Comment to Article 327. Pledge of goods in circulation of the Civil Code of the Republic of Kazakhstan  

The pledge of goods in circulation is a type of mortgage of movable property. What is common to the ratio of mortgages and mortgages of goods in circulation is to leave the pledged items with the mortgagor and grant him the right to use the mortgaged property. A special feature of the pledge of goods in circulation as a type of mortgage is the granting to the pledgor of the additional right to change the composition and physical form of the pledged property (stocks, raw materials, semi-finished products, finished products, etc.) provided that their total value does not become less than specified in the pledge agreement.

At the same time, a special legal regime for mortgaged property has also been established, which differs from the general rules on collateral. Goods in circulation alienated by the pledgor cease to be the subject of pledge from the moment they become the property, economic management or operational management of the acquirer, and the goods acquired by the pledgor specified in the pledge agreement become the subject of pledge from the moment the pledgor acquires ownership or economic management rights to them. In fact, in this case, the mortgagee has a real right to the property owned by the mortgagor. The real right of the mortgagee when pledging goods in circulation is characterized by a narrow set of powers (see paragraph 3 of the commentary to art. 310 of the Civil Code), but it is impossible to deny the existence of the rights of the mortgagee to the property pledged, acquired instead of alienated.

The right of the pledgor to change the composition and natural form of the pledged property is not absolute or unlimited. The pledgor has the right, based on the instructions of paragraph 2 of the commented article, to replace discarded goods only with those that were provided for in the contract on the pledge of goods in circulation. Therefore, it is necessary to recognize as essential the condition of the contract on the list of goods that can be used to replace retiring property, as well as on permissible operations that change the physical form of property.

The provisions of the legislation on the pledge of goods in circulation, which grant the pledgor the right to independently change the composition and physical form of the pledged property without the consent of the pledgee for the goods provided for in the contract and with the requirements for entering information about these changes into accounting, they also impose increased requirements on the pledgee to monitor transactions with goods provided in collateral for this type of collateral. Otherwise, the risk of violation by the pledgor of the terms of the pledge of goods in circulation will be attributed to the pledgee, since the legislation does not provide grounds for invalidating the transactions of the pledgor with the goods that violate the terms of the contract on the pledge of goods in circulation, and demanding it from the buyer.

If the pledgor violates the terms of the pledge of goods in circulation (for example, a decrease in the total value of the pledged property compared to the value specified in the pledge agreement, the replacement of property with goods not provided for in the agreement, or the absence of special accounting of goods in circulation, etc.), the pledgee has the right to suspend the operations of the pledgor with goods until the violations are eliminated by imposing mortgaged goods with their own marks and seals (a firm pledge is a type of pledge equivalent to a mortgage in accordance with the law). From the moment of suspension of the pledge of goods in circulation, the pledgee has rights similar to the rights of the pledgee in case of a firm pledge (see commentary to art. 303 of the Civil Code).

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The commentary was prepared within the framework of the scientific and practical research program of the Scientific Research Center of Private Law of the Kazakh State Law University.  

Head of the working group on the preparation of the draft Civil Code of the Republic of Kazakhstan, Corresponding Member of the Academy of Sciences of the Republic of Kazakhstan, Professor Suleimenov M.K.

Deputy head Professor Basin Yu.G.