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Contracts For The Custody, Use Or Possession Of Chattels

TITLE XVII. CONTRACTS FOR THE CUSTODY, USE OR POSSESSION OF CHATTELS

Chapter 1. General Provisions

Art. 2698 – Scope of this Title.
(1)    Where, under the terms of a contract, a person is in possession of a chattel the custody or possession of which has been transferred to him by his contracting party, his rights and obligations in his dealings with his contracting party shall be as provided in this Title.
(2)    Where provided by law, the same provisions shall apply to the relations between the owner and holder of a chattel regardless of any contract.

Art. 2699 – Immovables.
(1)    The provisions governing the hiring of immovables are laid down in the Title of this Code regarding “ Contracts relating to immovables” (Art. 2896-3018).
(2)    The provisions of this Title relating to free loans shall apply where the use or possession of an immovable is given to another free of charge (Art. 2701-2726 and 2767-2778).

Art. 2700 – Owner.
(1)    For the purpose of this Title, the word “owner” means the person who has transferred the possession of the chattel.
(2)    The provisions of this Title shall apply by analogy where the right which he ahs or claims to have on the chattel is one other than ownership.
(3)    For the purpose of this Title, the holder shall be assimilated to the possessor.

Art. 2701 – Obligation to deliver.
The owner shall deliver the chattel with its accessories to the holder in fit state for the use for which it is intended by its nature or under the contract.

Art. 2702 – Reference to the rules of sale.
The place and time of delivery shall be governed by the provisions relating to sale.

Art. 2703 – Defective chattel. – 1. Rescission of the contract.
(1)    Where, at the time of its transfer to the holder, the chattel is affected by a defect which appreciably diminishes its usefulness to the holder or makes it more difficult or costly to preserve it, the holder may apply for the rescission of the contract.
(2)    The holder shall have the same right where the defect occurs or becomes apparent after delivery of the chattel.
(3)    A particular usefulness to the holder shall not be taken into account unless the owner knew or should have known thereof on the making of the contract.

Art. 2704 -2. Damages.
(1)    The owner shall make good any damage which the holder has suffered owing to the defect of the chattel, where he knew or should have known of the defect on delivering the chattel to the holder and failed to inform the latter accordingly.
(2)    The same shall apply where the defect arises during the performance of the contract through the default of the owner.

Art. 2705 – 3. Contractual warranty.
The holder may apply for the rescission of the contract and the making good of the damage caused to him by the chattel where the chattel does not possess or ceases to possess a quality the existence of which was guaranteed by the owner.

Art. 2706 – 4. Holder knowing of defect.
(1)    The owner shall not warrant against a defect which he shows was known to the holder on the making of the contract.
(2)    Any express warranty given by the owner in such case shall be of no effect.

Art. 2707 – Dangerous defect.
(1)    Where the chattel is in such a state as seriously to endanger the life or health of the holder, of members of his household or of his employees, the holder may apply for the rescission of the contract notwithstanding that he knew of the defect of the chattel on the making of the contract.
(2)    Any stipulation to the contrary shall of no effect.

Art. 2708 – 6. Non-liability clause.
A stipulation whereby the owner excludes or limits his liability for defects of the chattel shall be of no effect where he has fraudulently concealed the defects are such as to make the chattel useless to the holder.

Art. 2709 – Peaceful possession.
The owner shall guarantee the holder the peaceful possession of the chattel during the currency of the contract.

Art. 2710 – Modification to the chattel.
The owner may not make any modification to the chattel that would render its possession less advantageous or more costly for the holder.

Art. 2711 – Disturbance.
(1)    The owner shall not be bound to guarantee the holder against disturbance of his possession by third parties who do not claim a right on the chattel.
(2)    The holder may take action against such third parties in his own name.

Art. 2712 – Encumbrances and taxes.
Encumbrances and taxes on the chattel shall be borne by the owner.

Art. 2713 – Custody and preservation of the chattel.
(1)    The holder shall ensure the custody and preservation of the chattel.
(2)    He may not change the way in which the chattel is used without the owner’s consent.

Art. 2714 – Duty to inform the owner.
The holder shall without delay inform the owner of all matters requiring his attention, such as urgent repairs, discovery of defects, encroachments, disturbances or damage caused by third parties to the chattel.

Art. 2715 – Cost of preservation and upkeep.
(1)    Where the preservation or upkeep of the chattel entails expenses which are not to be borne by the holder, the latter shall inform the owner accordingly.
(2)    The holder shall be entitled to the reimbursement of expenses he incurs in urgent eases, provided he immediately informs the owner accordingly.

Art. 2716 – Owner’s verification.
(1)    The owner may at any time satisfy himself that the holder complies with his obligations under the contract.
(2)    Such verification shall be exercised in a reasonable and non-vexations manner without causing the holder undue trouble.

Art. 2717 – Claim by a third party to the chattel.
(1)    Where a third party claims the ownership of or a right on the chattel, the holder shall immediately inform the owner thereof under penalty of damages.
(2)    Where the third party institutes legal proceedings, the holder may demand to be dismissed from the case and that the dispute be settled as between the third party and the owner.
(3)    In such case, he may release himself from his liability to return the chattel by depositing it at the owner’s expense under conditions fixed by the court.

Art. 2718 – Obligation to restore.
(1)    The holder shall return the chattel in the state in which and at the place where he received it.
(2)    The state in which the holder received the chattel shall be specified in an inventory drawn up by the parties.
(3)    Failing such inventory, the chattel shall be deemed to have been in good condition when the holder received it.

