Types of security

1. Remember the following:

неустойка	liquidated damages
залог/ипотека	pledge/mortgage
удержание имущества	lien
поручительство	suretyship
гарантия	guaranty
задаток	earnest money

2. Read and translate the following. Learn the definitions of the basic terms:

A.

DAMAGES – a sum of money awarded by a court as compensation for a tort or a breach of contract.

LIQUIDATED DAMAGES – are a sum fixed in advance by the parties to a contract as the amount to be paid in the event of the breach. They are recoverable provided that the sum fixed was a fair pre-estimate of the likely consequences of a breach but not if they were imposed as a penalty.

MORTGAGE – an interest in property created as a form of security for a loan or payment of debt and terminated on payment of the loan of debt. The borrower, who offers the security, is the morgagor, the lender, who provides the money, is the morgagee.

PLEDGE (PAWN) – an item of goods transferred by the owner (the pledgor) to another (the pledgee) as security for a debt.

LIEN – the right of one person to retain possession of goods owned by another until the possessor’s claims against the owner have been satisfied. The lien may be general, when the goods are held as security for all oustanding debts of the owner, or particular, when only the claims of the possessor in respect of the goods held must be satisfied.

SURETY (SURETYSHIP) – security in the form of money to be forfeited upon nonappearance in court, offered either by the defendant himself or by other people of suitable financial resourses, character, and relationship to the defendant.

EARNEST MONEY – is a sum paid by a buyer at the time of entering a contract to indicate the intention and ability of the buyer to carry out the contract.

GUARANTY (GUARANTEE) – a secondary agreement in which a person (the guarantor) is liable for the debt or default of another (the principal debtor), who is the party primarily liable for the debt. A guaranty requires an independant consideration and must be evidenced in writing.

B.

Read and translate the text:

The Russian Civil Code contains several methods of compelling performance of an obligation. To secure the performance of an obligation the Russian Civil Code places at the generous disposal of the creditor six nominate devices denominated respectively as liquidated damages, mortgage, lien, suretyship, bank guaranty and earnest money. Of the six security devices enumerated in Article 329, two are new to Russian law, i.e., bank guaranty and lien. These two devices were introduced into Russian Law for the first time by the 1994 Civil Code.

Under Russian law, pledge is a commonly used device for securing the performance of obligations. A pledge agreement is a typical component of a loan package, i.e. the package of documentation which is prepared between a bank and a borrower in order to provide a loan and to secure its repayment. Apart from a loan agreement, such a package may include a pledge and/or mortgage agreement, an assignment agreement, a bank guarantee, a suretyship agreement, a bank account management agreement etc..

The Russian word “zalog” is used generally to encompass three separate and distinct doctrines in American law: mortgage (i.e. “conveyance of a conditional fee of a debtor to his creditor, intended as a security for the payment of a loan, usually the purchase price or a part thereof of the real property so conveyed”), chattel mortgage (i.e. “conveyance of an interest in personal property, generally made as security for the payment of money, such as the purchase price of the property, or for the performance of some other act”), and pledge (i.e. “a deposit of personal property as security for a debt” or “delivery of goods by a debtor to a creditor until the debt is repaid”).

The Russian Civil Code recognizes four nominate types of pledge, i.e. the pledge of real property or other property similar in status to real property (“ipoteka”, that corresponds to “hypothecation” in English), pledge of personalty at a pawnshop (“zaklad”, that corresponds to “pledge”, in its narrow sense, in English), pledge of property rights, including rights of claim as well as securities, and pledge of goods in trade (that corresponds to chattel mortgage in English).

A mortgage creates two parallel sets of legal relations, i.e. the first one is between the creditor and the debtor, the second is between the pledgee and the peldged property. However, the legal connection between the pledgee and the pledged property does not create the pledgee’s right in rem with respect to the pledged property.

Pledge/mortgage may exist in possessory or nonpossessory form. In the event of possessory pledge, the pledged property is held by the pledgee; where pledge is nonpossessory, the pledged property remains with the pledgor. For instance, the mortgage of real property always has a nonpossessory nature, i.e. the mortgagor retains the mortgaged building, apartment or land in his possession and use.

The procedure for the execution of levy on the pledged property (foreclosure) constitutes an essential part of legislation concerning pledges. According to Russian law, execution may be levied in both judicial and extrajudicial manner, although execution on mortgaged real property may only be levied through a court action. Translate into English a typical foreclosure procedure described below: