8 For the purpose of expanding his business, Mr Zhang borrowed RMB 100,000 yuan from Mr Lee and would provide
a mini-bus as the pledge to Mr Lee. However, Mr Lee returned the mini-bus to Mr Zhang because he did not hold a
driver’s licence.
Subsequently, Mr Zhang borrowed another RMB 100,000 yuan from Mr Wang and put the mini-bus as the pledge
to Mr Wang. After the conclusion of the loan agreement and pledge agreement, Mr Zhang delivered the mini-bus to
Mr Wang.
During the period of his possession of the mini-bus, Mr Wang concluded a rental agreement with a transport company
without the advance consent of Mr Zhang. The mini-bus was put into transportation service by the transport company
but was totally destroyed in a traffic accident.
Upon the expiration of the loan agreement, Mr Zhang came to repay the principal and interest. However Mr Wang
could not return the pledged mini-bus to him.
Required:
Answer the following questions in accordance with the relevant provisions of the Property Law of China and give
your reasons for your answer:
(a) explain whether the pledge agreement between Mr Zhang and Mr Lee came into effect; (3 marks)
(b) explain what the legal relationship between Mr Zhang and Mr Wang was; (2 marks)
(c) explain whether Mr Wang was entitled to lease the mini-bus to the transport company; and (2 marks)
(d) explain against whom Mr Zhang should act in law for the recovery of the mini-bus. (3 marks)
(10 marks) 8 This question requires candidates to deal with the legal issues relating to security (guaranty) under the Property Law of China.
(a) In accordance with Article 208 and Article 212 of the Property Law, in cases where, to secure the payment of debts, the
debtor pledges its movable property for possession by the creditor, if the debtor defaults on such debt, the pledgee shall have
the priority to get payment from such pledged property. The right to the pledge shall be established upon delivery of the
pledged property by the pledgor.
Mr Zhang and Mr Lee concluded a pledge agreement but Mr Lee did not posses the mini-bus. The right to the pledge would
not be established. Therefore, the pledge agreement between Mr Zhang and Mr Lee did not come into effect.
(b) In accordance with Article 212 of the Property Law, the legal relationship between Mr Zhang and Mr Wang was the pledgor
and pledgee. Since they entered into a pledge agreement and Mr Zhang delivered the mini-bus as the pledge to Mr Wang,
the pledge agreement came into effect. Therefore, the legal relationship of pledgor and pledgee has been established.
(c) In accordance with Article 214 of the Property Law, during the period of the possession of the movable the pledgee is not
allowed to dispose of the pledged property.
(d) In accordance with Article 215 of the Property Law, the pledgee is under the obligation to keep the pledged property in a
good condition; and if the pledged property is damaged or lost due to improper keeping, the pledgee shall be liable for
compensation. In cases where any act of the pledgee may cause damage to or loss of the pledged property, the pledgor may
request the pledgee to surrender the pledged property to a competent authority, or seek to take back the pledged property
upon an earlier payment of the debt.
In this case Mr Wang lent the mini-bus to a third party without the consent of Mr Zhang and caused the damage of it, he
was liable for compensation. Hence Mr Zhang was entitled to claim for damages against Mr Wang, even though the minibus
was damaged by the transport company. | 
发表于 2008-10-11 11:22
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