The Study Of "Dormancy" Of The Validity Of Floating Mortgage

“Dormancy” of the validity of floating mortgage is a vivid description for the right vacuum period of mortgagee from the establishment of floating charge to the fixing of mortgaged property. During the period of “dormancy” of validity, mortgager has the right to possess and dispose the mortgaged property for normal commercial exchange, which reflects the flexibility and uncertainty of the floating charge system and is the most significant of the achievement of the whole system. The outcome of will directly affects whether the aim of floating charge system can be achieve or not. With the application of comparative analysis method, document analysis method and summarizing method, this dissertation focuses on discussing mentioned problems, combining the construction system domestic and overseas with the practices and problems in Chinese “Dormancy” principle of the validity of floating mortgageThe first part is to introduce the basic principle of “Dormancy” of the validity of floating mortgage. Accompanying with the development of floating mortgage, the evolution of the principle of “Dormancy” of the validity of floating mortgage stemmed from Roman law and improved with British law, and was popularized during the period of British law. According to Chinese <Property Law>, the application of “Dormancy” of the validity of floating mortgage begins with the validation of the contract and ends up with the “crystallization” of floating mortgaged property. During this period, mortgagee can disposed the mortgaged property freely on the premise of ensuring the security interest of floating mortgagee. In the mean time, the third party can acquire the mortgaged property and the priority of disposing mortgaged property via normal business activities with mortgagee.The second part mainly analyzes the existing problems of “Dormancy” of the validity of floating mortgage in China. Firstly, the regulation of “Dormancy” of the validity is unclear. “Normal business activities”, “vendee” and “get the mortgaged property”, the three criterions relating to identify the validity principle has not been defined in the <Property Law> clearly, which lead to the dispute of criterion of the principle. Besides, China has not set exception for “Dormancy” principle. The benefit of floating mortgagee will lack of protection when mortgager and buyer abuse their rights the “dormancy” principle endowed.Combining with legislative experiences and theories home and abroad, the third sections focuses on analyzing the clause 2, article 189 of the “the property law”. Relating to the definition of “normal business activities”, there are three ways to explain according to Chinese scholar: narrow definition, broad definition and the combination of enumerationism definition with principal criterion.The scholar proposing narrow definition claims that “normal business activities” is restricted to ordinary buying and selling activities; The scholar insisting broad definition proposes “normal business activities” should be decided by judges according to principle of honesty and credibility and market trading habits; Differently, the scholar supporting the combination of enumerationism definition with principal criterion sustains to combine the advantages with disadvantages of two above explaining methods, try to not only enumerate the categories of “normal business activities” but setting principal criterion, which enable the judge to acquire foundation once the practice is exhaustive listed. There is also disputation over the definition and scope of “vendee”. The first controversy is about whether the subjective state should be brings into the application of “Dormancy” principal. Some scholars insist that there is no need to consider the subjective state according to ‘property law' strictly while other scholars claim that pledger and lienee who do not involved into the business activities can be brought into the “vendee” scope. There are three opinions in Chinese educational circles relating to recognizing “acquiring mortgaged property”: firstly, the property can be acquired without delivering it to vendee. Secondly, the vendee can acquire the mortgaged property once it is delivered. Thirdly, delivery is the requirement of validity that the vendee acquire the mortgaged property.Base on the third part, the fourth part propose suggestions to better Chinese “Dormancy” of the validity of floating mortgage. The paper advises to combine detailed list method and principles-based standard to identify “normal business activity”; and suggests to consider whether the vendee is well meaning subjectively in defining the “vendee”. This paper also try to explain the “vendee” via broad explain method, suggesting that “vendee” should include the third party during the buying and selling, exchanging activities; As for the defining of the “acquirement of the mortgaged property”, the paper suggest the criterion for vendee to acquire the mortgaged property is delivery, which excludes possession reformulation and indicated delivery.