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Bailment & Pledge:

 The word bailment is derived from the French

word bailer which means to deliver. Bailment is
the delivery of goods by one person to another
from some purpose, when the purpose is
accomplished, the goods is returned to or
otherwise disposed off according to the direction
of the person delivering them.

Essentials and Legal Rules as to Bailment:
 Contract: A bailment is usually created by
agreement b/w the bailer & bailee

Delivery of Goods:
 In bailment, the possession of goods must be delivered by the bailer to the

 No Transfer of Ownership: In bailment, possession is transferred from

one person to another but ownership of goods remains with the bailer.

 Delivery of Goods for Some Purpose: The delivery of goods must be for
some specific performance.

 Return of Specific Goods: Goods are delivered to the bailee with the
condition that the same goods will be returned to the bailer after the
accomplishment of purpose.

 Movable Goods: In bailment, the goods bailed must be movable.

Movable Goods: In bailment, the goods bailed
must be movable.
Deposit of Money Into Bank
 It is Bailment: Deposit of money into bank by a
customer is not a contract of bailment because
the money deposited is not returned in identical
coins and notes deposits.

Classification of Bailment:

On the basis of benefit

 Bailor
 Bailee

On the basis of Rewards:

 Gratituous: Where neither the bailer nor the bailee get

any remuneration, then, it gratuitous.
 Non-Gratituous: When either the bailer or bailee get
remuneration, then it is known as non-gratuitous

Right of Bailer:

 Right of Termination: Bailer has right to terminate the
contrite of bailment, if the bailee does any inconsistent act
with regards to good

 Right to Demand Return of Goods: Any time in case of
gratuitous bailment. The bailer can demand back goods
bailed at any time even if he had lend it for a specific
goods. Period or for a specified purpose.

 Enforcement of Rights: The duties of bailee are the rights of

bailer & bailer can enforce those rights by filing a suit
against bailee.
Duties of Bailer:
 Duty to disclose known defects: A bailer is bound to disclose
all the defects relating to goods of which he is known.

 Duty to Bear Extraordinary expenses: Where the bailment is
gratuitous & the bailee is not to receive any remuneration,
the bailer shall pay bailee all the necessary expenses.

 Bear Risk for Loss: Bailer is to bear risk of loss or destruction
of the thing bailed if the bailee had taken prudent care of
the goods.

Rights of Bailee:

 Right to Interplead: If the person other than bailer

claims the goods, bailee may apply to court to
stop the delivery.

 Right Against 3rd Party: If a 3rd person
wrongfully deprive bailee to use the goods or
cause any injury, then bailee is entitled to such
remedies which are available to real owner.

 Right of Particular Lien: When the bailee has rendered
some services or skills on the good he had right of
particular lien unless he is paid.

 Right of General Lien: Banker, factors, attorney of High

Court, policy broker will be entitled to retain as a
security for a general balance of account any goods
bailed to then.

 Rightto Claim Compensation in Case of faulty

 Right to claim necessary expenses

 Right to return the goods to any of the joint bailer

Duties of Bailee:

 Duty of Reasonable care.

 Duty not to make unauthorized use of goods.
 Duty not to mix bailer’s goods with his own.
 Duty to return any profit out

 Particular Lien: It is available to the bailee against such goods in respect of which he
has rendered some servicing involving the excise of labour or skills.

 General Lien: It entitles a person to retain the position of goods belonging to another
for general balance of account.

 Finder of Goods: A person who comes by an article is not obliged to pick it up, but if he
does so or take charge of it becomes a bailee. Such person is called finder of goods.
Finder of goods is in position of bailee & enjoys all the rights & duties of bailee.

Rights of Finder of Goods:
 Right of Lien.

 Right of sue of reward. Exp. The finder of goods can sue to real owner for
the reward, if any, has been offered by the owner of goods.

 Right to Sale. Exp. The finder of goods generally cannot sell the goods, he
found but in following cases he can do so:

 When true owner of goods cannot be find after reasonable search.

 They where the true owner refuses to pay the lawful charges to finder of
 When the goods are perishable in nature.
 Where the lawful charges exceeds 2/3rd of the value of goods
Duties of Finder of Goods: 

 To take due care of the goods.

 To find the true owner.
 Must not use the goods of his personal purpose.
 He should not mix the goods with his own goods.
 Must return the goods to the real owner if he is


 Bailment of goods as a security for payment of
debts or performance of promise is called
pledge. The bailer is called pledger or pawner
and the bailee is called Pawnee.

