Bad Credit Leads to Increase in Financial "Pledges" in Lieu of Loans

In a troubling economy, many agreements are being reached between organizations and among individuals by way of pledges. Whether you are selling something or looking for a particular service to be performed, it is important to consider how a pledge may be requested in lieu of full payment or full completion of services.

A pledge is designed to be some form of repayment for a debt. Often, a tangible piece of property is used in consideration for the debt and the pledge is made to repay the debt through use of money or services. When the pledge is not followed through, the pledgee has a right to retain custody and ownership of the tangible item used as consideration. While in the ownership of the pledgee, however, the stipulations with regard to use will have to be outlined.

If you have given a tangible item for consideration in a pledge, it is important to know when and how the pledgee may use that item for their own benefit, use or simply to protect the integrity of the item. For example, if it is necessary that the tangible item be used while in their custody, so as to retain its integrity, then the pledgee must agree to do so as part of the agreement to accept the item as consideration.

In the unfortunate even the tangible item, used as consideration in a pledge, is damaged or lost the pledgee, the pledgee will have an obligation to replace or replenish the item. When the item used in consideration is lost and not available to return to you, the loss is legally termed a conversion. When conversion takes place, the pledgee must provide some compensation to you. While you may believe the compensation should include the full value of the item you placed into consideration, most courts will only require that the present-day value be compensated.

In an economy where credit scores and credit reports are on the decline, many adults are turning to pledges as a way to give and receive some forms of credit and to secure contractual agreements. If you are consideration a pledge, and offering a piece of your property or assets as consideration, it is important to know what the pledgee is required to do as part of the protection of that property and, when damaged or lost, to what extent reimbursement or replacement will need to be made. In doing so, you may opt to choose a different item for consideration when engaging in a pledge agreement.