„Secured transactions” is the area of law which relates to the rights and obligations of the borrower and lender. The main purpose of secured transactions is to provide credit for the borrower and security for the lender. Credit refers to something of value (usually money, but also other goods and services) given to the borrower before the payment is made. Security, on the other hand, is the form of guarantee for the creditor that a credit (for example loan) will be repaid.

Upon the creation of such agreement, the creditor acquires a security interest, that is the right to the specific thing (the collateral) owned by the lender. The scope of this right will depend upon the kind of security that was created. It is important to mention, however, that in the case of secured transactions the creditor does not become the owner of the collateral. He merely acquires a right in rem which is binding for third parties, so that anyone who buys collateral from the lender acquires the title limited by the rights of the creditor from the underlying transaction (the secured transaction). Other types of security arrangements, the ones which transfer the title to the collateral to the creditor, are referred to as quasi-security.

Under common law, there are two kinds of security interests, possessory and non-possessory. Possessory security interest gives the creditor the right to take the possession of the thing until the payment is made. The borrower owns the thing but do not posses it. The most common example of this would be pawning: borrowing money from a pawnbroker by leaving something valuable (a pledge) in the possession of a pawnbroker. Non-possessory security interest leaves the possession of the thing with the borrower. The borrower both owns and posses the thing which is a collateral until payment. A well-known example of it would be a mortgage, which is a form of security over real property owned by the borrower.

Mortgage and pawning are institutions within the area of secured transactions well known also under Polish law. Basic regulations and the usage of these two types of security agreements are very similar in both jurisdictions. Common law system, however, has also developed some institutions within the area of secured transactions that have no direct counterparts under Polish law. These are two types of non-possessory security interest, the fixed charge and the floating charge. [...]