Art. 2719 – Dispossession of the holder.
(1)    Where the holder has been dispossessed of the chattel in consequence of an event for which he is not to blame, he shall be released from his obligation to return it.
(2)    He shall inform the owner immediately, under penalty of damages, of the event in consequence of which he ceased to be in possession of the chattel.
(3)    The owner shall be entitled to anything which the holder receives in exchange for the chattel as a result of the dispossession and shall be subrogated to the holder’s rights.

Art. 2720 – Loss or deterioration of the chattel. – 1. Gainful custody.
(1)    Where he receives compensation for taking charge of the chattel or he is authorized to make use of it or he in any way derives profit from it, the holder shall be liable where the chattel is lost or deteriorates after he has received it.
(2)    He shall also be liable for any loss or deterioration caused by a person whom he has authroised to make use of the chattel, even temporarily.

Art. 2721 – 2. Limit of liability.
(1)    The holder shall not be liable only where he shows that the loss or deterioration was due to force majeure.
(2)    He shall not be liable where he shows that the loss or deterioration was due to the decay, dilapidation or other defect of the chattel.
(3)    He shall not be liable where deterioration is due to the normal and authorised use of the chattel.

Art. 2722 – 3. Custody without consideration.
(1)    Where he drives no profit form the chattel and he has taken charge of it in the sole interest of the owner, the holder shall not be liable for the loss or deterioration of the chattel unless it is due to his own default or occurs after he has been summoned to return the chattel.
(2)    The holder shall not be at fault unless he exercised less care in keeping and preserving the chattel than he exercises in the custody and preservation of his own property.

Art. 2723 – Holder in default.
Where the holder has been summoned to return the chattel, he shall not be liable where he shows  that the chattel would have been lost or deteriorated in like manner, had he returned it to the owner on the due date.

Art. 2724 – Improvements made to the chattel. – 1. Right to indemnity.
(1)    The holder shall not be entitled to any indemnity in respect of improvements he has made to the chattel.
(2)    Where such improvements have been made with the owner’s consent, the holder may however demand the reimbursement of the amount he has spent or of the surplus value of the chattel at the time of its return, whichever is the less.

Art. 2725 – 2. Compensation and right of removal.
(1)    Even where the holder is not entitled to nay indemnity, he may set off against any loss of value caused by deterioration for which he is liable but which is not due to his default, any increase he has brought about in the value of the chattel.
(2)    The holder may remove the improvements he has made to the chattel, if this can be done without damaging it.

Art. 2726 – Lien.
(1)    The holder may refuse to return the chattel to the owner until the latter has paid any indemnities due under this Chapter.
(2)    He may not refuse to return the chattel pending payment of a claim to which he is entitled on another ground.
(3)    Where he denies that he owes the holder an indemnity, the owner may demand that the chattel be returned to him on his providing adequate security for the discharge of any liability he may have incurred.

Chapter 2. Letting and Hiring
Section 1. General Provisions

Art. 2727 – Definition.
A contract of letting or hiring is a contract whereby one party, the lessor, undertakes to transfer to the other party, the lessee, the possession of an object for a fixed term in return for a consideration called the rent or hire.

Art. 2728 – Letting and hiring and sale.
(1)    The object hired shall remain the property of the lessor to whom it shall be returned on the termination of the contract.
(2)    Where it is stipulated that, after a certain number of payments of the rent or hire, the lessee shall become the owner of the object, the contract shall constitute a contract of sale, notwithstanding that the parties have termed it a contract of hire.

Art. 2729 – Letting and hiring and free loans.
Where no rent or hire has been stipulated, the provisions relating to free loans shall apply.

Art. 2730 – Wrongful use.
(1)    The lessor may apply for the rescission of the contract where the lessee does not make use of the property in accordance with the contract or usages and such use entails risk of irreparable damage to the object hired.
(2)    Where the object has already suffered damage or rescission prejudices him in any way, the lessor shall in addition be entitled to damages.

Art. 2731 – Upkeep of object.
(1)    The lessee shall maintain the object.
(2)    The cost of upkeep shall be borne by the lessee.

Art. 2732 – Payment of rent or hire.
(1)    The lessee shall pay the rent or hire on the agreed or customary dates.
(2)    In the absence of any stipulation or custom to the contrary, the rent shall be paid as it falls due, at the end of each quarter.

Art. 2733 – Arrears of payment.
(1)    Where the lessee is in arrears with a payment of the rent or hire, the lessor may grant him ten days’ grace, notifying him at the same time that in default of payment, the contract will be rescinded upon the expiration of that period.
(2)    The period of grace shall run from the day on which the lessee receives the lessor’s notification.

Art. 2734 – Sub-letting.
Unless otherwise agreed, the lessee may not sub-let the object hired or assign the contract without the consent of the lessor.

Art. 2735 – Termination of contract.
(1)    A contract of hire concluded for a fixed term shall terminate on the date agreed upon by the parties.
(2)    Unless otherwise provided, the contract shall not be terminated by the death or incapacity of one or both of the parties.
(3)    Where the lessee becomes bankrupt, the lessor may rescind the contract unless he is provided, within a reasonable time, with security for the rent or hire in arrears and the rent or hire falling due in the future.

Art. 2736 – Indeterminate contracts.
(1)    Where the duration of the contract of hire has not been fixed, either party may terminate the contract at any time.
(2)    In such case, the other party shall be entitled so a reasonable period within which to discharge his obligation to return the object hired or to take delivery of it.

Art. 2737 – Delay in return.
(1)    Where the lessee fails to return the object when summoned to do so, he shall pay the rent or hire until it is returned.
(2)    He shall in addition compensate the lessor for any damage caused to him by the delay.

Art. 2738 – Extension of the contract.
(1)    Where, on the expiration of a contract of hire entered into for a fixed term, the lessee remains in possession of the object hired and the lessor does not claim its return, the contract of hire shall be deemed to have been extended by the parties for an indeterminate period on the same terms as the original contract.
(2)    In such case, third parties who have guaranteed the performance of the original contract shall be released from their liabilities.

