These are special kinds of contracts dealing with delivery of goods. Both bailment and pledge involve transfer of possession (not ownership) of goods from one person to another.
Contract of Bailment (Section 148)
Bailment is the delivery of goods by one person to another for some purpose, upon a contract that the goods shall be returned or otherwise disposed of after the purpose is accomplished.
Parties
- Bailor: The person who delivers the goods
- Bailee: The person to whom the goods are delivered
Essentials
- Delivery of movable goods
- For a specific purpose
- Contract (express or implied)
- Return or disposal of goods after use
Duties of Bailor
- To disclose known faults in goods
- To compensate Bailee for any loss due to undisclosed defects
- To repay necessary expenses incurred by Bailee
Duties of Bailee
- Reasonable care of goods
- Not to use goods for unauthorized purposes
- To return goods on completion of purpose
Rights of Bailee
- Right to claim compensation for loss suffered due to Bailor’s negligence
- Right to lien (retain goods until dues are paid)
Types of Bailment
- Gratuitous Bailment (without reward)
- Bailment for Reward (commercial bailment)
Example
A gives his watch to B for repair. B is expected to return the watch after repairing it. This is bailment.
Contract of Pledge (Section 172)
Pledge is a special kind of bailment in which goods are delivered as security for payment of a debt or performance of a promise.
Parties
- Pawnor: The one who pledges the goods
- Pawnee: The one to whom goods are pledged
Essentials
- Delivery of goods (movable only)
- As security for a debt or promise
- Return of goods upon repayment or performance
Rights of Pawnee
- Right to retain goods till payment
- Right to recover expenses incurred
- Right to sell goods after giving notice if payment is not made
Duties of Pawnee
- Reasonable care of goods
- Not to use goods
- Return goods on repayment
Duties of Pawnor
- Payment of debt or performance of promise
- Reimbursement of any expenses
Example
A pledges his gold chain with B as security for a loan of ₹10,000. If A fails to repay, B can retain or sell the chain after notice.
Difference between Bailment and Pledge
| Basis | Bailment | Pledge |
|---|---|---|
| Purpose | For safekeeping or service | As security for a debt or promise |
| Right to Sell | Bailee cannot sell goods | Pawnee can sell after notice |
| Use of Goods | Bailee may use as per contract | Pawnee cannot use the goods |
| Consideration | May or may not involve consideration | Always involves a debt or promise |
Important Case Laws
Chand Mal v. Bright Bros (1960)
Held that a Bailee is bound to return the goods after the purpose is complete and is liable for negligence.
Lallan Prasad v. Rahmat Ali (1967)
Held that if the Pawnee sells the goods without giving notice to the Pawnor, the sale is invalid and the Pawnee is liable.