Comparison Chart

BASIS FOR
BAILMENT PLEDGE
COMPARISON

Meaning When the goods are temporarily When the goods are delivered to
handed over from one person to act as security against the debt
another person for a specific owed by one person to another
purpose, it is known as bailment. person, it is known as the pledge.

Defined in Section 148 of the Indian Contract Section 172 of the Indian Contract
Act, 1872. Act, 1872.

Parties The person who delivers the goods The person who delivers the goods
is known as the Bailor while the is known as Pawnor while the
person to whom the goods are person to whom the goods are
delivered is known as Bailee. delivered is known as Pawnee.

Consideration May or may not be present. Always present.

Right to sell the The party whom goods are being The party whom goods are being
goods delivered has no right to sell the delivered as security has the right
goods. to sell the goods if the party who
delivers the goods fails to pay the
debt.

Use of Goods The party whom goods are being The party whom goods are being
delivered can use the goods only, delivered has no right to use the
for the specified purpose. goods.

Purpose Safe keeping or repairs, etc. As security against payment of

debt.

Key Differences Between Bailment and Pledge

The following are the major differences between Bailment and Pledge

1. A Bailment is a contract in which goods are transferred from one party to

another party for a short period for a specific objective. The Pledge is a kind of
Bailment in which goods are pledged as security against payment of debt.
2. A Bailment is defined under section 148 while Pledge is defined under section
172 of the Indian Contract Act, 1872.
3. In bailment, the consideration may or may not be present, but in the case of a
pledge, the consideration is always present.
4. The objective of bailment is safe custody or repairing of goods delivered. On
the other hand, the sole purpose of delivering the goods is to act as security
against the debt.
5. The receiver has no right to sell the goods in case of bailment whereas if
Pawnor does not redeem the goods within the reasonable time, the Pawnee
can sell the goods after giving notice to him.
6. In bailment, the goods are used by the bailee only for the said purpose.
Conversely, in pledge, Pawnee has no right to use the goods.
 As per section 172 of the Indian Contract Act, 1872, a Pledge is a contract
where a person deposits an article or good with a lender of money as security
for the repayment of a loan or performance of a promise. Pledge is also
known as a pawn. The depositor or the bailor is the Pawnor and the bailee or
the depositee is the Pawnee. The Pawnee is under the duty to take
reasonable care of the goods pledged with him.

Duties of a Bailee/Pawnee

Duties of a bailee in respect of goods are as follows:

1. Take proper care of goods

According to section 151, it is the duty of a bailee to take care of goods bailed
to him. Bailee should take care of these goods as an ordinary man will take
care of his goods of the same value, quality, and quantity.

Thus, if the bailee takes due care of goods then he will not be liable for any
loss, deterioration of such goods. Also, the bailee needs to take the same
degree of care of goods whether the bailment is for reward or gratuitous.

However, the bailee is not liable for any loss due to the happening of any act
by God or public enemies though he agrees to take special care of the goods.

2. Not to make unauthorized use

As per section 153, the Bailee shall not make any unauthorized use of goods
bailed. In case he makes any unauthorized use, then bailor can terminate the
bailment.

Bailor can also claim for damages caused to goods bailed due to
unauthorized use as per Section 154.

3. Keep goods separate

The bailee needs to keep the goods separately from his own goods. He
should not mix the goods under bailment with his own goods. In case bailee
mixes the goods with his own goods without the consent of the bailor, then:

i. Bailor also has an interest in the mixture.

ii. If the goods can be separated or divided, the property in the goods remains
with both the parties. But, the bailee bears the expenses of separation or any
damages arising from the mixture.
iii. If it is not possible to separate the goods, the bailee shall compensate the
bailor for the loss of goods.

4. Not set adverse title

A bailee must not set an adverse title to the goods bailed.

 5. Return Goods

The duty of the bailee is to return the goods without demand on the
accomplishment of the purpose or the expiration of the time period. In case of
his failure to do so, he shall be liable for the loss, destruction, deterioration,
damages or destruction of goods even without negligence.

