INDEX

TOPIC PAGE

1 Introduction 2

2 Bailment
o 2.1 Essentials of bailment
o 2.2 Duties of a Bailor
o 2.3 Duties of a Bailee 2-5
o 2.4 Rights of Bailor
o 2.5 Rights of Bailee

3 Pledge
o 3.1 Essentials of Pledge
o 3.2 Rights of Pawnor 5-6
o 3.3 Rights of Pawnee

4 Difference between contract of Bailment and Pledge 6-7

o 4.1 Conclusion

5 Sample contract of Bailment 8-9

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1.0 INTRODUCTOIN
The article breaks down the distinction and correlation among Pledge and Bailment. In our
everyday cooperation’s with different sorts of individuals for different reasons intentionally or
accidentally. Undertaking an authoritative relationship has become so basic that individuals
barely understand that what they are attempted could have lawful results.
One such model is the situation of "Bailment". Bailment Contracts are expressed in Section 148
of the Act, expresses that when any individual conveys any products to someone else on an
agreement that upon an agreement that after the reason for which it was conveyed is finished the
merchandise will be gotten back to the proprietor of that products.
It fundamentally implies that when products have been given to somebody for any utilization, at
that point what use has been finished then those merchandise must be gotten back to the
proprietor of the products. The collector of the merchandise as though it's the property of the
beneficiary and will be obligated if the products get annihilated.
Like, assuming A hands over adornments to B for cleaning, and the gems gets taken, at that point
B will be responsible to A. For this situation since the adornments was given over to B for some
specific reason (For Polishing) and brief reason, so it turns into the agreement of bailment and A
turns into the Bailor and B turns into the Bailee. The entire motivation behind going into the
agreement of bailment is to guarantee that merchandise which are given over to someone else for
any individual will be returned after the satisfaction of that reason.
Now, in the case of pledge, as stated in section 172, is nothing but a special kind of pledge. In this
case, j the delivery of goods is there, but it differs from bailment on the point of object of the
delivery. In Bailment, the delivery of the goods is done for the completion of some purpose, but
here the goods are delivered as some kind of security for a loan taken or for a performance of a
promise.
Like, assume, A takes a credit from B for Rs 50,000 for a specific reason. Presently for the
security of that advance B conveys the papers of his property to A so A can guarantee that B will
return the cash credited or probably he can auction his property and recuperate his cash.

2.0 BAILMENT
A bailment is an exceptional agreement characterized under area 148 of the Indian Contract Act,
1872. It is gotten from a French word for example "bailer" which signifies "to convey". The
etymological significance of bailment is "giving over "or" change of ownership of merchandise".
By bailment, we mean conveyance of merchandise starting with one individual then onto the next
for a specific reason on the agreement that they will repay the products on the satisfaction of the
reason or discard them according to the heading of the bailor. The individual who conveys the
merchandise is known as bailor. Furthermore, the individual to whom the merchandise are given
is known as Bailee. Also, the property bailed is known as Bailed Property.

2.1 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,

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  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.
 Exception: The money deposited in the bank shall not account to bailment as the money
returned by the bank would not be the same identical notes. And it is one of the essentials of
the bailment that same goods are to be delivered back.

2.2 DUTIES OF A BAILOR

Section 150 of the Indian Contract Act, 1872 bound the bailor with certain duties to disclose the
latent facts specifically pertaining to defect in goods. Bailor’s duty of disclosure are:

 Gratuitous Bailment: It is the obligation of the bailor to uncover every one of the imperfections
in the products that he knows about to the Bailee that can meddle with the utilization of
merchandise or can open him to phenomenal dangers. Furthermore, inability to do a similar will
make bailor obligated for harms.

 Non-Gratuitous Bailment (Bailment for Reward): This obligation especially manages the
merchandise given on employ. According to this arrangement, when the products are bailed for
enlist, at that point in such a circumstance regardless of whether the bailor knows about the
imperfection in the merchandise or not will be expected to take responsibility for the injury that
has been caused because of the presence of such deformity.

2.3 DUTIES OF BAILEE

Bailee has to fulfil several obligations as per Indian Contract Act, 1872. That is:

 Duty to take reasonable care: It is the obligation of the Bailee to deal with products as his own
merchandise. He will guarantee all security means that are important to ensure the
merchandise. The norm of care ought to be like taken consideration by a judicious man. The
merchandise will be dealt with similarly whether they are needless or non-unwarranted. The
Bailee will be expected to take responsibility for installment of remuneration on the off chance
that he neglects to take due care. In any case, if the Bailee has taken due care and rather than
that the merchandise are harmed then in such a circumstance Bailee won't be at risk to pay
remuneration. The Bailee isn't responsible for the deficiency of merchandise because of
obliteration by fire. (Section 151-152)

 Duty not to make unauthorized use of the goods: Bailee is compelled by a sense of honor to
utilize the products for a particular reason just and not something else. On the off chance that
he utilizes the merchandise for some other reason than what is concurred for then the bailor
has the option to end such bailment or is entitled with pay for harm caused because of
unapproved use. (Section 153-154)

 Duty not to mix bailor’s goods with his own goods: It is the obligation of the Bailee not to blend
bailor's products in with his own. However, in the event that he needs to do likewise, he will
look for assent from the bailor for blending of merchandise. In the event that the bailor concurs
for the blending of the products, the interest in the blended merchandise will be partaken in
extent. In the event that, Bailee without the assent of bailor blends the products in with his own
then two circumstances emerge: merchandise can be isolated and merchandise can't be

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 isolated. In the previous case the Bailee needs to bear the expense of partition and in the last
case since there is the deficiency of the merchandise, in this manner, bailor will be entitled with
harms of such misfortune. (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)

