CONTRACT OF

BAILMENT AND
PLEDGE

B. Law
 Definition
Section 148 of the contract act, 1872 has defined bailment
as “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 of
according to the directions of the person delivering them”.
The person delivering the goods is called ‘bailor’. The
person to whom they are delivered is called ‘bailee’.
Example

Suman delivered a piece of cloth to a tailor to be

stitched into a coat. Here , there is a contract of
bailment, between Suman and the tailor. Suman is
‘bailor’, and the tailor is the ‘bailee’, and the purpose of
delivering the cloth is to get a coat stitched.
Essential characteristics of bailment
Bailment is a contract
Bailment is of movable goods
Bailment involves transfer of possession of goods
The transfer under bailment is temporary
The goods must be delivered to the other person
The bailor has the right to the return of goods
 Kinds of bailment
On the basis of charge:
1. Gratuitous bailment: where the goods are delivered
by the bailor to bailee without any charges.
e.g- a person is giving his scooty to his friend
without any charges.
2. Non- gratuitous bailment: in this the goods are
delivered for some consideration.
e.g- an auto owner giving it on hire to an auto driver.
Cont.
On the basis of benefits:
1. Bailment for the exclusive benefit of bailor only: for
instance, A while going out of station, hands over a box
of ornaments to B for safe custody.
2. Bailment for the exclusive benefit of bailee only: e.g
giving a loan of something by the bailor to the bailee.
3. Bailment for the mutual benefit of both bailor and
bailee: e.g giving a tent on rent.
 Duties of the bailor
To disclose faults in the goods bailed [sec (150)].

To repay the necessary expenses [sec(158)].

To indemnify the bailee [sec(164)].

Liability on premature breach of bailment [sec(159)].

 Rights of bailor

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 Duties of the bailee
To take reasonable care of the goods bailed [sec(151)]

Not to make any unauthorized use of goods bailed [sec(153)].

Not to mix the goods bailed with his own goods [sec(155)].

To return the goods [sec(160)]

To return any increase or profit from the goods bailed s[sec(163)].

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Rights and liabilities of finder of
goods
Section 71 provides that, “a person who finds the good
belonging to another and takes them into his
possession is called the finder of goods”.
His duties and liabilities are mentioned below:
1. to take reasonable care of goods.
2. to restore the goods to the real owner.
3. no to use the goods for his own purpose.
 Lien

Lien means the right of one man to retain that which

is in his possession belonging to another until some
debt or claim of the person in possession are satisfied.
Characteristics of lien
Possession is essential for exercising the right of lien.
Without possession, there can be no lien.
The right of lien arises from statute or law, not from a
contract.
The possession must be rightful, and not obtained by
force, fraud or misrepresentation
The right of lien is a right to possess something, not to
sell it
The right of lien is not transferable to a third person
Kinds of lien
 Pledge
Meaning :
According to section 172, ‘pledge’ is “the bailment of
goods as security for payment of a debt or performance
of a promise.”
The bailor in this case is called the “pawner”. The
bailee is called the “pawnee”.
Pledge can be made only of movable properties.
 Difference between bailment and
pledge
Basis Pledge Bailment
1.Object the goods are delivered as the goods are generally
a security for the payment delivered for care-taking
of a debt or the performa- or for a specific usage.
-nce of a promise.
2. Scope bailment is include in a pledge is not included in
pledge. Bailment.
3. Uses the pawnee does not have there is no restriction on
right to use the goods. The bailee from using the
goods.
Essentials of a Valid
Pledge
Pledge is only of movable goods
Pledge involves judicial possession of goods
Pledge involves transfer of possession
Pledge can only be of a saleable commodity
Pledge involves return of goods
Rights of a Pawnor or Pledger

Right to get back the goods pledged [sec(160 & 161)]

Right to increase or profit [sec(163)]
Right to compensation
Right to get profit in case of sale [sec(176)]
Defaulting pawnor’s right sec(175)]
Duties of pawnor
To pay the debt
To disclose the defects in goods [sec(150)]
To repay the necessary expenses [sec(175)]
Duty after sale
Rights of pawnee or pledgee
Right to retainer to goods [sec(173)]
Right of retainer for subsequent advances
Right to extraordinary expenses [sec(175)]
Right in case the pawnor makes default [sec(176)]
Right against true owner in case the pawnor’s title is
defective
Duties of a pawnee
To take reasonable care of the goods pledged [sec(151)]
Not to make improper use of goods pledged [sec(154)]
Not to mix the goods pledged with his own goods
[sec(156 & 1570]
To return the goods pledged after the performance of
the contract [sec(160)]
Who may PLEDGE?
As per rule, only the owner of goods has the right to pledge
the goods. A non-owner of goods cannot make a valid
pledge. If non-owner makes a pledge, it will be void. But
there are exceptions to the rule when even a non-owner can
make a valid pledge.
These exceptions are:
 Pledge of goods by mercantile agents [sec(178)]
 Pledge where pawnor has limited interest in goods
[sec(179)]
 Pledge by a person in possession under a voidable contract
[sec(178)(a)]
Cont.

 Pledge by co-owner in possession of goods

 Pledge by a buyer in possession before sale in
completed