The Functional Value and Interpretation of Purchase Money Security Interest

Author: Zou Hailin



Abstract: Article 416 of the Chinese Civil Code is a specific provision relating to purchase money security interest (PMSI). In theory and institutional logic, PMSI belongs to a special type of movable mortgage that has the legal effect of super-priority. It provides special protection for the seller and improves the institutional structure of the movable mortgage to a considerable extent so that the movable mortgage is no longer subject to the location of title to collateral, thus enriching the connotation of Numerus Clausus related to the movable mortgage, integrating the interpretation and application rules of movable mortgage, and constituting one of the most innovative achievements of movable security interests with Chinese characteristics. The introduction of PMSI has eliminated the obstacles of insufficient supply of legalistic norms of “atypical guarantee” in practice, and reshaped the image of Numerus Clausus related to movable mortgage. As a result, ”typical guarantees”, such as retention of title, should withdraw from historical arena. At the same time, due to the characteristics of PMSI, many interpretation problems have been caused by the integration of the super-priority into the systematic rules of the movable mortgage, which need to be clarified accordingly at the theoretical and practical levels.

Keywords:purchase money security interest; super priority; movable mortgage; contract for sale


Author:Zou Hailin, a research fellow at CASS Law Institute and a professor and doctoral supervisor at CASS Graduate School.


Source: 4 (2021) Northern Legal Science.