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.

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Rights and Duties of Bailor

DUTIES or RESPONSIBILITIES or LIABILITIES
of the BAILOR :-
Following are the important duties and
liabilities of the bailor :
1. Explain the Defect :-
It is the basic duty of the bailor that he should
disclose all the defects of the goods before
delivering to bailee. If the bailor does not
disclose then he himself will be responsible for
loss.
Example :- Mr. Wands hires a car from Mr.
Zane. Car is defective. Mr. Zane does not
disclose facts that car is defective. Mr. Wands
drives a car and he is injured. Mr. Zane is
responsible to Mr. Wands for damage.
2. Warning to the Bailee :-
If a bailor feels that bailee is showing
carelessness and goods are in danger. He
should give warning to the bailee.
3. Payment of Necessary Expenses :-
It is the duty of the bailor that he should also
pay necessary expenses sustained by the bailee
connection with the bailment.
4. To Indemnify The Bailee :-
It is the duty of the bailor that he should
compensate the loss of bailed which he has
suffered due any one of the following reasons :
a. The bailor was not entitled to make the
bailment.
b. The bailor was not entitled to give direction
in this respect.
c. The bailor was not entitled to receive back
the goods.
IMPORTANT RIGHTS OF BAILOR :-
Following are the important rights of bailor :
1. Right of Return :-
As the purpose of bailment completes bailor
has a right to take back the goods bailed. If
bailee fails to return then bailor has a right to
claim for compensation.
2. Return Before Time :-
With the consent of the bailee the bailor may
return his goods before the specified period.
3. Right of Termination :-
The contract of the bailment can be terminated
by the bailor if the goods bailed are misused
or against the conditions of the contract.
4. Right of Profit :-
The bailor has right to get profit from the
goods bailed according the conditions of the
contract.
5. Gratuitous Good Right Of Return :-
In case of gratuitous bailment the bailor has a
right to terminate the contract at any time. If
bailee cause a loss it may be compensated to
the bailor.

Essentials of a Bailment

1. There should be a contract:

A bailment is based on a contract, i.e., it is
created by a contract. The contract of bailment
may be express or implied. In some cases e.g.,
in case of finder of goods, a contract of
bailment can be implied by law.

2. Delivery of goods by one person to
another:

In bailment, there must be delivery of goods
by one person to another. However, the word,
'delivery' is very wide. It may be actual or
constructive.
It should be noted that in bailment, only
possession of the goods passes from one
person to another. Possession means control
of goods to the exclusion of others. Mere
custody of goods as against possession is not
sufficient. For example, a master while giving
his goods to his servant retains the possession
with him and parts only with the custody of
the goods.
Thus to create bailment, there must be delivery
of goods.

Examples:

(1) A delivers his watch to a watch-maker for
repair.

(2) A lady handed over her old jewellery to a
jeweler for melting and making it into a new
one. Every evening, she used to collect the
half-made jewellery and put in into a box kept
in the shop of the jeweler. She used to keep
the key of the box with her.
One day the box was stolen. Held, the jeweler
was not liable as the jeweler had re-delivered
the jewellery to the lady and as such, the
jeweler could not any more be regarded as a
bailee. The lady must bear the loss herself.
[Kaliaperumal Pillai v. Visolakshmi]
It should be noted that in bailment, only the
possession of the goods is transferred not the
ownership. Again, only movable goods can be
bailed as immovable goods cannot be
delivered.

3. The goods are delivered for certain
purpose:

The purpose may vary from safe-keeping or
safe custody to repairing or changing the form
of the goods.

Examples:

(1) A leaves his suit-case with a Railway Cloak
Room for safe custody.

(2) A gives his watch for repair to a watch-
maker.

(3) A gives a piece of cloth to a tailor for
stitching it into a shirt.

4. The same goods must be returned:

For a transaction of bailment, it is necessary
that the same goods must be returned.
Where money is deposited in a savings bank
account or any other account, it is not a
transaction of bailment because the bank is
not going to return the same currency notes
but will return only an equivalent amount.
However, where money or valuables are kept
in safe custody, it will amount to a transaction
of bailment as these will be returned in specie.
It should be noted that return of goods in
specie does not mean that their form cannot
change.

For example, old ornaments can be
changed into new one. A piece of cloth can be
stitched into a shirt.

Consideration is not necessary in case of
Contract of Bailment :

In case of bailment for mutual benefit of the
bailor and bailee, consideration is there for
both the parties e.g., A gives his watch for
repair to B for Rs. 10. For A, consideration is
repair of his watch and for B, consideration is
Rs. 10. However, in case of bailment either for
the benefit of the bailor or bailee alone,
consideration in the form of something in
return is not there. In such cases the
detriment suffered by the bailor in parting
with the possession of goods is considered as a
sufficient consideration to support the promise
on the part of the bailee to return the goods.