Forfeit

• Monetary amount defined by legislation or agreement, which must be paid by a debtor to the creditor in the case of non-fulfilment, or improper fulfilment.

• Creditor is not required to prove losses.

• The agreement on damages must be committed in writing, irrespective of the form of the principal obligation. Failure to comply entails invalidity.

The Reduction of the Amount of Forfeit

• If the amount of forfeit which is subject to payment is exorbitantly large as compared to the losses of the creditor, the court shall have the right to reduce it, considering the degree of the execution of the obligation by the debtor and the interests of the debtor and the creditor, which merit attention.

Pledge

• Method of securing the execution of an obligation, by which a creditor (pledge holder) has the right, in the case of failure by the debtor to execute the obligation secured with the pledge, to receive compensation from the value of the pledged property, in a priority procedure before the other creditors of the person to whom that property belongs (pledger), with the exceptions established by the Civil Code.

What could be pledged?

- Any property including objects and property rights (claims), except for the objects which are excluded from turnover, claims which are inseparably associated with the person of the creditor, in particular the claims of alimony, compensation for harm caused to life or health, and other rights the assignment of which to any other person is prohibited by legislative acts, may be subject of a pledge.

Types of pledge

• Mortgage is a of pledge under which the pledged property remains in the possession and use of the pledger or a third person.

• Pawning shall be the of pledge whereby the pledged property is transferred by the pledger into the possession of the pledge holder.

Pledge agreement

• A pledge agreement must indicate the pledged object and its evaluation, the amount and the deadline for the execution of the obligation which is secured with the pledge, an indication of which of the parties keeps the pledged proper, and whether it is allowed to use it

• A pledge agreement must be concluded in writing.

• Failure to comply with above rules entails invalidity of the pledge agreement.

Subsequent pledge

• Is allowed only if allowed by the main pledge agreement