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BAILMENT AND PLEDGE

WITH ITS DIFFERENCES

Assignment submitted for the partial fulfillment of the degree

BBALLB Honors of 1st semester under the supervision of
Professor Sukanya Majilya
Department of Law, Techno India University

By Adrish Chatterjee
BBA LLB Honors, 2nd Semester
ID- 201001501001
Techno India University
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ACKNOWLEDGEMENT

I would like to express my deep sense of gratitude and sincere thanks

to Professor Sukanya Majilya for her guidance, support and
encouragement in completing my project. I would also like to thank
all the faculty members of the department for their help and moral
support.

I would like to take this opportunity to thank my Co-Ordinator Dr.

Avipsha Sarkar and Dr. Vibha Pandey and our director Dr.
Pushpita Pramanik who allowed us to do the project that helped me
gain heaps of knowledge.

Last but not the least, I would like to thank my family for their
constant support, wishes and encouragement, which are an invaluable
possession to me than anything else.
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INDEX
SNO TOPIC PAGE
NO
1 INTRODUCTION 04
2 BAILMENT 05
3 TYPES OF BAILMENTS 06
4 ESSENTIALS OF BAILMENT 06
5 DUTIES OF BAILOR 07
6 DUTIES OF BAILEE 08
7 RIGHTS OF BAILOR 09
8 RIGHTS OF BAILEE 10
9 TYPES OF LIENS 11
10 RIGHTS OF FINDER OF GOODS 12
11 PLEDGE AND ITS ESSENTIALS 14
12 RIGHTS OF PAWNOR AND PAWNEE 15
13 DIFFERENCES BETWEEN BAILMENT 17
AND PLEDGE
14 CONCLUSION 19
15 BIBLIOGRAPHY 20
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INTRODUCTION

Bailment and Pledge are two special contracts that are often confused. Every
pledge is a bailment but every bailment is not pledge. Bailment means a
delivery of goods from one person to another for a special purpose. Whereas
Pledge means delivery of goods as security for the payment of debt or
performance of a promise. Therefore, Bailment & Pledge are two different
contracts. Pledge is a special kind of bailment.
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BAILMENT

A Bailment is a special contract defined under section 148 of the Indian

Contract Act, 1872. It is derived from a French word i.e., “bailer” which means
“to deliver”. The etymological meaning of bailment is “handing over “or
“change of possession of goods”. By bailment, we mean delivery of goods from
one person to another for a special purpose on the contract that they shall
reimburse the goods on the fulfilment of the purpose or dispose of them as per
the direction of the bailor. The person who delivers the goods is known as
bailor. And the person to whom the goods are given is known as Bailee. And
the property bailed is known as Bailed Property.

MODES OF DELIVERY IN BAILMENT

 Actual Delivery: If the goods are physically given into the

possession of the buyer, the delivery is an actual delivery.

 Constructive delivery: The transfer of goods can be done even

when the transfer is affected without a change in the possession or
custody of the goods. For example, a case of the delivery by
attornment or acknowledgment will be a constructive delivery. If you
pick up a parcel on behalf of your friend and agree to hold on to it for
him, it is a constructive delivery.

 Symbolic delivery: This kind of delivery involves the delivery of a

thing in token of a transfer of some other thing. For example, the key
of the go downs with the goods in it, when handed over to the buyer
will constitute a symbolic delivery.
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TYPES OF BAILMENTS

 Gratuitous Bailment: It is the duty of the bailor to disclose all the

defects in the goods that he is aware of to the Bailee that can interfere
with the use of goods or can expose him to extraordinary risks. And
failure to do the same will make bailor liable for damages.

 Non-Gratuitous Bailment (Bailment for Reward ): This duty

particularly deals with the goods given on hire. As per this provision,
when the goods are bailed for hire, then in such a situation even if the
bailor is aware of the defect in the goods or not will be held liable for
the injury that has been caused due to the existence of such defect.

ESSENTIALS OF BAILMENT

 There shall be a contract between the parties for the delivery of goods,

 The goods shall be delivered for a special purpose only.

 Bailment can only be done for movable goods and not for immovable goods
or money.

 There shall be a transfer of possession of goods.

 Ownership is not transferred to Bailee; therefore, Bailor remains the owner.

