building of the township (town)
or village enterprises such as a plant is to be mortgaged, it shall be the
departments prescribed by the local people's governments at and above the county
level;
3. in case that the woods are to be mortgaged, it shall be the forestry
administration departments at and above the county level;
4. in case that aircraft, vessels or vehicles are to be mortgaged, it shall
be the registration departments for transportation means; or
5. in case that the equipment or other movables of a enterprise are to be
mortgaged, it shall be the administrations of industry and commerce where the
properties are located.

Article 43 Where the party takes other properties to mortgage, he may go
through the gage registration on a voluntary basis, the mortgage contract shall
be effective as the date of registration.
The party who has not handled the gage registration shall not be opposed to
a third party. If the party goes through the gage registration, the registration
department is to be the notary department of the area where the mortgagor is
located.

Article 44 When the gage registration is to be handled, the following
documents or their copies shall be produced to the registration department:
1. the master contract and the mortgage contract; and
2. the certificate of ownership of or right to the use of the gage.

Article 45 The information registered by the registration department shall
be allowed to inquire and read, copy by hand and copy.

Section 3 Effect of Mortgage

Article 46 Within the guaranteed scope of a mortgage shall be the master
obligatory and its interest, contractual fine, damage compensation and expense
of realization of mortgage. If there is an agreement otherwise in the mortgage
contract, it shall be complied with.

Article 47 At the date of expiration of the debt performance period, if the
debtor has not performed the debt so that the gage has been distrained by the
people's court, from the date of distraining the mortgagee shall be entitled to
collect the natural fruits separated from the gage and the legal fruits that the
mortgagee may collect on the gage. If the mortgagee has not informed the fact of
the distraining of the gage to the obligatory person who shall satisfy the claim
out of proceeds for the legal fruits, the effect of mortgage shall not extend to
the said fruits.
The fruits of the proceeding paragraph shall eliminate in advance the
expense of collecting the fruits.

Article 48 If the mortgagor wants to mortgage a property that has been
leased, he shall notify the leasee in writing, and the original lease contract
continues to be effective.

Article 49 During the period of mortgage, if the mortgagor assigns the gage
registered, he shall inform the mortgagee and also notify the assignee of the
situation that the grant has been mortgaged; if the mortgagor does not inform
the mortgagee or notify the assignee, the assigning behavior shall be invalid.
If the value amount of the gage assigned is obviously lower than its value,
the mortgagee may demand the mortgagor to offer the equivalent guarantee; if the
mortgagor does not offer, the gage shall not be assigned.
The value amount from assigning the gage by the mortgagor shall satisfy in
advance the mortgagee for the claim out of the proceeds on the obligatory right
guaranteed or be deposited to the third party he agreed with the mortgagee. The
part exceeding the amount of the obligatory right, shall be owned by the
mortgagor, while the short part shall be satisfied by the debtor.

Article 50 The mortgage right shall not be separated from the obligatory
right so that it is assigned solely or as a guarantee of other obligatory
rights.

Article 51 If the behavior of the mortgagor causes the value of the gage to
decrease, the mortgagee shall be entitled to have right to demand the mortgagor
to stop his behavior. When the value of the gage decreases, the mortgagee shall
be entitled to have right to demand the mortgagor to restore the value of the
gage, or offer a guarantee equivalent to the value decreased.
If the mortgagor has no fault for the decrease of the value of the gage the
mortgagee shall demand the mortgagee to be offered only within the extent of
compensation for the damage obtained by the mortgagor. The part of the gage of
which the value does not decrease, shall still be the guarantee of the
obligatory right.

Article 52 The mortgage shall exist simultaneously with the obligatory
right it guarantees, where the obligatory right is extinct, the mortgage shall
be extinct as well.

Section 4 Realization of Mortgage

Article 53 At the date of expiration of the debt performance period if the
mortgagee has not been satisfied with the claim out of proceeds, he may make an
agreement with the mortgagor to keep the said property to offset the gage or
satisfies his claim out of proceeds from the auction, sale of the said gage; if
failing to make an agreement, the mortgagor may file a case to the People's
Court.
After the gage is set off, auctioned or sold, the part of the value amount
exceeding the amount of the obligatory right shall be owned by the mortgagor,
the short part shall be satisfied by the debtor.

