Legal Definitions - tacit hypothecation

Definition: Tacit hypothecation is a type of lien or mortgage that is created by law without the parties' express agreement. It is a pledge of something as security without delivery of title or possession.

Examples:

• General hypothecation: A debtor pledges all their property as collateral to satisfy an outstanding debt.
• Maritime lien: A type of tacit hypothecation that gives a creditor the right to seize a ship to satisfy a debt owed by the ship's owner.

These examples illustrate how tacit hypothecation works. In general hypothecation, the debtor pledges all their property as collateral, even if specific items are not named in the security agreement. In maritime lien, the creditor has a right to seize the ship without the owner's express agreement to satisfy a debt. In both cases, the lien or mortgage is created by law without the parties' express agreement.