Recently press reports have indicated that increasingly, mortgaged houses are being auctioned by banks or other mortgageors in cases where no other solution can be found for long term overdue mortgage payments. That mortgage agreements do allow banks to do so is largely known and recognized.

Less well known is that in contract logistics, a similar legal tool may be incorporated into a contract with a principal, the right of pledge. This right of pledge, if correctly incorporated in the contract, may give the creditor a similar position as  the morgageor in real estate: namely, the right to auction the goods of his debtor which are in the custody of the creditor pursuant to the agreement with the debtor.

In the previous edition of Legal Tips & Tweaks I briefly discussed this right of pledge, calling it a razor-sharp weapon for the creditor in obtaining invoice-payment from his debtor, notwithstanding a bankruptcy of the latter.

The question arises how to enact the right of pledge into a contract. Obviously, a tailor made clause can be inserted into such a contract. However, in contact logistics,  several sets of General Conditions are circulating where the right of pledge is duly incorporated. We will examine those later; for now we conclude that the right of pledge can be enacted  into a  contract by correctly incorporating General Conditions that contain a right of pledge.

An example are the Dutch Freight Forwarding Conditions: these contain a right of pledge in art. 19. So by correctly incorporating the Forwarding Conditions into a logistic contract the right of pledge is incorporated as well.

Vast numbers of papers, articles and brochures have been written on how to correctly incorporate general conditions into an agreement.  One of my recommendations in that respect concerns the use of automated e-mail signatures. Every outgoing e-mail sent by a company should end with a signature tekst stating, for instance, that all activities and agreements of the company are subject to  General Conditions that can be downloaded by clicking on a hyperlink incorporated in the signature.. That hyperlink opens the General Conditions of that company in PDF format, as published on the Company’s website.

Use of the e-mail signature is no panacea for all cases. but it has definitely assisted in concluding that the conditions indeed formed part of the contract in, for instance, ad hoc freight forwarding agreements  concluded by telephone and confirmed by the logistic service provider through  email with a proper signature.

So, either by a tailor-made provision in the contract, or by incorporation of the pledge through general conditions, let us presume that a valid and binding pledge-clause is in place and investigate through an example what the clause can do for us in the in the next edition of Legal Tips & tweaks.

Part 1 Right of pledge (pandrecht)  – an underestimated tool for getting your invoices paid

Frans Vreede
Independent Legal Consultant Aviation & Logistics Law
M +31650 213 971
frans@vreede.aero
www.fransvreede.aero