Section 2. Hiring of cattle
Paragraph 1. – Cattle included in lesse of agricultural undertaking

Art. 2739 – Scope of this Paragraph.
Unless otherwise agreed by the parties, the provisions of the following Articles shall apply where an agricultural undertaking leased to a farmer includes cattle.

Art. 2740 – Sale of cattle. – 1. Rights of farmer.
(1)    The farmer may sell the cattle included in the undertaking.
(2)    He shall however keep on the land cattle equivalent in species, number and quality to that which he received.
(3)    The lessor may not compel the farmer to sell cattle, notwithstanding that the cattle have increased in number.

Art. 2741 – 2. Rights of lessor.
(1)    The lessor may not sell the cattle included in the undertaking.
(2)    He may compel the farmer to prepare every year an inventory of the cattle to be found within the undertaking.
(3)    He may terminate the contract where it appears that the cattle are reduced in number by more than one quarter for reasons attributable to the farmer.

Art. 2742 – Products of animals. – 1. Principle.
(1)    Without prejudice to the provisions of the following Articles, the farmer may freely dispose of the products of the animals of their hides, skins and increase.
(2)    He shall account for his management to the lessor, where the rent consists of a share of these products or is fixed having regard thereto.

Art. 2743 – 2. Wool.
(1)    Only the farmer may sell the wool of sheep and ewes where he manages the undertaking or the flock consists of less than fifty heads.
(2)    Only the lessor may sell such wool where he manages the undertaking or the flock consists of more than fifty heads.

Art. 2744 – 3. Manure.
Manure form animals shall be used exclusively for the exploitation of the land.

Art. 2745 – 4. Increase from breeding.
Animals which perish or are slaughtered shall be replaced in proportion to the increase form breeding.

Art. 2746 – Duty to return cattle.
(1)    The farmer shall, at the end of the contract, return cattle equivalent in species, number and quality to that which he received.
(2)    The provisions of sub-art. (1) shall apply notwithstanding that the cattle were valued in the contract.

Art. 2747 – Deficit. – 1. Loss borne by the lessor.
(1)    Where there is a deficit, the loss shall be borne by the lessor where the rent consists of a given share in the profits or of certain products of the animals.
(2)    The former shall not be liable for such deficit unless the loss of the animals is due to his fault or that of a person for whom he is liable.

Art. 2748 – 2. Loss borne by the farmer.
The farmer shall be liable to repay the value of animals not returned by him where the rent is fixed independently of the profits of the animals.

Art. 2749 – 3. Extent of liability.
(1)    The value of animals not returned shall be fixed having regard to the valuation made by the parties.
(2)    Failing such valuation, the farmer shall repay their value as on the day of the termination of the contract.

Paragraph 2. – Cattle principal object of the contract

Art. 2750 – Scope of this Paragraph.
(1)    The provisions of the following Articles shall apply where the main object of the contract consists in cattle or other animals the breeding of which is of an agricultural or commercial interest.
(2)    Nothing shall affect contrary usages.

Art. 2751 – Model contracts.
(1)    Model contracts may be drawn up by the Ministry of Agriculture to serve as a basis for individual contracts regarding certain kinds of animals or contracts to be executed in certain regions of the Empire.
(2)    Individual contracts relating to the animals or regions specified in model contracts shall be deemed to be made on the conditions laid down in such model contracts.
(3)    The parties may be express provisions depart from the terms of model contracts.

Art. 2752 – Duration of contract.
(1)    Unless otherwise expressly agreed, the contract shall be deemed to be made for four years.
(2)    The period of four years shall be reckoned from the day of the making of the contract.

Art. 2753 – Notice to landowner.
(1)    Where cattle is given to another person’s framer, notice shall be given to the owner whose land is exploited by such farmer.
(2)    Where notice is not given, the owner may, notwithstanding any custom to the contrary, seize or retain the animals with a view to obtaining payment of his claims against the farmer.
(3)    It may not be alleged that he knew or should have known that the animals did not belong to his farmer.

Art. 2754 – Inventory of animals.
(1)    The ownership of animals shall not be transferred to the tenant as a result of an inventory of the animals having been made in the contract.
(2)    Such inventory has as its sole purpose to permit of establishing whether there is a profit or loss at the end of the contract.

Art. 2755 – Upkeep of animals.
(1)    The tenant shall preserve and maintain the animals with the care required by custom.
(2)    He shall bear the costs arising therefrom.

Art. 2756 – Increase from breeding.
Increase from breeding shall be jointly owned by the lessor and tenant.

Art. 2757 – Products of animals.
Only the tenant shall be entitled to the dairy products manure and work of the animals.

Art. 2758 – Wool.
(1)    The wool of sheep and ewes shall be divided equally between the lessor and tenant.
(2)    The tenant shall inform the lessor of the day when the shearing will take place.

Art. 2759 – Sale of animals.
(1)    The tenant may not, without the consent of the lessor, dispose of any animal of the flock or of the increase from breeding.
(2)    The lessor may not dispose thereof without the consent of the tenant.

Art. 2760 – Loss of animals.
(1)    The tenant shall not be liable for the loss of animals unless it is due to his fault.
(2)    The lessor shall prove that the tenant is at fault.
(3)    The tenant shall account for the hides of animals which have died.

Art. 2761 – Accounts.
(1)    The lessor may demand that the tenant submit every year an inventory of the animals together with his annual accounts.
(2)    He may terminate the lease where it appears that the animals have reduce in number by more than one quarter for reasons attributable to the tenant.

