As we saw previously, notably with a loan money agreement, the creditor, in order to protect his loan, must include security in the agreement. In Thailand, the Civil and Commercial Code provides these securities. Some are attached to the person, some to the goods, movable or immovable, material or immaterial. There are 3 types of securities; let’s take a look at the essential information about each below:
Section 680 Suretyship is a contract whereby a third person, called the surety, binds himself to a creditor to satisfy an obligation in the event that the debtor fails to perform it.
A contract of suretyship is not enforceable by action unless there is some written evidence signed by the surety.
Generally, if the surety is jointly responsible, the creditor can ask directly for the performance of the obligation (Section 691). Suretyship is a security attached to a person. It is important to know that Section 681/1 protects the natural person from being a joint debtor.
Section 702. A mortgage is a contract whereby a person, called the mortgagor, assigns a property to another person, called the mortgagee, as security for the performance of an obligation without delivering the property to the mortgagee.
The mortgagee is entitled to be paid out of the mortgaged property in preference to ordinary creditors, regardless of whether or not the ownership of the property has been transferred to a third person.
Section 714 A mortgage contract must be made in writing and registered by the competent official.
Section 703. Immovables of any kind can be mortgaged.
The following movables can also be mortgaged, provided they are registered according to the law:
- Ships of five tons and over
- Floating houses
- Beast of burden
- Any other movables with regard to which the law may provide registration for that purpose.
Also, rights over leasehold according to the Rights over Leasehold Asset Act B.E. 2562
Section 747. A pledge is a contract whereby a person, called the pledgor, delivers to another person, called the pledge, a movable property as a security for the performance of an obligation.
Judgement of Supreme Court No. 4278/2534 The defendant borrowed money from the plaintiff and made a pledge agreement with the plaintiff for a sewing machine. But did not deliver the sewing machine to the plaintiff. It is not considered a pledge under Section 747.
You can see the pledgor has to deliver a moveable property to the pledge; if not, it isn’t the pledge.
Section 750. If the pledged property is a right represented by a written instrument, the pledge is void unless such an instrument is delivered to the pledge and the pledge is notified in writing to the debtor of the right.
These security agreements with their different protections might make you confused, so to know which one is best in your case, come to visit us. Moreover, they can be used to guarantee any kind of debt, not just the loan money agreement.