BAILMENT AND PLEDGE

MEANING OF BAILMENT

The word ‘Bailment’ is derived from a French word ‘baillier’ which means ‘to deliver’.

According to Section 148, 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 otherwise disposed off
according to the directions of the person delivering them.

Explanation:
If a person already in possession of the goods of another contracts to hold them as a bailee, he thereby becomes
the bailee, and the owner becomes the bailor of such goods, although they may not have been delivered by way
of bailment.

The person delivering the goods is called the ‘bailor’.

The person to whom the goods are delivered is called the ‘bailee’.

Examples of bailment:
1.X who is going out of station delivers a horse to Y for proper care.
2.X lends a horse to Y for his riding only without charge.
3.Y hires a horse from X for riding.
4.X delivers a horse to a doctor, Y, for medical treatment.
5.X sells a horse to Y who leaves the horse in the possession of X.
 Essential elements of a Bailment:

1. Agreement:
There must be an agreement between the bailor and the bailee. This agreement may be either express or implied.
However, a bailment may be implied by law also. For example, bailment between a finder of goods and owner of
goods.

2. Delivery of Goods:
There must be delivery of goods. It means that possession of goods must be transferred.
The delivery must be voluntary; for example, the delivery of jewellery its owner to a thief who shows a revolver,
does not create a bailment because the delivery is not voluntary.
Delivery may be actual or constructive.

- Actual Delivery:
A delivery is said to be actual where the goods are physically handed over by one person to another. For
example, delivery of a car for repairs a workshop dealer.

Constructive Delivery :
A delivery is said to be constructive when it is made by doing anything which has the effect of putting goods
in the possession of the intended bailee or of any person authorized to hold them on his behalf. For example,
delivery of the key of a car to a workshop dealer for the repair of the car.
3.Purpose:
The delivery of goods must be for some intended purpose. For example, wrong delivery of goods to
Jaipur Golden Roadways instead of Patel Roadways, does not create any bailment.

4.Return of Specific Goods:

The goods which form the subject matter of bailment must be returned to the bailor or otherwise
disposed off according to directions of the bailor, after the accomplishment of purpose or after the
expiry period of the bailment.
Meaning of Pledge (or Pawn)

The bailment of goods as security for payment of a debt or performance of a promise is called
pledge (or pawn).

Example: X borrows Rs 1,00,000 from Citi Bank and keeps his shares as security for payment of a debt. It is a
contract of pledge.

Meaning of a Pawnor (or Pledgor) :

The person who delivers the goods as security for payment of a debt or performance of a promise is called the
Pawnor or Pledgor. In the aforesaid example, X is the pawnor.

Meaning of Pawnee (or Pledgee) :

The person to whom the goods are delivered as security for payment of a debt or performance of a promise is
called the Pawnee or Pledgee. In the aforesaid example, Citi Bank is the pawnee.
Special Feature of Pledge:
It is the special property in goods and not the general property in goods, which passes to the
pledgee. General property means the ownership of goods and special property means the
possession of goods.

Example: A producer of a film borrowed Rs 10,00,000 from a financier-distributor and

agreed deliver the final prints of the film when ready. This agreement was not a pledge
because there was no actual transfer of possession. [Revenue Authority vs. Sudarshan
Pictures]
 Distinction between Pledge and Bailment:

Basis of distinction Pledge Bailment

Pledge is bailment of goods for
a specific purpose, i.e. Bailment is for a purpose of
I. Purpose
repayment of a debt or any kind.
performance of a duty.
Pawnee cannot use the goods Bailee can use the goods as per
II. Right to use
pledged. terms of bailment.
Pawnee can sell the goods
Bailee can either retain the
pledged after giving notice to
III. Right to sell goods or sue the bailor for his
the pawnor in case of default
dues.
by the pawnor.