Chapter 52: Personal and real security*
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No credit without security and, to add what Goode has written in his manual on commercial law (2004a, p. 577), ‘Enterprises live (and sometimes 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 consumer needs a loan to buy a new car, irrespective of the formal legal framework, 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 borrower, 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.

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Edited by Jan M. Smits
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