Pledge

Definition (S.172 Indian Contract Act):

“ Bailment of goods as security for payment of a
debt or performance of a promise is called
pledge”

Bailor is called pledger/pawner

Bailee is called pledgee/pawnee

Distinction between Pledge & Bailment:

1. Purpose
2. Use of goods
3. Rights
4. Lien
 Rights & Duties of Pledger
Rights:
1. To receive back
2. To enforce preservation & proper maintenance
3. To redeem the debt

Duties:
1. Must disclose any material fault or risks in goods
2. Responsible to meet extraordinary expenses in
preservation of goods pledged
3. When pledgee exercises his right of sale, any shortfall
has to be made good by pledger
4. Liablle for loss caused due to defects in his title
 Rights & Duties of Pledgee
Rights:
1. Right to retainer (S.173)
2. Right to retainer for subsequent advances
3. Right to extraordinary expenses
4. Right on default by pledger (sue/sell)
5. Right against its owner, when pledger’s title is defective
Duties:
1. Required to take as much care as any person of ordinary
prudence
2. Must not put the goods to an unauthorized use
3. Bound to return goods on payment of debt
4. Any accruals to the goods should be delivered accordingly