Procrastinating Debtor — practice questions

Correct answer: C. Clause 2/1/2: It is not permitted to stipulate any financial compensation, in cash or other consideration, as a penalty clause for a debtor’s delay in settling his debt, whether or not the amount is pre-determined; this covers compensation for loss of income (opportunity loss) and for loss due to a change in the value of the currency of the debt. The other three items are permitted: recovery expenses (Clause 2/1/4), acceleration absent force majeure (Clause 2/1/6) and a mandate to sell a mortgaged asset without recourse to the courts (Clause 2/1/5).

Correct answer: A. Clause 2/1/3 prohibits a judicial demand on a debtor in default for financial compensation in cash or other consideration for the delay. Clause 2/1/4 provides that the procrastinating debtor is liable for legal and other expenses incurred by the creditor in order to recover his debt. Recovery expenses are reimbursement of actual costs, not a return on the money, and the Standard does not limit them to legal expenses alone.

Correct answer: D. Clause 2/1/5: The creditor is entitled to apply for the sale of any asset mortgaged as collateral for the debt, for the liquidation of the debt. He is equally entitled to stipulate that the debtor must give a mandate to the creditor to sell the mortgaged asset without recourse to the courts. Retaining an excess over the debt as compensation would breach Clause 2/1/2, and the clause provides for sale, not appropriation.