6. Return increase or profits

A bailee shall return the goods along with any increase or profit accruing to
the goods to the bailor, in the absence of any contract to the contrary.

For example, A leaves a hen in the custody of B. The hen gets a chick. B shall
deliver the hen along with the chick to A.

Duties of a bailor/ Pawnor

Duties of a bailor are as follows:

1. It is the duty of a bailor to disclose all faults. If bailor fails to disclose such
faults then he will be responsible for the damage caused to goods or loss
suffered by the bailee.
2. Also, the bailor is under the duty to pay the extraordinary expenses incurred
by the bailee for such bailment.
3. It is the duty of the bailor to accept the goods after the purpose for which such
goods were bailed is accomplished.
4. It is the duty of the bailor to indemnify the bailee for the cost incurred due to
the defective title of goods bailed to the bailee.

Solved Example on Duties of Bailee and Bailor

Explain Bailee’s, Particular Lien?

Ans. As per section 170 of the Indian Contract Act, 1872, the bailee has a lien
on the goods that he receives under the contract of bailment. When the bailor
bails the goods to the bailee for a particular purpose and the bailee expands
skill and labour on these goods, he has a right to retain the goods until the
bailor pays him his charges in respect of skill and labour. However, the right of
lien arises only when the bailee uses skill and labour on the goods to confer
an additional value on the goods.

For example, X gives a piece of cloth to Y for stitching a shirt. Y promises to

deliver the shirt in a week’s time. After a week Y has the shirt ready. But, he
has a right to retain it until X pays him his charges.

