Legal and Regulatory Moreover, if a time is stipulated for the payment of the debt, or the performance of the prom-

Environment of ise, for which the pledge is made, and the pawnor defaults on that count, i.e, repaying the debt
Business or performing the promise, he may redeem the goods pledged at any subsequent time before the
actual sale of them. However, he must, in that case, pay, in addition, any expenses that have arisen
Notes
from his default [Section 177].

Duties of pawnor
The pawnor has the following duties.
Duty to repay the debt or perform the promise  The pawnee is bound to comply with the terms
of pledge. Accordingly, he must repay the debt in full along with interest and other charges, if any,
or perform the promise at the stipulated date or time.
Duty to disclose defects in the goods pledged  The pawnor should disclose to the pawnee defects
in the goods pledged, if any, of which he is aware, failing which he will be liable for any loss to the
pawnee due to such defect.
Duty to meet extraordinary expenses  If the pawnee has incurred any extraordinary expenses
for preserving the goods pledged, it is the duty of the pawnor to compensate him for the same.

Pledge by non-owners
Generally, only the owner or co-owner of the goods can pledge them. But to facilitate mercan-
tile transactions, the law, under certain circumstances, permits a pledge by a person who is not
the owner but is in the possession of the goods. Accordingly, the following non-owners too can
make a valid pledge of the goods.
1. A mercantile agent
2. Person in possession under voidable contract
3. Seller or buyer in possession after sale
4. Person having limited interest.
Mercantile agent  Where a mercantile agent is, with the consent of the owner, in possession
of goods or the document of title to goods, any pledge made by him, when acting in the ordinary
course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the
owner of the goods to make the same, provided that the pawnee acts in good faith and has, at the
time of pledge, no notice of the fact that the agent has no authority to pledge [Section 178].
Person in possession under voidable contract  A person who is in possession of goods under a
voidable contract can make a valid pledge provided the pawnee has acted in good faith and without
any knowledge of the defect in pawnor’s title [Section 178 A].
Seller or buyer in possession  A seller left in possession of goods sold or documents of title
thereof is no more the owner. But the pledge made by him will be valid provided the pawnee
acted in good faith and had no knowledge of the defect in the pawnor’s title. On the same foot-
ing, a buyer, who with the consent of the seller, obtains possession of goods before sale can make
a valid contract [Refer Section 30 of Sale of Goods Act].
Person having limited interest  Where a person who pledges goods in which he has only a
limited interest, for example, he is a mortgagee or has a lien over these goods, the pledge will
be valid to the extent of that interest [See Section 179].

Contracts of Agency: Introduction

Contact of agency is another class of special contracts contained under Sections 182 to 238 of the
Indian Contact Act, 1872. If a person asks another person to purchase or sell certain goods, or pro-
vide a particular service on his/her behalf, and the latter promises to do the needful, a contract of
agency comes into being. Agency is basically a relationship that arises when one person, called the
principal, authorises another, called the agent, to act on his/her behalf, and the other person agrees
to do so. The law of agency is based on the principle ‘what a person does by another, he/she does
by himself/herself’. Thus, the most important effect of establishing an agency relationship is that
Self-Learning it enables the agent to make a contract between his/her principal and a third party.
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