Art. 2762 – Termination of contract.
(1)    The contract shall terminate on the expiry of the period agreed by the parties or prescribed by law.
(2)    A party who intends to terminate the contract shall give the other party at least six months notice in advance.

Art. 2763 – Death of parties.
(1)    The contract shall not be terminated by the death of either party.
(2)    The heirs of the deceased tenant may however terminate the contract by giving notice to the lessor within six months from the death of the tenant.
(3)    In such case, the contract shall terminate on the first of Megabit which follows but not less than three months after the lessor has received notice from the heirs of the tenant.

Art. 2764- Settlements of accounts.
(1)    Where the contract comes to an end or is rescinded, a new inventory of the animals shall be made.
(2)    The lessor may take animals of each species to the extent shown in the first inventory made.
(3)    What remains shall be divided equally between the lessor and the tenant.

Art. 2765 – Insufficient number of animals.
(1)    Where the animals are reduced below the number shown in the first inventory, the lessor shall take what remains and the parties shall bear the loss equally.
(2)    The tenant shall not be liable for the loss unless it is due to his fault or that of a person for whom he is liable.

Art. 2766 – Usages or stipulations null and void.
(1)    Any usage or stipulation to the effect that the tenant shall be liable where all the animals are lost as a result of a fortuitous event and without his fault shall be of no effect.
(2)    Any usage or stipulation to the effect that the share of the tenant in the loss shall be greater than his share in the profits shall be of no effect.
(3)    Any usage or stipulation to the effect that the lessor may, at the end of the contract, take more animals than be supplied shall be of no effect.

Chapter 3. Loan for Use, or Free Loan

Art. 2767 – Definition.
A loan for use, or free loan, is a contract whereby one party, the lender, undertakes to transfer a chattel to the other party, the borrower, for gratuitous use.

Art. 2768 – Gratuitousness of the contract.
(1)    The fee loan is essentially gratuitous.
(2)    Where it is stipulated that the ‘lender shall receive a remuneration, the rules of contracts of letting and hiring shall apply.

Art. 2769 – Ownership of chattel.
(1)    the lender shall retain the ownership of the chattel loaned.
(2)    The borrower shall return the chattel to the lender on the termination of the contract.

Art. 2770 – Upkeep of chattel.
(1)    The borrower shall maintain the chattel.
(2)    The cost of upkeep shall be borne by the borrower.

Art. 2771 – use of chattel.
(1)    The borrower may use the chattel loaned only for the purpose defined in the contract or, failing such stipulation, for a purpose in keeping with its nature.
(2)    He may not allow a third party to make use of the chattel without the lender’s consent.

Art. 2772 – Return of chattel.
(1)    The borrower shall return the chattel at the agreed time.
(2)    Where no time has been agreed and the use for which the chattel has been lent itself implies no such time, the borrower shall return the chattel immediately at the lender’s request.

Art. 2773 – Premature return. – 1. Borrower’s right.
The borrower may return the chattel before the agreed time unless such return causes damage to the lender.

Art. 2774 – 2. Lender’s right.
The lender may claim the return of the chattel before the time at which is should normally have been returned where the borrower makes an uncovenanted use thereof, deteriorates it or allows a third party to make use of it or where the lender himself is in urgent and unforeseen need of it.

Art. 2775 – Death of borrower.
Where the borrower dies, the lender may require his heirs to return the chattel to him immediately, notwithstanding that he had agreed to lend it to the borrower for a fixed term.

Art. 2776 – Wrongful use.
(1)    The borrower shall be liable for the loss or deterioration of the chattel, even due to force majeure, where he puts the object to an unauthorized use or improperly allows a third party to make use of it.
(2)    In such case, he shall not be released from his liability unless he can prove that the chattel would have been lost or deteriorated, had he not violated his obligation.

Art. 2777- Avoidable loss.
The borrower shall be liable for the loss of the chattel through force majeure where he could have averted the loss by using a chattel of his own or, being unable to save both his own chattel and that lent to him, chose to save his own.

Art. 2778 – Contractual valuation.
Where the chattel was valued on the making of the contract, the borrower shall be liable for its loss in all cases.

Chapter 4. Bailment
Section 1. Bailment in General

Art. 2779 – Definition.
A contract of bailment is a contract whereby one person, the bailee, undertakes to receive a chattel from another, the bailor, and to keep it on the latter’s behalf.

Art. 2780 – Bailment, conditional sale and hire of services.
(1)    Where the bailee has the option of retaining the chattel on the expiration of the contract, on paying its price, the rules of conditional sale shall apply and not those of bailment.
(2)    Where the bailee undertook to repair the chattel or to transform it the rules of hire of services shall apply and not those of bailment.

Art. 2781 – Ownership of chattel.
(1)    The bailor shall retain the ownership of the bailed chattel.
(2)    The bailee shall return the chattel to him on the termination of the contract.

Art. 2782 – Bailment of consumable chattels.
(1)    Where the chattel entrusted to the bailee is a sum of money or a certain quantity of consumable goods and the bailee has been authorized to make use of them, the rules relating to loans of money and other fungibles shall apply.
(2)    Where the chattel entrusted to the bailee is a sum of money which has been banded over to the bailee unsealed and unclosed, the bailee shall be deemed to be authorized to make use of it.

Art. 2783- Use of bailed chattel.
(1)    Where the bailment consists of other chattels, the bailee may not make use of them without the bailor’s authorization.
(2)    Where he violates this rule, the rules governing the letting and hiring shall apply to his detriment.
(3)    The bailor may in particular demand payment of a rent the amount of which shall be fixed equitably.

Art. 2784 – Gratuitous or paid bailment.
(1)    Bailment shall be gratuitous where it is not apparent that the parties intended to provide for a remuneration to the bailee.
(2)    In this regard, the professional standing of the bailee and all other relevant circumstances shall be taken into account.