 Bailee is duty bound to deliver the same goods back and not any other goods.
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DUTIES OF BAILOR

1. Duties under section 150

a. Duties of gratuitous bailor: -

 He is supposed to disclose the bailee, faults in the

goods bailed, of which he has knowledge.
 He should also disclose such information which will
materially interfere with the use of goods, or expense
the bailee to extraordinary risk.

b. Duties of non-gratuitous bailor: -

 Bailor is liable for damages caused to the bailee by the

defective goods. It is immaterial whether the bailor
had a previous knowledge of such defect or not. It is
his duty to check that the goods which he delivers are
reasonably safe for the purpose of bailment.

2. Duty to pay the bailee necessary expenses (sec-158)

Bailor shall repay the bailee all necessary expenses incurred by him for the
purpose of bailment.

3. Duty to indemnify the bailee for defective title (sec-164)

Bailor shall indemnify the bailee for any loss caused to bailee due to
defective title of the bailor.

4. Duty to receive back the goods (sec-161)

It is the duty of the bailor to receive back the goods, when returned by
bailee. If the bailor wrongfully refuses to receive back the goods, he shall be
liable to pay ordinary expenses of custody of goods incurred by the bailee.

DUTIES OF BAILEE
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 Duty to take reasonable care: 

It is the duty of the Bailee to take care of goods as his own goods. He
shall ensure all safety measures that are necessary to protect the goods.
The standard of care should be such as taken care by a prudent man.
The goods shall be taken care of equally whether they are gratuitous or
non-gratuitous. The Bailee shall be held liable for payment of
compensation if he fails to take due care. But if the Bailee has taken
due care and instead of that the goods are damaged then in such a
situation Bailee will not be liable to pay compensation. The Bailee is
not liable for the loss of goods due to destruction by fire. (Section 151-
152)

 Duty not to make unauthorized use of the goods:

Bailee is duty bound to use the goods for a specific purpose only and
not otherwise. If he uses the goods for any other purpose than what is
agreed for then the bailor has the right to terminate such bailment or is
entitled with compensation for damage caused due to unauthorized
use. (Section 153-154)

 Duty not to mix bailor’s goods with his own goods:

 Itis the duty of the Bailee not to mix bailor’s goods with his own. But
if he wants to do the same then he shall seek consent from the bailor
for mixing of goods. If the bailor agrees for the mixing of the goods,
then the interest in the mixed goods shall be shared in proportion. In
case, Bailee without the consent of bailor mixes the goods with his
own then two situations arise: goods can be separated and goods can’t
be separated. In the former case the Bailee has to bear the cost of
separation and in the latter case since there is the loss of the goods,
therefore, bailor shall be entitled with damages of such loss. (Section
155-157)

 Duty to return the goods on the fulfilment of purpose:

Bailee is duty bound to return the goods once the purpose is achieved
or on the expiry of the time period for which the goods were bailed.
But if the Bailee makes default in returning the goods on proper time,
then he will be responsible with the loss, destruction or deterioration of
the goods if any. (Section 160-161)
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In the case of Bank of India v. Grains & Gunny Agencies, the court held that if
the goods are lost or destroyed due to the negligence of servant of Bailee, then
in such case as well Bailee shall be liable.

 Duty to deliver to the bailor increase or profit if any on

the goods bailed:
The Bailee has a duty to return the goods along with increase or profit
subject to contract to the contrary. Accretion that has accrued from the
bailed goods is the part of the bailed goods and therefore bailor has the
right over such accretions if any. And such accretions shall be handed
over to the bailor along with the goods bailed. For instance, A leaves a
cow in the custody of B and cow gives birth to the calf. Then B is duty
bound to hand over the bailed goods along with accretion to the bailor.
(Section 163)

RIGHTS OF BAILOR
 Enforcement of Bailee’s Duty:

Since Right of the bailor is same as the right of the Bailee, therefore on
the fulfilment of all duties of Bailee the bailor’s right is accomplished.
For example, it is the duty of the Bailee to give the accretions and it is
the right of bailor to demand the same.

 Right to claim damages: 

If the Bailee fails to take care of the goods, the bailor has the right to
claim damages for such loss. (Section 151)

 Right to Termination the Contract:

 If the Bailee does not comply with the terms of the contract and acts
in a negligent manner in such case the bailor has the right to rescind
the contract. (Section 153)

 Right to claim compensation: 

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If the Bailee uses the goods for an unauthorized purpose or mixes the
goods which cause loss of goods in such case bailor has the right to
claim compensation.

 Right to demand the return of goods:

It is the duty of the Bailee to return the goods and the bailor has the
right to demand the same.

