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"Personal and Real Security" [2006] ELECD 198; in Smits, M. Jan (ed), "Elgar Encyclopedia of Comparative Law" (Edward Elgar Publishing, 2006)

Book Title: Elgar Encyclopedia of Comparative Law

Editor(s): Smits, M. Jan

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781845420130

Section: Chapter 47

Section Title: Personal and Real Security

Number of pages: 13

Extract:

47 Personal and real security*
J.H.M. (Sjef) van Erp


1 Introduction
No credit without security and, to add what Goode has written in his
manual on commercial law (2003b, p. 577), `Enterprises live (and some-
times die) by credit.' In other words: security is vital for getting financing,
which in its turn is essential for economic life. Whether a buyer of goods is
given time to pay the purchase price after delivery of the goods or a con-
sumer needs a loan to buy a new car, irrespective of the formal legal frame-
work, from an economic point of view in each case credit will be given by
a lender to a borrower. Of course, the lender will demand repayment and,
realizing that repayment is not a priori certain, the lender will want some
form of reassurance that any given credit will be paid back.
The bare promise of the borrower provides some certainty. If the bor-
rower, for example, no longer is paying any agreed-upon instalments, this is
a breach of contract with ensuing consequences. Such a claim, however, is
strictly personal. In the case of the borrower's insolvency the lender will
have to accept that other creditors also have claims and that he will rank
pari passu among them. For most, not to say all, lenders this will not be
enough. They will want more certainty. In legal terms: they will demand
security, which can be given in several ways. These will be discussed ...