Section 171 states the provisions for a general lien. It is a right to detain any
property belonging to another person which is in the possession of the person
exercising the lien in respect of any payment lawfully due to him.
(1) What is Bailment?
As per section 148 of the contract act 1872, the bailment is a process of transferring
the goods of one person delivering to another person without altering the ownership
of the goods in the form of an agreement is called bailment.
(2) What is Bailor?
Bailor is an individual who gives up the right of owning his property for a short period
without altering the ownership of the goods or property is known as a bailor.
(3) What is Bailee?
Bailee refers to a single person who receives the goods or the property from the
bailor gaining the custody of change as a caretaker but not the ownership.
Since with the bailment agreement, they do have their rights and duties of bailor and
bailee which we shall know below.
(4) DUTIES AND RIGHTS OF BAILOR:
DUTIES OF BAILOR :
1.Duty to Disclose Faults (section-150) :
It is the bailor’s responsibility to let the bailee know the faults in the goods or the
property before the contract itself. If he fails to do then the bailor himself responsible
for the damage caused to the bailee.
Example :
A lends his car to B which has faults, he does not give the information or the fact
about the problematic car condition to B. Then B, rides it, he met with an accident,
and B was injured. In that situation, A is accountable for the injury of B.
2. Duty to Refund Bailee’s Expenses (section -158) :
A bailor has to bear the extraordinary expenses to the bailee for taking care of the
goods which are required or kept or work done in the process of keeping it in good
condition. Bailor has to pay the expenses that occurred by bailee by him.
3.Duty to Indemnify the Bailee ( section-159 ) :
Bailor has always a right to terminate the agreement at any time even when it was
for a specific period. But bailor has to bear any loss which occurs to the bailee due to
ending the agreement before time.
4.Duty to Payback the Bailee for the defective title (section-164):
If the bailee suffers any loss or damage as a consequence of the misleading title or
defective title by the bailor. The bailor is accountable for the whole damage and loss.
RIGHTS OF BAILOR :
1.Right to the enforcement of Performance:
When the bailor sends the goods to the bailee for a particular purpose, and in the
instance of non-gratuitous bailment, the bailor has a primary right to acquire all the
benefit through the latter on of such goods.
2.Right to Demand For Damages:
Bailor has the right to demand the damages against the goods if they caused by
bailee carelessness.
3.Return of Goods (section 159):
When the goods are delivered under the agreement of bailment under section 159,
Bailor always holds a right to ask for the return of the goods before the time of
agreement completes. If the bailee will have any loss by this decision bailor, he has
to pay for the loss.
4.Compensation from wrong Doer (section 180):
If a third person damages the goods bailed or deprives the right of the bailee to use
of goods, then both bailor and bailee have the right to file suit against the third
person and ask for compensation.
In the case of Morvi Mercantile Bank Ltd. v. Union of India, (AIR 1965 SC 1954), the
supreme court held, Under this section, a pledge being a bailment of goods as
security for payment of a debt, the pledgee will have the same remedies as the
owner of the goods would have against a third person for deprivation of the said
goods or injury to them.
(5) DUTIES AND RIGHTS OF BAILEE :
DUTIES OF BAILEE:
In the case of N.R. Srinivasa Iyer v. New India Assurance Co. Ltd. Madras. (AIR
1983 SC 899), the supreme court held “Once a man has taken charge of goods as a
bailee for reward, it is his duty to take reasonable care to keep them safe; and he
cannot escape that duty by delegating it to his servant. If the goods are lost or
damaged, whilst they are in his possession, he is liable unless he can show-and the
burden is on him to show that the loss or damage occurred without any neglect or
default or misconduct of himself or of any of the servants to whom he delegated his
duty.”
1.Reasonable care of the Goods (section -151):
The bailee holds the duty to take care of the goods received by the bailor and when
he fails to return it in the same condition causing damage then the bailee is liable for
the damage.
When the goods are damaged after taking the bailee’s proper care. Then the bailee
is not chargeable for the loss under section 152.
2.Duty of Unofficial use of Goods:
The bailee has to make sure they use goods only under the bailment contract if he
uses them illegally then the bailment agreement can be canceled by the bailor under
section 154.
3.Not to Merge Bailor Goods with his Other Goods:
Bailee must keep the goods apart from his goods. He should not mix his goods with
his own or any other goods without taking the permission of the bailor. If he indulges
in the mixing of other goods bailee must pay charges for damage to the bailor.
4.Not to keep an Adverse Title:
The bailee does the process of caretaker on behalf of the bailor. He has to return the
goods once the contract comes to an end or if the bailor asks him to return the
goods. According to section 117 in the evidence act 1872, Bailee can never hold the
right of ownership for the goods as the bail.
5.Return The Benefit with the Goods:
Bailee has to give the profit which is acquired by the goods of the bailor at the time of
returning the goods. Unless if it is mentioned in the bailment agreement.
6.Duty to Return the Goods:
Bailee has to give back or send back the goods to the bailor after finishing the
bailment agreement, as well he has to send back the goods only on the directions of
the bailor.
If goods tend to get damaged in the process. The bailee holds the responsibility even
without his context. Duties can be considered as the key role in the rights and duties
of bailor and bailee the whole process of bailment.
RIGHTS OF BAILEE:
1.Right to Transport the Goods to any one of the Joint Bailors:
If the goods of several joint owners (bailers) are being delivered, then the bailee has
the right to send the goods to any one of the bailers, unless if there is a specific
mention of a bailor in the agreement.
2.Right to Deliver the Goods to Bailor without Title (section -166):
According to section 166 of the act, If the bailor has no title to the goods and the
bailee returns them back to the bailor in good faith, the bailee is not liable to the
owner.
3.Right of lien (section-170/171):
When the rightful charges are not accounted to the bailee, regarding the goods
service which is done, then he earns the right to keep the goods with him until the
charges are paid is called the right of lien.
4.Right to expenses or Remuneration:
Bailor has to pay the necessary expenses which were occurred on the goods for the
work done to take care of them. Such amount has to be compensated to the bailee
under the conditions of the bailment agreement.
Rights are very essential in the rights and duties of bailor and bailee because it
benefits both resulting in mutual growth in business and relationship.