RIGHTS OF BAILEE

 Right to recover expenses:

In the contract of Bailment, the Bailee incurs expenses to ensure the

safety of goods. The Bailee has the right to recover such expenses
from the bailor. (Section 158)

 Right to remuneration: 

When the goods are bailed to the Bailee, he is entitled to receive

certain remuneration for services that he has rendered. But in case of
gratuitous bailment, the Bailee is not awarded any remuneration.

 Right to recover compensation:

At times a situation arises wherein bailor did not have the capacity to
contract for bailment. Such a contract causing loss to the Bailee,
therefore the Bailee has the right to recover such compensation from
the bailor. (Section 168)

 Right to Lien:
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Bailee has the right over Lien. By this, we mean that if the bailor fails
to make payment of remuneration or does not pay the amount due, the
Bailee has the right to keep the goods bailed in his possession till the
time debtor dues are cleared. Lien is of two types: particular lien and
general lien. (Section 170-171)

In the case of Surya Investment Co. v. S.T.C, the court held that expenses
incurred by Bailee during preservation of goods under lien shall be borne by
bailor.

 Right to suit against a wrongdoer:

After the goods have been bailed and any third party deprives the
Bailee of use of such goods, then the Bailee or bailor can bring an
action against the third party. (Section 180)

GENERAL AND PARTICULAR LIEN

GENERAL LIEN
A general lien is a right of one person to retain any property or goods which are
in his possession belonging to another person until the promise or liability is
discharged.

It is a right to retain the property belonging to another for a general balance of

the account.

A general lien is available to bankers, factors, attorneys of High Court and

policy brokers.

Example: A delivers a rough diamond to B, a jeweller, to be cut and polished,

which is accordingly done. B is entitled to retain the stone till he is paid for the
services he has rendered.
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PARTICULAR LIEN
Particular lien is one in which the person has a right to retain the possession of
goods for which the charges are due. Particular lien is available only to bailee
against those goods in respect of which he has rendered some service involving
the exercise of labour or skill.

Example- A delivered some gold to B, a goldsmith for the purpose of making
ornaments. B made the ornaments. Here, B is entitled to retain the ornaments till
he is paid for the services he has rendered.

RIGHTS OF FINDER OF GOODS

MAY SUE FOR SPECIFIC REWARD OFFERED (168)

The finder of goods has no right to sue the owner for compensation for trouble
and expense voluntarily incurred by him to preserve the goods and to find out
the owner, but he may retain the goods against the owner until he receives such
compensation, and where the owner has offered a specific reward for the return
of goods lost, the finder may sue for such reward, and may retain the goods
until he receives it.
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When finder of thing commonly on sale may sell it (169)

When a thing which is commonly the subject of sale is lost, if the owner cannot
with reasonable diligence be found, or if he refuses upon demand, to pay the
lawful charges of the finder, the finder may sell it— —When a thing which is
commonly the subject of sale is lost, if the owner cannot with reasonable
diligence be found, or if he refuses upon demand, to pay the lawful charges of
the finder, the finder may sell it—"

(1) when the thing is in danger of perishing or of losing the greater part of its
value, or

(2) when the lawful charges of the finder, in respect of the thing found, amount
to two-thirds of its value.
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PLEDGE

Pledge is a kind of bailment. Pledge is also known as Pawn. It is defined under

section 172 of the Indian Contract Act, 1892. By pledge, we mean bailment of
goods as a security for the repayment of debt or loan advanced or performance
of an obligation or promise. The person who pledges the goods as security is
known as Pledger or Pawnor and the person in whose favour the goods are
pledged is known as Pledgee or Pawnee.

ESSENTIALS OF PLEDGE

Since Pledge is a special kind of bailment, therefore all the essentials of

bailment are also the essentials of the pledge. Apart from that, the other
essentials of the pledge are:

 There shall be a bailment for security against payment or performance

of the promise,
 The subject matter of pledge is goods,
 Goods pledged for shall be in existence,
 There shall be the delivery of goods from pledger to pledgee,
 There is no transfer of ownership in case of the pledge.

o Exception: In exception circumstances pledgee has the right to sell

the movable goods or property that are been pledged.
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RIGHTS OF PAWNOR

Defaulting pawnor’s right to redeem (sec 177)

If a time is stipulated for the payment of the debt, or performance of the
promise, for which the pledge is made, and the pawnor makes default in
payment of the debt or performance of the promise at the stipulated time, he
may redeem the goods pledged at any subsequent time before the actual sale of
them1, but he must, in that case, pay, in addition, any expenses which have
arisen from his default.

