Deference between Bailment and Pledge

Bailment vs Pledge

The words bailment and pledge are used
mainly in terms of contract. They can be seen
being referred to by lawyers in a court of law
to prove their point. Bailment is a type of
contract and pledge is also a type of contract.
People who are not aware of the origin of
these words use them in the same breath as if
they are interchangeable which is not correct.
This article will throw light on these two
concepts as they hold significance in
jurisprudence.
Bailment
The act of delivering goods for a special
purpose is termed as bailment. The person who
is delivering the goods is called a bailor while
the person who receives the goods is referred
top as a bailee in the contract. The goods that
are transferred in this manner shall be
returned to the owner upon completion of the
purpose of the contract. The point to be
remembered in this kind of transaction is that
ownership of the goods does not get changed.
In bailment, only goods are involved, and all
movable items apart from property and money
come under bailment. Thus it is clear that
when you keep money in a bank account, it
does not come under bailment.
Pledge
But, if a person keeps his gold or other
valuable items in a bank locker or with a
money lender in exchange for a loan, he is
making a pledge to the money lender or the
bank that he will return the money and get
back his valuables. This is deemed as a kind of
bailment and all conditions that are applicable
on a bailment apply in such a case also.
Bailment for security can be termed as a
pledge. You are keeping your valuables with
the money lender as a security against the loan
and also making a pledge to pay back the
money. To your pledge, the money lender
agrees to keep the valuables as a security. In
this special type of bailment where goods act
as a security for payment of loan is called a
pledge.
In brief:
Bailment vs Pledge
• Bailment is an act of transferring goods to
another person and such goods need to be
returned to the owner after the completion of
the purpose
• Bailment involves only goods other than
property and money
• Pledge is a special type of bailment where
you promise to pay the money a money
lender gives in exchange for your valuable
goods that act as a security.

Pledge

PLEDGE :-

It is defined in the following words, "Bailment
of goods as a security for the payment of a
debt or performance of a promise is called
pledge."

Bailor is called pledgor or "Pawnor" and Bailee
is called "Pawnee" or pledgee.

Example :- Mr. Shukla borrows Rs. Ten
thousands from Mr. Pritam and keeps his
motor cycle as security for payment of the
debt. The bailment of motor cycle is called
pledge.

Note : In this example Mr. Shukla is a Pawnor
and Mr. Pritam is a Pawnee.

BASIC ESSENTIALS OF PLEDGE :-

Following are the important essentials of
pledge :

1. Moveable Property :-
The pledge is concerned with the moveable
property. All types of goods and valuable
documents are included in it.

2. Transfer of Possession :-

In case of pledge only possession of goods
transferred by the pawnor to the pawnee.

Example :- Mr. Nelson ledges car with Mr.
Mcculan and gets Rs. 100,000. He gives the
possession of car to Mr Mcculan.

3. Ownership Right :-

In case of pledge, the ownership of the goods
remains with the pawnor. It is not transfered
to pawnee.

Example :- Mr. Wali pledges the plot with Mr.
Raffel and gets 10 lac. The ownership of the
plot remains with Mr. Wali.

4. Case of Mere Custody :-

Those people who have only mere custody of
the goods cannot pledge them.

Example :- A custodian cannot pledge his
masters banglow. It will be invalid pledge.

5. Limited Interest :-

Pledge property cannot be used for unlimited
interest. When a person pledges goods in
which he has only limited interest, the pledge
is valid to the extent of that interest only.

Example :- Mr. Nelson gives car to Mr. Andre
for repair, but does not pay Rs. 20,000 repair
charges. Mr Andre pledges the car with Mr.
Smith and borrows Rs. fifty thousands. This
pledge is valid only up to ten thousands.