What is Pledge under Indian Contract Act? What is the difference between pledge and bailment?

1. SUBJECT:
LAW OF CONTRACT-II
SUBMITTED TO:
MR. GOPAL KAG
PRESENTED BY:
SWASTI CHATURVEDI
B.B.A. LL.B. 3rd
Semester
Section- ‘B’

2. A pledge is only a special kind of bailment,
and chief basis of distinction is the object
of the contract. Where the object of the
delivery of goods is to provide a security
for a loan or for the fulfillment of an
obligation, that kind of bailment is pledge.
Pledge is governed by the principle of
Bailment.

3. As per Section 172 of Indian Contract Act, 1872,
“The bailment of goods as security for payment of
a debt or performance of a promise is called
‘Pledge.’ The Bailor in this case is called ‘Pawnor’
and the Bailee is called ‘Pawnee’.”
Example:
If X delivers to the Bank ornament (gold) for
obtaining loan, it is called pledge. Here in this
example X is Pledger or Pawnor and the Bank is
Pledgee. or Pawnee.

5. (i) Delivery of possession:
There must be a bailment of goods as defined in section
148 of the Contract Act that is delivery of goods. The
delivery of possession may be actual or constructive. If
the Pledger has goods in his physical possession he
could effect the pledge by actual delivery.
(ii) Security for payment of debt :
The bailment must be by way of security. The goods are
delivered as security for the payment of a debt or
performance of a promise.

6. (iii) Condition:
Delivery should be upon a contract and a
condition to return.
(iv) Movable Property :
To constitute pledge, the subject matter of
property must be a movable property. It can
be valuable documents, goods, chattels etc.

7. 1. Right to Enforce
If the pawnee neglects in any one of his duties, the pawnor has a
right to enforce them by filing a suit against the pawnee.
2. Right to Avoid the Contract
If the pawnee does any act, which is inconsistent with the terms of
the bailment as regards the goods bailed, the pawnor can terminate
the pledge.
3. Right to Return the Goods Lent Gratuitously
When the goods are lent gratuitously, the pawnor can demand back
the goods at any time even before the expiry of the time fixed or the
achievement of the object.
4. Right to Get Compensation
If any third person does some injury to the goods bailed or deprives
the pawnee of the use of the goods, then the pawnor may file a suit
against the wrong-doer, and recover compensation from him.

8. 1. Duty to disclose faults
The pawnor is expected to disclose to the pawnee all the defects
known to him and which would get in the way with the use of goods
pledged. A
2. Duty to repay pawnee’s expenses
A pawnor is duty bound to repay to the pawnee expenses incurred by
him for work done on the goods received under conditions of pledge
and for which he is not receiving any remuneration or deriving any
benefit.
3. Duty to indemnify the pawnee
The pawnor is bound to make good the loss suffered by the pawnee
that is in excess of the benefit actually derived, where he had
delivered the goods gratuitously and compelled the pawnee to return
them before the expiry of the period of pledge.

9. 1. Right to recover necessary expenses incurred:
The pawnee is entitled to recover necessary expenses
from pawnor being incurred at the time of pledge.
2. Right to retain the pledged goods:
The pawnee has a right to retain the goods being pledge in
case of defalut of payment.
3. Right to Apply to Court to Decide the Title to the
Goods
If the goods bailed are claimed by the person other than
the bailor, the bailee may apply to the court to stop its
delivery and to decide the title to the goods.
4. Right of Lien
The bailee has a right to exercise lien i.e., to refuse to
return the goods to the bailor until his lawful charges are
paid to him.

10. 1. Duty to take reasonable care of the
pledged goods
2. Duty not to make unauthorised usage of
the goods
3. Duty to return the goods in case of
fulfillment of purposes
4. Duty not to mix or part with the goods:

11.  Pledge by a mercantile agent
 Pledge by person in possesion under a
voidable contract
 Pledge by person who is having a limited
interest in the property
 Pledge by a seller in possession after sale
 Pledge by a buyer in possession after sale

12. Pledge is a kind of bailment where a thing is delivered as
security for the repayment of a debt or performance of
any promise. Delivery of the possession to the pawnee
may be actual delivery or constructive delivery.
Ownership of the pledged article does not pass to the
pledgee. The pawnee has the right to retain goods till the
payment, of the debt, any interest on the debt, and any
other necessary expenses incurred for preservation of
the goods. Where pawnee incur any other extraordinary
expenses on goods for preservation, he is entitled of the
same from pawnor. In case of the default of the pawnor,
in the debt or performance, the pawnee has the right to
sell the goods pledged.
The pawnor has also the right to redeem the goods
before the actual sale, but after the payment of the debt
or performance of promise and any other expenses
which have arisen from his default.