DIFFERENCE BETWEEN PLEDGE AND BAILMENT

BAILMENT

The word ‘Bailment’ is derived from the French word ‘Bailer’ which means to deliver. The etymological meaning of bailment is “handing over” or “change of possession of goods”. In legal sense, it involves change of possession of goods from one person to another for some specific purpose.

Bailment is a delivery of goods on condition that the recipient shall ultimately restore them to the Bailor or dispose of them according to the direction of the Bailee or dispose of them according to the direction of the Bailor.

ACCORDING TO SECTION 18 OF INDIAN CONTRACT ACT, 1872
“It 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 of according to the directions of the person delivering them. The person delivering the goods is called bailor and the person to whom they are delivered is called bailee”.

Thus, the contract of bailment is a contract between two persons under which one person called the bailor delivers some goods for some purpose to another, called the bailee on the condition that the same goods shall be returned by the bailee to the bailor or according to his order on the fulfillment of the stated purpose.

PLEDGE

A pledge is only a special kind of bailment, and chief basis of distinction is the object of the contract. Where the object of the delivery of goods is to provide a security for a loan or for the fulfilment of an obligation, that kind of bailment is pledge. 

ACCORDING TO SECTION 172 OF INDIAN CONTRACT ACT, 1872

The bailment of goods as security for payment of a debt or performance of a promise is called “pledge”. The bailor is in this case called the “Pawnor”. The Bailee is called the “Pawnee”.

DIFFERENCE BETWEEN THE PLEDGE AND BAILMENT

BASISBAILMENTPLEDGE
1.    MeaningIt’s a contract where goods are entrusted upon by the bailor to the bailee for the fulfilment of certain objective after which the good/s is returned to the owner.It’s a peculiar kind of bailment in which the pawnor delivers his goods to pawnee as security for a debt owed to that person or performance of a contract owned to that person.
2.    PartiesIn this case, there are two parties; Bailor-who gives the goods for a certain purpose & Bailee- who is the receiver of the good.In this case, there are two parties; Pawnor- who gives his good as security for debt & pawnee-who receives the good.
3.    SectionsIt’s defined under section 148 of the Act.It’s defined under section 172 of the Act.
4.    ConsiderationsIn the contract of bailment, consideration may be involved or may be missing. It depends upon the contractual terms.But, in this case, since the whole concept of the pledge is that it’s a security for a debt so the involvement of consideration is important or else there will be no contract of pledge.
5.    Right to sell the goodIn this case, the good/s is entrusted to the bailee for a specific use, so in this case, the bailee has no right to sell the good but has the duty to return it after the fulfilment of the purpose.In this case, since the good entrusted upon works as a security/assurance for the debt so in case the debt is not paid then pawnee can sell the good as he has been given this right so that he can satisfy his debt
6.    PurposeThe main purpose of undertaking a bailment contract is for the main safekeeping of goods or for the repair.The main purpose of undertaking this contract is for ensuring security against the payment of the debt.
7.    Use of goodsIn this case, the bailee can use the goods to the extent allowed by the bailor for the specified purpose only.In this case, the pawnee can never use the good/s for any purpose. He doesn’t have the right to do it, only has the right to keep the good/s until the repayment of debt is made.
8.    LienBailee can use the lien over the good/s but only for labour and servicePledgee also exercises the lien over the goods but for the non-payment of the interest.
9.    Rights of the pawnee & bailee  I.     Right to compensation [section 164] II.     Right to expenses [section 158] III.     Right to lien [section 170-171] IV.     Right to sue [section 180-181]  I.     Right to retainer [section 173-174] II.     Right to extraordinary expenses [section 175] III.     Right to sell [section 176]  
10.    Who can undertake pledge/bailmentThere is as such no bar or special provisions provided specifically mentioning who can or cannot enter into bailment.        I.            Mercantile agent [section 178] II.            Pawnee can further pledge the goods to subsequent Pawnee provided he shall have the right to do so as per his interest on the property [section 179].
11.         Payment defaultIn the case of bailment, the bailee can either retain the goods till the payment is made or can sue the bailor for his outstanding dues.In this case, if pawnor fails to pay the debt, the pawnee can sell the good entrusted upon as security to the debt.

CONCLUSION

The pledge has a limited scope as compared to bailment; many businessmen take a loan from the financial institution by pledging their stock as security. In short, we can say that every pledge is a bailment, but every bailment is not a pledge. So, both of them are very important at their places.

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