Article 54 If there are two or more creditors who have a mortgage on the
same property, the value amount obtained from the auction, sale of the gage
shall be satisfied pursuant to the following provisions:
1. where the mortgage contract is effective through registration, it shall
be satisfied in the registration sequence of the gage; if equal in sequence,
then it shall be satisfied according to the proportion of the obligatory right;
or
2. where the mortgage contract is effective as the date of signing, and the
said gage has been registered, it shall be satisfied according to the item 1 of
this Article; if the gage has not registered, it shall be satisfied in the
sequence of the effective date of the contracts, and if equal in sequence, it
shall be satisfied according to the proportion of the obligatory right. The
registered gage has priority to the unregistered gage.

Article 55 After the signing of the city real estates mortgage contract,
the houses built lately upon the land shall not belong to the gage. When the
said mortgaged real estates is needed to be auctioned, the lately built houses
upon the land may be auctioned together with the gage, but as for the amount
from the auction of the lately built houses, the mortgagee shall not be entitled
to have priority in satisfying the claim out of proceeds.
Where the right to the use of land of the unreclaimed land contracted for
management according to this Law is to be mortgaged, or the right to the use of
the land within the extent occupied by the buildings of the township (town) or
village enterprises such as a plant is to be mortgaged, after the realization of
mortgage, the collective ownership and purpose of the land shall not be changed
without the legal procedure is gone through.

Article 56 The value amount obtained from the auction of the right to the
use of the stated-owned land appropriated, after paying the amount equivalent to
the transfer fee of the right to the use of land which shall be paid, the
mortgagee shall be entitled to have right in priority for the claim out of
proceeds.

Article 57 The third party who offers guarantee of a mortgage on behalf of
the debtor, after the realization of the mortgage by the mortgagee, shall be
entitled to have right to claim repayment from the debtor.

Article 58 The mortgage right extinguishes with the extinction of the gage.
The compensation for the extinction shall be as the mortgaged property.

Section 5 Mortgage of the Maximum Amount

Article 59 The mortgage of the maximum amount prescribed in this Law, means
that the mortgagor and the mortgagee agree, within the extent of maximum amount
of the obligatory right, to take the gage as the guarantee of the obligatory
right occurred continuously during a certain period.

Article 60 A loan contract may be attached with a mortgage contract of
maximum amount.
The contract signed by the creditor and debtor on a certain item commodity
with which the trade occurs continuously during a certain period, may be
attached with a mortgage contract of maximum amount.

Article 61 The obligatory right of the master contract with the mortgage of
maximum amount shall not be assigned.

Article 62 The mortgage of maximum amount shall, besides that it is applied
to the provisions of this section, be applied to other provisions of this
Chapter.GO TO TOP


Chapter IV Pledge

Section 1 Pledge of Movables

Article 63 The pledge of movables described in this Law, means that the
debtor or the party delivers his movables to the creditor for possession, and
takes the said movables as the guarantee of the obligatory right. When the
debtor does not perform the debt, the creditor shall be entitled to have right
to keep the said movables to offset or have priority in satisfying in the claim
out of proceeds from the value amount of the auction or sale of the said
movables.
The debtor or the third party prescribed in the proceeding paragraph shall
be a pledgor, the creditor shall be a pledgee, the movables delivered shall be
the pledgings.

Article 64 The pledgor and the pledgee shall enter into a pledge contract
in writing.
A pledge contract shall be effective as the date of remitting the pledgings
to the pledgee.

Article 65 A pledge contract shall contain the following contents:
1. the categories and amount of the master obligation right guaranteed;
2. the time period to perform the debt by the debtor;
3. the name, quantity, quality and situation of the pledgings;
4. the extent guaranteed by the pledge;
5. the time to deliver the pledgings; and
6. other items which the parties consider necessary to agree.
If a pledge contract has the contents incompletely prescribed in the
proceeding paragraph, it may be supplemented.

Article 66 The pledgor and the pledgee shall not agree that, when the
pledgee is not satisfied at date of expiration of the time limitation for the
debt performance, the ownership of the pledgings is to be transferred to the
pledgee.

Article 67 The guaranteed scope of a pledge shall conclude the master
obligatory right and its interest, contractual fine, damage compensation,
expense for keeping the pledgings and expense for realization of pledge. If
there is an agreement otherwise in the pledge contract, it shall be complied
with.