Art. 2785 – Modification of circumstances of bailment.
(1)    Where urgent circumstances so require, the bailee may keep the chattel under conditions other than those agreed upon and may in particular entrust the chattel to a third party or alienate it, where it is in imminent danger of loss or deterioration.
(2)    He shall inform the bailor as soon as possible of these events.

Art. 2786 – End of bailment. – 1. Bailor’s right.
(1)    The bailee shall return the chattel to the bailor as soon as the latter claims it, unless a fixed term has been provided in favour of the bailee.
(2)    The bailor shall indemnify the bailee for expenses he has incurred in consideration of the agreed term.

Art. 2787 – 2. Bailee’s right.
(1)    The bailee may at any time require the bailor to take the chattel back, unless a fixed term has been provided in favour of the bailor.
(2)    Where no such term has been agreed, the court may grant the bailor a reasonable period within which to take the chattel back.

Art. 2788 – Several bailors.
(1)    Where the chattel has been entrusted to the bailee by several bailors who are unable to agree upon the conditions on which the chattel is to be returned, the court shall fix such conditions.
(2)    The provisions of sub-art. (1) shall apply where the bailor dies leaving several heirs and the chattel is indivisible.

Art. 2789 – Bailment in the interest of third party.
Where the bailment was made in the interest of a third party and such third party has informed the bailor and bailee of his agreement, the latter shall not return the chattel to the bailor without the third party’s consent.

Art. 2790 – Return of chattel.
(1)    Where it has been agreed that the bailee shall keep the chattel in a certain place, it shall be returned in that place.
(2)    The expense and risk of the return of the chattel shall in all cases be borne by the bailor.

Art. 2791 – Return of profits.
The bailee shall return the profits he has collected from the chattel.

Art. 2792 – Restitution to whom made.
(1)    The bailee shall return the chattel to the bailor or to the person designated by him.
(2)    He may require the bailor to prove that he is the owner of the chattel.

Art. 2793 – Bailor’s duties.
(1)    The bailor shall pay the bailee the agreed remuneration.
(2)    He shall indemnify him for all expenses incurred for the preservation of the chattel.
(3)    He shall compensate him for all damage the bailment may have caused him, unless such damage is due to the bailee’s default or that of a person for whom the bailee is liable.

Art. 2794 – Lien.
The bailee may retain the chattel until all monies due to him in consequence of the bailment have been paid in full.

Art. 2795 – Bailee’s heir.
(1)    Where he has alienated the chattel in good faith and in ignorance of the bailment, the bailee’s heir shall only repay the price he has received.
(2)    Where the price has not yet been paid, the bailor shall be subrogated to the heir’s claim against the buyer.

Section 2. Bailment on Trust

Art. 2796 – Definition.
There shall be bailment on trust where a chattel, the legal position of which is in dispute or uncertain, is entrusted to a third party, the trustee, who keeps it and returns it to its lawful owner when the doubt has been resolved.

Art. 2797 – Appointment and dismissal of trustee.
(1)    The trustee shall be appointed by agreement between the parties to the dispute.
(2)    Failing such agreement, he shall be appointed by the court.
(3)    The trustee may not be dismissed before he has completed his function, except where the parties so agree or for good cause.

Art. 2798 – Return of the chattel.
The trustee may not return the chattel except with the agreement of all the interested parties or upon an order of the court.

Art. 2799 – Reference to rules regarding bailment.
The rules of bailment shall apply in addition to those of this Section.
Section 3. Bailment in Distress

Art. 2800 – Definition.
There shall be bailment in distress where a person is compelled by urgent necessity to entrust to another the custody of chattels belonging to himself, in order to preserve them from imminent danger.

Art. 2801 – Special rules for bailment in distress.
(1)    The person to whom the chattels are offered may not refuse to accept them without good cause.
(2)    He may demand a remuneration where the bailment lasts for more than one week.
(3)    The court may reduce the amount of the remuneration required by him at the time of bailment.

Art. 2802 – Forms and proof.
(1)    Bailment in distress shall not be subject to any special form.
(2)    It may be proved by any means.

Art. 2803 – Application of rules of bailment.
The rules regarding a contract of bailment shall apply in addition to those of this Section.
Section 4. Chattels Found, or Deposited with a Person without his knowledge

Art. 2804 – Finder’s rights and obligations.
(1)    Whosoever has found a chattel and taken possession of it shall, by virtue of the law, be in the same position as a bailee.
(2)    Nothing shall affect the provisions of the Title of this Code relating to “Individual Ownership” (Art. 1154-1158).

Art. 2805 – Deposit without the knowledge or against the will of another.
(1)    The rules of bailment shall not apply where chattels have been deposited with a person without his knowledge or against his will.
(2)    The person with whom chattels are thus deposited shall incur no liability as a consequence of the deposit.

Chapter 5. Warehousing

Art. 2806 – Definition.
A contract of warehousing is a contract whereby one party, the warehouseman, being duly licensed for the purpose by the public authorities, undertakes to receive and store goods on behalf either of the bailor or of the purchaser of the goods or of a person who received them in pledge.

Art. 2807 – Loss or deterioration of goods.
(1)    The warehouseman shall be liable for the preservation of the goods he has received.
(2)    He shall not be liable where he shows that the loss or deterioration of the goods is due to force majeure, or to the nature or defects of the goods or their packing.

Art. 2808 – Duty to inform bailor.
The warehouseman shall inform the bailor where the goods undergo changes which seem to call for further measures.

Art. 2809 – Return of goods.
(1)    The warehouseman shall store the goods until the expiration of the agreed period.
(2)    He may not avail himself of circumstances as a result of which a bailee would be authorized to return the goods before the due date because of unforeseen events.

