A connex lien is a form of lien in which the pledged object has a close economic connection with a claim. The associated lien only arises or is only effective if a specific claim exists. As a rule, the creditor (the pledgee) and the debtor (the pledgee) create the associated lien by agreement. This agreement stipulates that the pledged object serves as security for the fulfillment of a certain claim of the pledgee.
A typical example of a connex lien is a lien on a vehicle used by a bank as collateral for a car loan. In this case, the lien arises only if the debtor fails to pay the loan installments on time. The bank can then realize the vehicle as a pledged object in order to satisfy itself from the proceeds.
The connex lien provides the pledgee with additional security, as he can use the pledged object for repayment in the event of non-fulfillment of the claim. However, it is important to note that the lien only exists as long as the underlying claim exists. When the claim is settled, the lien also expires.
The connex lien is regulated in most jurisdictions and is subject to certain requirements and formalities in order to be effective. It is advisable to consult an attorney or other professional for specific questions regarding the contingent lien law, as the exact provisions may vary by jurisdiction.
Connected lien in logistics
A connected lien in freight forwarding or logistics refers to a security interest. A freight forwarder or logistics company is entitled to this for the goods it transports or stores. The lien secures the claims of the forwarder or a logistics service provider for payment of freight charges, storage costs or other services associated with transportation or storage.
The connected lien is “connected” because it is directly linked to a specific claim. The freight forwarder or logistics service provider has the right to retain the goods or, in the event of non-payment, to sell them in order to settle its claims. This lien is generally limited to the specific goods associated with the outstanding receivables.
In practice, the associated lien acts as an important instrument for freight forwarders and logistics companies to obtain additional security for the settlement of outstanding invoices, thus providing a means of exerting pressure on defaulting customers.
Alternatives to the contiguous lien
There are several alternative means and methods of securing payment claims to the lien in freight forwarding or logistics. Here are some of the most common alternatives:
- Retention of title: The supplier retains title to the goods until full payment has been made. This is particularly common in sales transactions, but can also be used in an adapted form in logistics, especially when it comes to the delivery of goods.
- Bank surety or guarantee: A bank or other financial institution issues a surety or guarantee for the customer’s obligations to the freight forwarder or logistics provider. This guarantee can be used to cover possible failures.
- Credit insurance: This insurance protects the freight forwarder or logistics provider against payment defaults by customers. The insurance usually covers a certain percentage of the outstanding amount.
- Factoring: In factoring, a company sells its receivables to a factor (usually a bank or a specialized finance company), which immediately pays a large part of the invoice value and assumes the risk of bad debt losses.
- Agreement of down payments or advance payments: The freight forwarder or logistics provider may require down payments or full advance payments for its services before transportation or storage begins.
- Contractual sanctions and penalties: Contractual clauses can be agreed that provide for sanctions or penalties for late payments. These can create an additional incentive for timely payment.
- Fiduciary storage: The goods can be placed under the control of a neutral trustee until payment has been made.
These alternatives can be used alone or in combination to minimize the risks associated with payment processing in logistics and forwarding. The choice of the appropriate method depends on the specific situation, the parties involved and the contractual conditions.
Falk Albrecht GmbH, an international freight forwarder specializing in Spain, France and Portugal, has never had to use this lien in its 35-year history. We maintain a long-term and cooperative relationship with our customers and business partners.
If you would like to find out more about our services, we look forward to hearing from you or simply give us a call: +49 202 26569 – 0