Article 68 The pledgee shall be entitled to have right to collect the
fruits produced by the pledgings. If there is an agreement otherwise in the
pledge contract, it shall be complied with.
The fruits of the proceeding paragraph shall eliminate in advance the
expense of collecting the fruits.

Article 69 The pledgee shall bear the obligation to keep the pledgings
properly. If he does not keep the pledgings properly so that the pledgings are
extinct or damaged, the pledgee shall bear the civil liability.
If the pledgee cannot keep the pledgings properly which probably cause the
extinction or damage of the pledgings, the pledgor may demand the pledgee to
have the pledgings to be deposited, or demand to satisfy the obligatory right
before the date of expiration in order that the pledgings can be returned.

Article 70 If there is a probability of damage of or obvious deduction of
the value of the pledgings that is enough to hurt the rights of the pledgee, the
pledgee may demand the pledgor to offer the relevant guarantee. If the pledgor
does not offer the guarantee, the pledgee may auction or sell the pledgings, and
make an agreement with the pledgor that the value amount obtained from the
auction or sale is used to satisfy the obligatory right guaranteed before the
date of expiration or to be deposited to the third party whom he agrees with the
pledgor.

Article 71 At the date of expiration of the debt performance time
limitation if the debtor has performed the debt, or the pledgor has satisfied
the obligatory right guaranteed before the date of expiration, the pledgee shall
return the pledgings.
At the date of expiration of the debt performance time limitation if the
pledgee has not been satisfied, he may make an agreement with the pledgor to
keep the pledgings to offset, or to auction, sell the pledgings.
After the pledgings are kept to offset or auctioned, sold, the part that the
value amount exceeds the amount of the obligatory right shall be owned by the
pledgor, the short part shall be satisfied by the debtor.

Article 72 The third party who offers the guarantee of a pledge on behalf
of the debtor shall, after the realization of the pledge by the pledgee, be
entitled to have right to claim repayment from the debtor.

Article 73 The right of the pledge extinguishes with the extinction of the
pledgings. The compensation for the extinction shall be as the pledged property.

Article 74 The pledge shall be existed simultaneously with the obligatory
right it guarantees, where the obligatory right is extinct, the pledge is
extinct as well.

Section 2 Pledge of Rights

Article 75 The following rights may be pledged:
1. a bill of exchange, check, promissory note, bond, deposit receipt, bill
of lading or warehouse receipt;
2. the share or share paper which may be assigned according to the law;
3. the property right of the exclusive right to use trademark, patent right,
copyright which may be assigned according to the law; or
4. other rights which may be pledged according to the law;

Article 76 Where the bill of exchange, check, promissory note, bond,
deposit receipt, bill of lading or warehouse receipt is to be pledged, the right
voucher shall be delivered to the pledgee within the time limitation agreed in
the contract. The pledge contract shall be effective from the date of delivery
of the right voucher.

Article 77 Where the bill of exchange, check, promissory note, bond,
deposit receipt, bill of lading or warehouse receipt with clear record of the
date of cashing or delivery of the goods is to be pledged, if the date of
cashing or delivery of the goods is before expiration of the debt performance
time period, the pledgee may make a cashing or delivery of the goods before the
date of expiration of the debt performance time period, and make an agreement
with the pledgor that the value amount cashed or the goods delivered is to be
used to satisfy the obligatory right guaranteed before the date of expiration or
to be deposited to the third party he agrees with the pledgee.

Article 78 Where the share paper that may be assigned according to the law
is to be pledged, the pledgor and the pledgee shall enter into a written
contract, and go through the pledge registration to the security registration
institution. The pledge contract shall be effective as the date of registration.
After the share paper is pledged, it shall not be assigned, however it may
be assigned with the agreement between the pledgor and the pledgee. The value
amount obtained from the assignment of the shares by the pledgor shall be used
to satisfy the pledgee the obligatory right guaranteed before the date of
expiration or to be deposited to the third party he agrees with the pledgee.
Where the shares of a limited liability corporation are to be pledged, it
shall be applied to the concerned provisions of the Corporation Law on the
assignment of shares. The pledge contract shall be effective as the date of
recording the pledge of the shares in the shareholders' name list.

Article 79 Where the property right of the exclusive right to use
trademark, patent right or copyright which may be assigned according to the law
is to be pledged, the pledgor and the pledgee shall enter into a written
contract, and go through the pledge registration to its administration
department. The pledge contract shall be effective as of the date of
registration.