Art. 2810 – Mixing goods.
(1)    The warehouseman may not mix fungible goods with other goods of the same kind and quality without express authority.
(2)    The bailor may claim out of goods thus mixed such quantity as corresponds to his share thereof.
(3)    The warehousman may return this share without the co-operation of the other bailors.

Art. 2811 – Sale of goods.
(1)    After giving the bailor due notice, the warehouseman may sell the goods where they are not removed by the bailor on the date stipulated in the contract.
(2)    Where no definite term has been fixed for the storage, he may sell the goods after one year from the date of deposit.
(3)    He may in any case sell the goods whenever they are in danger of decay.

Art. 2812 – Disposal of proceeds.
After deduction of the expenses entailed by the sale and other sums due to the bailee, the proceeds of the sale shall be held at the disposal of the persons entitled to them.

Art. 2813 – Receipt and voucher.
(1)    Where the bailor so requires, the warehouseman shall give him a receipt for the goods warehoused.
(2)    The receipt shall be accompanied by a voucher containing the same information as the receipt.
(3)    The receipt and voucher shall be taken from the same counterfoil register, The counterfoil shall be retained by the warehouseman.

Art. 2814 – Particulars in receipt and voucher.
He receipt and voucher shall state:
(a)    The name and surname, or trade name, and address of the bailor; and
(b)    The place of storage; and
(c)    The kind and quantity of the goods stored and ay other information necessary to identify them; and
(d)    Whether customs duties have been paid on the goods and whether they are insured.

Art. 2815 – Beneficiaries of documents of title.
(1)    The receipt and voucher may be made out in the name of the bailor or in that of a third party designated by him.
(2)    They may be transferred, either together or separately, by endorsement.

Art. 2816 – Rights of holder of both titles.
(1)    A person in possession both of the receipt and of the voucher may demand that the goods stored be handed over to him.
(2)    He may also require that the goods be divided up into a number of lots at his expense and that the warehouseman give him a receipt and voucher for each separate lot in exchange for the original titles.

Art. 2817 – Rights of holder of voucher.
A person in possession of the voucher alone shall have a right of pledge on the goods detained by the warehouseman.

Art. 2818 – Transfer of voucher.
(1)    Where the voucher alone has been endorsed for the first time, the amount of the debt and interest thereon, and the date on which payment falls due, shall be stated on it.
(2)    The endorsement and the above information shall be entered on the receipt and countersigned by the beneficiary of the endorsement.

Art. 2819 – Absence of required information.
(1)    Where the endorsement on the voucher fails to state the amount of the debt guaranteed, the goods stored shall be secured to their full value to guarantee the debt.
(2)    Where he has paid a sum that was not due, the person in whose name the receipt is made out, or the holder of the receipt, may recover from the first endorsee and from any person holding the voucher in bad faith.

Art. 2820 – Rights of holder of receipt.
(1)    A person in possession of the receipt only may inspect the goods stored and take the customary samples.
(2)    He may not remove the goods stored unless he deposits with the warehouseman or trustee the sum due at maturity to the pledge.

Art. 2821 – Sale by pledges.
(1)    Where he is not paid on maturity and he has drawn up a protest in accordance with the provisions of Art. 781-784 of the Commercial Code, the holder of the voucher may cause the goods to be sold eight days after payment becomes due.
(2)    An endorser who has of his own free will paid the holder of the voucher shall be subrogated to the holder’s rights.
(3)    He may cause the goods to be sold eight days after the debt has become due.

Art. 2822 – Sale of goods stored.
Where the goods stored have to be sold, either by the warehouseman or by the creditor holding the voucher, the relevant provisions of the chapter on pledges shall apply to the sale.

Art. 2823 – Redress against endorsers.
(1)    The person holding the voucher may not bring an action against the endorser before he has caused the goods to be sold.
(2)    The time-limits for actions for recovery against successive endorsers shall be as prescribed by Art. 817 (3) of the Commercial Code.
(3)    They shall run from the date on which the goods were sold.

Art. 2824 – Non-compliance with required formalities.
(1)    The holder of the voucher shall lose his right to recover from the endorsers where he fails to draw up his protest upon maturity or fails to institute, within fifteen days from the date of the protest, proceedings to have the goods sold.
(2)    He shall however retain his right to recover from the endorsers of the receipt and from the debtor.
(3)    Such right of recovery shall be barred after three years.

Chapter 6. Contracts of Pledge

Section 1. Contracts of Pledge in General
Paragraph 1. – Conditions for the validity of the contract

Art. 2825 – Definition.
A contract of pledge is a contract whereby a debtor undertakes to deliver a thing, called the pledge, to his creditor as security for the performance of an obligation.

Art. 2826 – Person furnishing the pledge.
A contract of pledge may be made between the creditor and a third party to secure the debt of another person.

Art. 2827 – Debt guaranteed.
A contract of pledge may be made in order to guarantee a future or conditional debt.

Art. 2828 – Form of contract.
(1)    The maximum amount of the debt guaranteed shall in all cases be specified in the contract of pledge or the contract shall be void.
(2)    Where the amount exceeds five hundred Ethiopian dollars, the contract of pledge shall not be valid except where it is evidenced by writing and as from the day when such deed acquires undisputed date.

Art. 2829 – Pledge.
(1)    The pledge may consist of a chattel, a totality of effects, a claim or another right relating to movable property.
(2)    It must be capable of being sold separately by public auction.

Art. 2830 – Creditor’s possession.
(1)    The creditor shall be deemed to be in possession of the pledge where the document of title without which the pledge cannot be disposed of has been delivered to him.
(2)    The provisions of sub-art (1) shall apply in particular where a voucher for goods warehoused, or the bill of lading or way-bill in the case of goods in transport, has been endorsed in his favour.

