HW Legal
The claimant had a garage carry out a restoration of his classic car. When it came to paying, a dispute arose between him and the garage over the price of the work. To secure its claim, the garage held on to the car (it exercised a right of retention). The claimant wanted the vehicle back, so he placed the disputed sum in escrow with a lawyer. Under the terms of the escrow, the lawyer was to pay the sum to the garage as soon as the court, in the pending proceedings, awarded it the disputed amount. The escrow agreement was concluded only between the claimant and the lawyer; the garage neither joined it nor accepted the security. And it refused to hand the car over.
Two questions arose: can a right of retention be brought to an end by placing sufficient security in attorney escrow? And does the creditor have to accept the security that has been provided?
Under Section 1399(d) of the Civil Code, a right of retention ends if the debtor provides the creditor with sufficient security. The Civil Code says nothing about acceptance. Under the previous law (the old Civil Code, Act No. 40/1964 Coll.), by contrast, a right of retention also ended where the debtor provided the entitled person with other security "with that person's consent".
The Supreme Court accepted that attorney escrow can serve both a payment function and a security function. Sufficient security can therefore be provided through it. But for a right of retention to end, the creditor has to accept the security. The position is thus the same as under the previous law (Section 180(2) of the old Civil Code), even though the current Act no longer expressly requires the creditor's consent.
The debtor's mere provision of security is only an offer; without acceptance it has no legal effect. The Supreme Court's reasoning rested above all on how security instruments are built: security typically arises by agreement (suretyship, a lien, a security transfer of a right). Acceptance can, however, be given orally or by conduct, unless the law expressly requires written form.
Academic opinion on whether the creditor's acceptance is needed is divided.
(based on the Supreme Court judgment of 27 March 2024, case no. 21 Cdo 2976/2023)