Fiduciary Transfer of Ownership for Security Purposes & Retention of Ownership by a Seller

The article is devoted to security constructions such as fiduciary transfer of ownership and retention of ownership by the seller under a contract of sale within the framework of European private law. The author points out that the transfer of ownership for security purposes is a security right, at the same time the retention of the legal title should be qualified as a quasi-security right, because the security property interest in it is not transferred by the debtor to the creditor, but is being retained by a seller. It was found that the security transfer of ownership as a means of ensuring the fulfilment of the obligation has both incentive and compensatory functions unlike the retention of title security instrument which only encourages the buyer to fulfill the obligation paying for the goods by retaining ownership by the seller. It has been shown that in contrast with transfer of ownership as security right which allows the creditor to satisfy his property interest at the expense of security property, retention of ownership by the seller enables the seller to satisfy such interest at the expense of ownership until full payment. This article highlights the German and French civil law governing the enforcement of security arrangements for the transfer of ownership and the retention of ownership by the seller. It is concluded that the distinguishing features of these security institutions related to: default remedies of creditor, the transfer of ownership moment, and claiming property from the bankruptcy estate of the debtor.