Art. 2831 – Possession by an agreed third party.
(1)    The parties may agree that the pledge be delivered to a third party acceptable to them both.
(2)    The rights and duties of such third party shall be as prescribed by the provisions relating to the bailment of goods or warehousing.

Art. 2832 – Debtor’s possession.
(1)    The furnishing of a pledge without dispossession of the debtor may be made in such cases only as are expressly provided by law.
(2)    In all other cases, the contract shall be of no effect where it stipulates that the pledge shall remain with the debtor.

Art. 2833 – Regulation of contract of pledge.
(1)    The rules governing contracts of pledge are to be found, in addition to this Chapter, in the special laws relating to particular cases and forms of pledging or to the institutions authorized to lend against security.
(2)    The special rules governing the committal of goods in warehouses are given above in the Chapter on warehousing.

Paragraph 2. – Rights and Duties of Pledger

Art. 2834 – Ownership of pledge.
(1)    The pledger shall retain his rights on the pledge, save for the restrictions arising out of the contract of pledge.
(2)    He may dispose freely of his rights and may in particular alienate the pledge or re-pledge it subsequently.

Art. 2835 – Cost of maintaining and preserving the pledge.
The pledger shall reimburse the pledge for expenses incurred in maintaining and preserving the pledge.

Art. 2836 – Abuse by creditor.
Where the creditor fails to observe the provision of the law in respect of the pledge, the pledger may demand that it be delivered to a trustee.

Art. 2837 – Premature payment of the debt.
(1)    The pledger may at any time demand the return of the pledge by paying the debt secured by it.
(2)    Any stipulation to the contrary shall be of no effect.

Art. 2838 – Pledge furnished by a third party.
(1)    Where the pledge has been furnished by a third party, no contract between the creditor and the debtor made subsequently to the furnishing of the pledge may impair the third party’s position.
(2)    The pledger may set up against the creditor all the defenses the debtor himself could have raised, without it being possible to set up against him the fact that the debtor had waived them.

Paragraph 3. Rights and Duties of Pledgee

Art. 2839 – General principle.
(1)    The pledge shall have on his debtor’s property the rights of a creditor.
(2)    He shall in addition have on the pledge the particular rights deriving from this Chapter.

Art. 2840 – Use of the pledge.
The pledge may not make use of the pledge without the pledger’s consent, except where such use is necessary for its preservation.

Art. 2841 – Fruits.
(1)    Where the pledge produces fruits, the creditor, or the custodian of the pledge, shall collect them.
(2)    The fruits shall become the property of the pledgee.
(3)    The value of the fruits produced by the pledge shall be applied successively to the expenses incurred for the custody and preservation of the pledge, to interest and to the capital of the debt secured.

Art. 2842 – Action for possession.
(1)    The pledge may bring actions for possession in respect of the pledge.
(2)    The custodian of the pledge shall inform the pledgee and the pledger without delay of circumstances requiring the institution of such actions.

Art. 2843 – Third party’s claim to the pledge.
The pledgee may exercise the rights deriving from the contract of pledge notwithstanding that the pledge has been delivered to him by a person who was not authorized to dispose of it.

Art. 2844 – Exception.
(1)    The owner of the pledge may take it back where he shows that the pledgee knew or should have known, on the making of the contract, that the other party was not authorized to pledge the thing.
(2)    He may also take the pledge back by discharging the debt secured by it.

Art. 2845 – Return of pledge.
(1)    The creditor shall return the pledge to the pledger or to the person designated by him, where the contract of pledge is extinguished by payment of the debt or for any other reason.
(2)    Until the pledge is returned, he shall be liable for the loss of or damage to the pledge in accordance with the provisions of Art. 2720.

Art. 2846 – Lien.
The pledge may retain the pledge until monies due to him under the provisions of this Chapter have been paid in full.

Art. 2847 – Loss or deterioration of the pledge.
Where the pledge has been entrusted to his keeping, the pledge shall be liable for its loss or deterioration as provided in Art. 2720 and 2721 of this Code.

Art. 2848 – Subrogation to property rights.
Where the pledge is lost or damaged for any reason whatsoever, the pledgee’s right shall apply to the compensation due for its replacement from the person liable for the loss or deterioration, from the insurer or from the person who has expropriated it.

Paragraph 4. – Extinction of Contract of Pledge

Art. 2849 – Accessory character of the contract.
The contract of pledge shall be extinguished and the pledge shall be returned where the debt it guaranteed is discharged.

Art. 2850 – Indivisibility of pledge.
The creditor may not be compelled to return the pledge or part thereof until he has been paid I full, notwithstanding that the debt or pledge is divisible.

Paragraph 5. Sale of Pledge

Art. 2851 – Commissoria lex.
(1)    Any agreement, even subsequent to the furnishing of the pledge, authorizing the creditor, in the event of not-payment on the due date, to take possession of the pledge or to sell it without complying with the formalities required by law shall be of no effect.
(2)    It may however be agreed, after the debt has become due, that the debtor shall make over the pledge to the creditor in settlement of the debt.

Art. 2852 – Effect on third parties.
(1)    The contract of pledge shall not affect third parties unless the pledge is in the possession of the pledge, or the person designated for the purpose by the parties, at the time when the pledge invokes the contract.
(2)    The contract of pledge shall be of no effect where at that time the pledge is still in the debtor’s possession or it has returned to his possession with the pledgee’s consent or it is in the possession of a third party from whom the creditor cannot demand its return.