Article 80 After the right prescribed in Article 79 is pledged, the pledgor
shall not assign or permit others to use them, however it may be assigned with
the agreement between the pledgor and the pledgee. The assignment fee,
permission fee obtained by the pledgor shall be used to satisfy the obligatory
right of the pledgee guaranteed before the date of expiration or to be deposited
to the third party he agrees with the pledgee.

Article 81 The pledge of rights shall, besides that it is applied to the
provisions of this section, be applied to other provisions of Section 1 in this
Chapter.GO TO TOP


Chapter V Lien

Article 82 The lien prescribed in this Law means that, according to the
provisions of Article 84 in this Law, the creditor possess the property of the
debtor according to the agreement of the contract, if the debtor does not
perform the debt pursuant to the time limitation agreed in the contract, the
creditor shall be entitled to have right to have a lien on the said property
according to this Law, to keep the said property to offset or have priority in
satisfying for the claim out of proceeds from the value amount of the auction,
sale of the said property.

Article 83 The guaranteed scope of a lien shall conclude the master
obligatory right and its interest, contractual fine, damage compensation,
expense for keeping the subject with a lien and expense for realization of the
right of lien.

Article 84 As for the obligatory right occurred with the contract of
safekeeping, contract of carriage or contract for processing work, if the debtor
does not perform the debt, the creditor shall be entitled to have a lien on it.
Other contracts in which a lien may be agreed prescribed by the laws, shall
be applied to the provisions of the proceeding paragraph.
The parties may agree in the contract the subject that shall not be had with
a lien.

Article 85 If the property with a lien is separable, the value of the
subject with a lien shall be equal to the amount of the debt.

Article 86 The lienor shall bear the obligation to keep the subject with a
lien properly. If he does not keep the subject with a lien properly so that the
subject with a lien is extinct or damaged, the lienor shall bear the civil
liability.

Article 87 The creditor and the debtor shall agree in the contract that,
after the creditor has a lien on the property, the debtor shall perform the debt
within the time limitation that shall not be less than 2 months. If the creditor
and the debtor have not agreed in the contract, after the creditor has a lien on
the property of the debtor, he shall determine a time limitation of more than 2
months, inform the debtor to perform the debt within the said time limitation.
If the debtor does not perform the debt yet at the date of expiration of the
time limitation, the creditor may make an agreement with the debtor to keep the
subject with a lien to offset, and may also auction, sell the subject with a
lien according to the law.
After the subject with a lien is kept to offset or auctioned, sold, the part
of which the value amount exceeds the amount of the obligatory right shall be
owned by the debtor, the short part shall be satisfied by the debtor.

Article 88 The right of lien extinguishes,
1. if the obligatory right extinguishes; or
2. if the debtor offers guarantee otherwise and it is accepted by the
creditor.GO TO TOP


Chapter VI Deposit

Article 89 The parties may agree that one party will pay the deposit to
another party as guarantee. After the debtor performs the debt, the deposit
shall offset the value amount or be returned. If the party who pays the deposit
does not perform the debt, he shall not be entitled to have right to demand the
deposit to be returned; if the party who accepts the deposit does not perform
the debt, he shall return twice the amount of the deposit.

Article 90 The deposit shall be agreed in writing. The parties shall agree
the time limitation to pay the deposit in the deposit contract. The deposit
contract shall be effective as the date of actual payment of the deposit.

Article 91 The amount of the deposit shall be determined by the parties,
but shall not exceed 20 percent of the target amount of the master contract.GO TO TOP


Chapter VII Supplementary Provisions

Article 92 The real estate prescribed in this Law indicates the land and
the fixtures upon the land such as a house or woods.
The movables prescribed in this Law indicates the subjects except the real
estate.

Article 93 The guaranty contract, mortgage contract, pledge contract,
deposit contract prescribed in this Law may be a written contract entered into
separately, including the mails or letters, faxes between the parties which have
the nature of guarantee, and may also be the guarantee articles in the master
contract.

Article 94 When the gage, pledgings and subject with a lien is offset or
sold, the market price shall be refereed to.

Article 95 If any law such as the Maritime Code has specific provisions on
the guarantee, they shall be complied with.

Article 96 This Law shall become effective on the date of October 1, 1995.GO TO TOP

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