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Difference between Bailment and Pledge

Difference Between Bailment and Pledge

Introduction

Both bailment and pledge are types of special contracts under the Indian Contract Act, 1872.
Both involve the delivery of goods from one person to another for a specific purpose.
However, there are some important differences between bailment and pledge based on the purpose, rights, and duties of the parties.

In this assignment, we will understand both concepts separately and then explain their differences.

Meaning of Bailment

According to Section 148 of the Indian Contract Act, 1872:

"A bailment is the delivery of goods by one person to another for some purpose, upon a contract that the goods shall be returned once the purpose is accomplished or otherwise disposed of according to the instructions of the person delivering them."

Parties to Bailment:

  • Bailor: The person who delivers the goods.

  • Bailee: The person who receives the goods.

Example of Bailment:

  • Giving your clothes to a dry cleaner is bailment.
    You expect the clothes to be cleaned and returned.

Meaning of Pledge

According to Section 172 of the Indian Contract Act, 1872:

"A pledge is the bailment of goods as security for payment of a debt or performance of a promise."

Parties to Pledge:

  • Pawnor: The person who pledges the goods.

  • Pawnee: The person to whom goods are pledged.

Example of Pledge:

  • Giving gold jewelry to a bank to take a loan is a pledge.
    The jewelry is kept as security until the loan is repaid.

Key Differences Between Bailment and Pledge

Basis of Difference Bailment Pledge
Definition Delivery of goods for a specific purpose with a promise to return them. Delivery of goods as security for repayment of a loan or fulfillment of a promise.
Purpose Purpose can be anything like safekeeping, repair, transportation, etc. Purpose is always to act as security against a loan or debt.
Right to Sell Bailee does not have the right to sell the goods. Pawnee has the right to sell the goods after giving proper notice if the pawnor defaults.
Example Giving a car to a garage for servicing. Pledging gold to a bank for a loan.
Ownership Ownership remains with the bailor. Ownership remains with the pawnor, but the pawnee has special rights.
Consideration May or may not involve money or loan. Always involves a loan or some kind of debt/security.
Duties of Receiver Bailee must take reasonable care of the goods and return them. Pawnee must take reasonable care and return goods after debt is cleared.
Remedy on Default Bailee can claim expenses but cannot sell goods. Pawnee can sue the pawnor and also sell the goods after notice.

Important Points to Remember

  • Every pledge is a bailment, but every bailment is not a pledge.

  • In a pledge, the goods are given specifically as security, but in a bailment, goods can be given for any lawful purpose.

  • In a pledge, the pawnee has a legal right to sell the goods if the pawnor does not fulfill his promise, but a bailee cannot sell the goods in ordinary bailment.

Case Laws

1. Lallan Prasad v. Rahmat Ali (1967):
It was held that the pawnee can sell the pledged goods if the pawnor fails to repay, after giving reasonable notice.

2. Kaliaperumal Pillai v. Visalakshmi (1938):
It was held that in bailment, the bailee must return the goods after the purpose is completed and cannot use the goods for his own benefit.

Conclusion

Bailment and pledge are two important concepts in law related to the transfer of goods.
The main difference lies in the purpose for which the goods are delivered.
While bailment is made for various reasons, pledge is specifically made for securing a loan or obligation.
Understanding these differences is important for anyone dealing with property, business, or finance.

Thus, both bailment and pledge help in protecting the interests of the parties involved and are governed by the principles laid down in the Indian Contract Act, 1872.


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