Art. 2853 – Default.
(1)    Before causing the pledge to be sold, the pledgee shall call upon the pledger to discharge his obligation and give him due notice that, upon default, he will cause the pledge to be sold.
(2)    Similar notice shall be given to the third party who has furnished the pledge.

Art. 2854 – Sale of pledge.
(1)    Where, within eight days from the notice provided in Art. 2853, no objection has been raised or the objection is dismissed, the pledgee may cause the pledge to be sold by public auction.
(2)    Where the pledge is quoted on the market or has a current price, the pledge may cause it to be sold by private contract through the intermediary of a person authorized to make such sales.

Art. 2855 – Limitation by the court.
The court may, on the application of the pledger, limit the creditor’s right to the sale of one of the pledges which is sufficient to pay off the pledge.

Art. 2856 – Assignment of pledge to the pledge.
The pledgee may apply to the court to order that the pledge be given to him in payment, to the extent of the amount due to him, according to an expert valuation or the current price of the pledge, where it is quoted on the market.

Art. 2857 – Priority right.
(1)    The pledge may be paid out of the proceeds of the sale of the pledge before all other creditors.
(2)    In addition to the debt specified in the contract of pledge, the pledge shall secure the contractual interest and legal interest on the debt and the expenses incurred for the custody, preservation or sale of the pledge.

Art. 2858 – Limitation of creditor’s rights.
(1)    The pledge may not enforce his priority right arising out of the contract of pledge beyond the maximum amount specified therein.
(2)    The pledge may not enforce his priority right to obtain security for another debt, even if incurred subsequently to the contract of pledge, owed to him by the debtor or pledger.

Art. 2859 – Disposal of proceeds.
(1)    The proceeds shall be attributed to the creditor to the amount of the debt due to him and shall be deemed to have been paid by the pledger.
(2)    The balance of the proceeds shall be handed over to the pledger.

Art. 2860 – Several pledges.
(1)    Where the pledge is encumbered with several rights of pledge, the creditors shall be paid according to their rank.
(2)    The rank shall be determined by the dates on which the various pledges were entered into.

Art. 2861 – Purchaser’s rights.
The purchaser of the pledge shall acquire the ownership thereof free of any encumbrance.

Art. 2862 – Creditor’s liability.
A creditor who sells a thing belonging to a third party which has been duly pledged shall not be liable unless he knew or should have known, on the making of the contract, that it belonged to the third party.

Section 2. Pledging of Claims or other Intangibles

Art. 2863 – Relation of pledger and debtor.
The provisions governing the relations of a guarantor and principal debtor shall apply to the relations between a third party who has finished a pledge and the principal debtor.

Art. 2864 – Claims not established by title.
(1)    The pledging of claims which are not established by a title shall, regardless of the amount of the sum guaranteed, be executed in the form of a document specifying the claim pledged and the maximum amount of the debt guaranteed.
(2)    The pledging shall be notified, under pain of being declared void, to the debtor of the claim which has been pledged, or shall be accepted by him in a document of undisputed date.

Art. 2865 – Rights not established by title.
(1)    The pledging of rights which are not rights of claims and which are not established by a title shall be executed in the forms prescribed for the transfer of the said rights.
(2)    A document of undisputed date, and adequately specifying the right pledged and the debt guaranteed, shall be required in all cases, under pain of nullity.
(3)    Nothing shall affect such special provisions as may govern the pledging of some of such rights.

Art. 2866 – Acknowledgement of debt.
(1)    Where the claim or right pledged is established by an acknowledgement of debt or by anther non-negotiable instrument, such instrument shall be delivered to the pledge or the third party named in the contract of pledge.
(2)    The pledging of claims and rights established by negotiable instruments shall be carried out in accordance with the provisions of Art. 950-958 of the Commercial Code.
Art. 2867 – Claims producing periodical income. – 1. Extent of pledge.
(1)    A pledge founded on a claim yielding interest or other periodical income, such as a dividend, shall, unless otherwise provided, apply only to current benefits to the exclusion of those previously due.
(2)    Where such accessory benefits are represented by separate titles, they shall not be included in the pledge unless themselves committed in the form required by law.
Art. 2868 – 2. Rights and duties of pledge.
(1)    The pledge shall collect the interest on the claim pledged with him and all other periodical payments due from the debtor under his claim.
(2)    He shall apply the proceeds successively to the expenses due to himself, to interest and to the capital of the debt guaranteed.
(3)    The pledger may not object to such payment.

Art. 2869 – Preservatory measures.
The pledge shall take such steps as are necessary to prevent the extinction of the claim or right pledged with him.

Art. 2870 – pledged shares.
Pledged shares shall be represented at the annual general meeting of the company by the shareholder himself and not by the pledge.

Art. 2871 Rights of debtor of claim pledged.
(1)    The debtor of the claim which has been pledged may set up against the pledge the defenses he is entitled to raise against his won creditor.
(2)    Where he has accepted the pledging without reservation, he may however not oppose the setting-off of a counter-claim which arose against his own creditor before his acceptance.

Art. 2872 – Collection of debt pledged.
(1)    The pledge shall collect the debt pledged with him when it falls due.
(2)    However, where the pledger objects to such payment, the debtor may obtain his discharge only by depositing the sum or the goods due from him.
(3)    Sums of money or other fungible things received in payment shall be deposited in the place agreed upon by the parties or, in the absence of such agreement, in a place fixed by the court.

Art. 2873 – Sale of claim or right pledged.
Where the debt secured has become due, the pledge may cause the debt or right pledged with him, or the goods received from the debtor in payment, to be sold as provided in Section 1 or this Chapter.

Art. 2874 – Reference to preceding section.
Anything relating to the pledging of claims or intangibles that is not governed by this Section shall be governed by the provision of Section 1 of this Chapter.