Essential of Pledge:
Delivery of Goods:

 The delivery of goods to pledgee is necessary to

constitute a pledge.
 Delivery of goods should be by way of security.
 The security being for the payment of debt or the
performance of a promise.
 Goods must be movable.
 An implied condition to return the goods.

Contracts of Indemnity and Guarantee

 A contract of indemnity is one whereby a person promises
to save the other from loss caused to him by the
conduct of the promisor himself or of any third
person.For example,a shareholder executes an
indemnity bond favouring the company thereby
agreeing to indemnify the company for any loss caused
as a consequence of his own act.
 The person who gives the indemnity is called the
'indemnifier' and the person for whose protection it is
given is called the 'indemnity-holder' or 'indemnified'.

 A contract of indemnity is restricted to cover the loss
caused by the promisor himself or by a third person.
The loss must be caused by some human agency. Loss
arising from accidents like fire or perils of the sea are
not covered by a contract of indemnity
A contract of ‘Guarantee'
 A contract of ‘Guarantee' is a contract, whether
oral or written, to perform the promise, or
discharge the liability, of a third person in case
of his default.
 A contract of guarantee is a conditional promise by
the surety that if the principal debtor defaults he
shall be liable to the creditor.

 A contract of guarantee involves three persons,viz.
a person who gives the guarantee is called the
'surety'; the person in respect of whose default
the guarantee is given called the 'principal
debtor'; and the person to whom the guarantee is
given is called the 'creditor'.
Difference between Indemnity and Guarantee:-

 In a contract of indemnity there are two parties i.e. indemnifier and indemnified.
A contract of guarantee involves three parties i.e. creditor, principal debtor
and surety.

 An indemnity is for reimbursement of a loss, while a guarantee is for security of

the creditor.

 In a contract of indemnity the liability of the indemnifier is primary and arises

when the contingent event occurs. In case of contract of guarantee the liability
of surety is secondary and arises when the principal debtor defaults.

 The indemnifier after performing his part of the promise has no rights against the
third party and he can sue the third party only if there is an assignment in his
favour. Whereas in a contract of guarantee, the surety steps into the shoes of
the creditor on discharge of his liability, and may sue the principal debtor.

Contracts of Bailment and Pledge

 A 'bailment' is the delivery of goods by one person to

another for some purpose upon a contract that they
shall, when the purpose is accomplished, be returned or
disposed of according to the directions of the person
delivering them.

 The person delivering the goods is called the 'bailor' and
the person to whom the goods are delivered is called the

 The examples of a contract of bailment are:- delivering a
watch or radio for repair; leaving a car or scooter at a
parking stand; leaving luggage in a cloak room;
delivering gold to a goldsmith for making ornaments;
leaving garments with a dry cleaner,etc.

 The essence of bailment is the transfer of possession. The

ownership remains with the owner. There cannot be a
bailment of immovable property.
 A 'pledge' is a bailment of goods wherein the
goods are delivered as a security for payment of
a debt or performance of a promise.

 The bailor is called the 'pledgor' or 'pawnor' and

the bailee is called the 'pledgee' or 'pawnee'.

 Thus, pledge is a special kind of bailment. Pledge
can be made only of movable properties.

 In order to make the pledge legally valid it is

essential that the pledgor has the legal right or
title to retain the goods.
Difference between Bailment and Pledge:-
 Purpose:- A pledge is made for a specific purpose, while
bailment can be made for any purpose.

 Property:- In bailment, the bailee gets only the possession

of goods bailed. The ownership remains with the bailor.
In the case of pledge, the pledgee acquires a special
property in the goods pledged whereby he gets possession
coupled with the power of sale, on default.

 Right of sale :- Bailee can exercise a lien on the goods

bailed. He has no right of sale. But in case of a pledge,
the pledge can sell the goods after due notice to pawner.

Contracts of Agency

 An 'Agent' is a person employed to do any act or to represent

another in dealings with third person. The person who
employs the agent and for whom such act is done, or who is
so represented, is called the 'principal'.
 The relation between the agent and the principal is called
'Agency'. It is only when a person acts as a representative of
the other in the creation,modification or termination of
contractual obligations,between that order and third
persons, that he is an agent.
 The essence of a contract of agency is the agent's
representative capacity coupled with a power to affect the
legal relations of the principal with third persons.

Contracts of agency are based on two important
 Whatever a person can do personally shall also be
allowed to be done through an agent except in
case of contracts involving personal services
such as painting, marriage, singing, etc.

 He who does an act through a duly authorized

agent does it by himself i.e. the acts of the agent
are considered the acts of the principal.

Thank you……