Pledge where pawnor has only a limited interest (sec 179)

Where a person pledges goods in which he has only a limited interest, the
pledge is valid to the extent of that interest. —Where a person pledges goods in
which he has only a limited interest, the pledge is valid to the extent of that
interest.

RIGHTS OF PAWNEE

Pawnee's right of retainer (sec 173)

The Pawnee may retain the goods pledged, not only for payment of the debt or
the performance of the promise, but for the interests of the debt, and all
necessary expenses incurred by him in respect of the possession or for the
preservation of the goods pledged
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Pawnee not to retain for debt or promise other than that

for which goods pledged. Presumption in case of
subsequent advances (sec 174)
The Pawnee shall not, in the absence of a contract to that effect, retain the goods
pledged for any debt or promise other than the debt or promise for which they
are pledged; but such contract, in the absence of anything to the contrary, shall
be presumed in regard to subsequent advances made by the Pawnee.

Right to recover extraordinary expenses (sec 175) 

The expenses incurred by Pawnee on the preservation of goods pledged can be
recovered from Pawnor.

The right of suit to procure debt and sale of pledged goods

(sec 176)
 On the failure to make repayment to Pawnee of the debt, the Pawnee has two
right: either to initiate suit proceedings against him or sell the goods. In the
former case, the Pawnee retains the goods with himself as collateral security
and initiate the court proceedings. He need not provide any notice of such
proceedings to the Pawnor. And in the latter case, the Pawnee can sell the goods
after giving due notice of sale to the Pawnor. If the amount received from the
sale of goods is less than the amount due then the rest amount can be recovered
from Pawnor. And if the Pawnee gets more amount than the due amount then
such surplus is to be given back to Pawnor.
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DIFFERENCES BETWEEN
BAILMENT AND PLEDGE

Basis Bailment Pledge

Transfer of goods from one

Transfer of goods from one person to
person to another as security for
Meaning another for a specific purpose is
repayment of debt is known as
known as the bailment.
the pledge.

The person who delivers the

The person who delivers the bailed
pledged goods is known as
goods is known as Bailor and the
Parties Pledger or Pawnor and the
person receiving such goods is known
person receiving such goods is
as Bailee.
known as Pledgee or Pawnee.

The consideration may or may not be

Consideration Consideration is always there.
present.

Bailee has no right to sell the goods Pledgee or Pawnee has the right
Right to Sell
bailed. to sell the goods.

Bailee can use the goods only for a

Pledgee or Pawnee cannot use
Use of Goods specific purpose only and not
the goods pledged.
otherwise.

The purpose of pledged goods

Purpose The purpose of bailed goods is for is to act as security for
safekeeping or repairs etc. repayment of debt or
performance of the promise.
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DIFFERENCES IN EXAMPLES

ON BAILMENT
Suppose Mr X handovers his car to a car service centre (say Y) to get his car
serviced, in this case, there is a transfer of property from Mr X to Y for car
service. Hence such transfer of goods is known as a bailment. Moreover, Mr X
who delivered his car is called a Bailor whereas Mr Y is known as a Bailee.

ON PLEDGE
Now if Mr A pledges the Gold to the ICICI Bank to get a Gold Loan, in this
case, the possession of gold transfers from Mr A to ICICI Bank to avail a loan.
Therefore, such transfer of possession of goods is known as Pledge. Also, here
the Pledgor/Pawnor would become Mr A and Pledgee/Pawnee will be ICICI
Bank. 
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CONCLUSION
When a person transfers the possession of his goods to another person for some
specific purpose, then it is called the contract of bailment. If there is a benefit of
one party through the bailment and other party does not get anything in return,
that bailment is called gratuitous bailment. And when the contract of bailment is
done which result in the mutual benefit of both i.e., bailor and bailee, is called
non-gratuitous bailment. The bailor has the duty to disclose the defect of the
goods and to repay the amount incurred by a bailee to keep goods safe and any
damages against the damage caused to bailee by the goods of the bailor.
similarly, the bailee has the duty to keep the goods of the bailor safe and to
return them to bailor after completion of the purpose for which the bailment
takes place.

In the pledge, the pawnor transfer/bailed his goods to the Pawnee as security
against the amount he takes from the Pawnee. The pawnor has a duty to pay the
amount back to the Pawnee and the Pawnee has a duty to return the goods after
pawnor pays the amount. The Pawnee should not make unauthorized use of the
goods bailed to him if he does, he will be liable to pay compensation to the
pawnor.  
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BIBLIOGRAPHY

https://www.toppr.com/

https://en.wikipedia.org/

https://indiankanoon.org/

https://lawctopus.com/
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THANK YOU