What is the proper characterization of pactum commissorium in a pledge?

What is the proper characterization of pactum commissorium in a pledge?

• A. It is valid in all cases.
• B. It is a specialized form that is sometimes allowed.
• C. It is null and void and cannot be enforced.
• D. Its validity depends on the value of the collateral.

Answer: (C)

Pactum commissorium is a clause in a pledge that lets the creditor automatically acquire the pledged property upon default, without going through the proper sale process. This undermines the debtor’s right to due process and to observe the collateral’s value through a judicial or proper extrajudicial sale. The pledge is meant to secure repayment by allowing a sale of the collateral under established procedures, not by immediate, automatic transfer of ownership. Because this stipulation bypasses due process and the usual safeguards (like fair valuation and bidding), it is void from the outset and cannot be enforced. The creditor’s remedy remains to foreclose or sell the pledged item through the proper channels and apply the proceeds to the debt, with any surplus returned to the debtor. Its invalidity does not depend on how valuable the collateral is; it is void in all cases.

Pactum commissorium is a clause in a pledge that lets the creditor automatically acquire the pledged property upon default, without going through the proper sale process. This undermines the debtor’s right to due process and to observe the collateral’s value through a judicial or proper extrajudicial sale. The pledge is meant to secure repayment by allowing a sale of the collateral under established procedures, not by immediate, automatic transfer of ownership. Because this stipulation bypasses due process and the usual safeguards (like fair valuation and bidding), it is void from the outset and cannot be enforced. The creditor’s remedy remains to foreclose or sell the pledged item through the proper channels and apply the proceeds to the debt, with any surplus returned to the debtor. Its invalidity does not depend on how valuable the collateral is; it is void in all cases.