 Duty to deliver to the bailor increase or profit if any on the goods bailed: The Bailee has
an obligation to return the merchandise alongside increment or benefit subject to agreement
despite what might be expected. Accumulation that has gathered from the bailed merchandise
is the piece of the bailed products and thusly bailor has the directly over such growths assuming
any. Also, such gradual additions will be given over to the bailor alongside the merchandise
bailed. For example, A leaves a cow in the care of B and cow brings forth the calf. At that point B
is compelled by a sense of honor to give up the bailed products alongside growth to the bailor.
(Section 163)

2.4 RIGHTS OF A BAILOR

As such Indian Contract Act, 1872 does not provide for Rights of a Bailor. But Rights of a
Bailor is same as Duties of the Bailee i.e. Rights of Bailor = Duties of Bailee. So the rights of
bailor are:

 Enforcement of Bailee’s Duty: Since Right of the bailor is same as the privilege of the Bailee,
hence on the satisfaction of all obligations of Bailee the bailor's privilege is refined. For instance,
it is the obligation of the Bailee to give the gradual additions and it is the privilege of bailor to
request something very similar.
 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: In the event that the Bailee doesn't agree with the
provisions of the agreement and acts in a careless way in such case the bailor has the option to
cancel the agreement. (Section153)
 Right to claim compensation: 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.

2.5 RIGHTS OF A 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)

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  Right to remuneration: At the point when the merchandise are bailed to the Bailee he is
qualified for get certain compensation for administrations that he has delivered. In any case, in
the event of needless bailment, the Bailee isn't granted any compensation.
 Right to recover compensation: Now and again a circumstance emerges wherein bailor didn't
have the ability to contract for bailment. Such an agreement making misfortune the Bailee,
thusly the Bailee has the option to recuperate such pay from the bailor. (Section168)
 Right to Lien: Bailee has the right over Lien. By this, we imply that if the bailor neglects to make
installment of compensation or doesn't pay the sum due, the Bailee has the privilege to keep
the merchandise bailed in his ownership till the time account holder contribution are cleared.
Lien is of two kinds: specific lien and general lien. (Section 170-171)
 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)

3.0 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 favor
the goods are pledged is known as Pledgee or Pawnee.

3.1 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.
 Exception: In exception circumstances pledgee has the right to sell the movable goods or
property that are been pledged.

3.2 RIGHTS OF PAWNOR

According to Section 177 of the Indian Contract Act, 1872 the Pawnor has the Option to
Redeem. By this, we imply that on the reimbursement of the obligation or the exhibition of the
guarantee, the Pawnor can reclaim the products or property promised from the Pawnee before
the Pawnee makes the real deal. The privilege of reclamation is doused once the genuine deal is
finished by the Pawnee according to one side under segment 176 of the Indian Contract Act,
1872.

3.3 RIGHTS OF A PAWNEE

The rights of the Pawnee as per Indian Contract Act, 1872 are:

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  Right to retain the goods: On the off chance that the Pawnor neglects to make the installment
of an obligation or doesn't proceed according to the guarantee made, the Pawnee has the
option to hold the merchandise swore as security. In addition, Pawnee can likewise hold
products for non-installment of interest on obligation or non-installment of costs brought about.
Yet, Pawnee can't hold products for some other obligation or guarantee other than that
concurred for in the agreement. (Segment 173-174)
 Right to recover extraordinary expenses: The expenses incurred by Pawnee on the preservation
of goods pledged can be recovered from Pawnor. (Section 175)
 The right of suit to procure debt and sale of pledged goods: On the inability to make
reimbursement to Pawnee of the obligation, the Pawnee has two right: either to start suit
procedures against him or sell the products. In the previous case, the Pawnee holds the
products with himself as insurance security and start the court procedures. He need not give any
notification of such procedures to the Pawnor. What's more, in the last case, the Pawnee can
sell the merchandise subsequent to giving due notice of offer to the Pawnor. In the event that
the sum got from the offer of merchandise is not exactly the sum due then the rest sum can be
recuperated from Pawnor. Furthermore, on the off chance that the Pawnee gets more sum than
the due sum, such excess is to be rewarded Pawnor. (Section 176)

4.0 DIFFERENCE BETWEEN CONTRACT OF BAILMENT AND PLEDGE

BASIS BAILMENT PLEDGE
Meaning It’s a contract where goods are entrusted It’s a peculiar kind of bailment in which the
upon by the bailor to the bailee for the pawnor delivers his goods to the pawnee as
fulfilment of certain objective after which the a security for a debt owed to that person or
good/s is returned to the owner. performance of a contract owned to that
person.
Parties In this case, there are two parties; Bailor-who In this case, there are two parties; Pawnor –
gives the goods for a certain purpose & bailee who gives his good as security for debt &
– who is the receiver of the good. pawnee – who receives the good.
Sections It’s defined under section 148 of the Act. It’s defined under section 172 of the Act.
Considerations In the contract of bailment, consideration But, in this case, since the whole concept of
may be involved or may be missing. It the pledge is that it’s a security for a debt so
depends upon the contractual terms. the involvement of consideration is
important or else there will be no contract of
pledge.
Right to sell the In this case, the good/s is entrusted to the In this case, since the good entrusted upon
good bailee for a specific use, so in this case, the works as a security/assurance for the debt so
bailee has no right to sell the good but has the in case the debt is not paid then pawnee can
duty to return it after the fulfilment of the sell the good as he has been given this right
purpose. so that he can satisfy his debt.
Purpose The main purpose of undertaking a bailment The main purpose of undertaking this
contract is for the main safekeeping of goods contract is for ensuring security against the
or for the repair. payment of the debt.
Use of Goods In this case, the bailee can use the goods to In this case the pawnee can never use the
the extent allowed by the bailor for the good/s for any purpose. He doesn’t have the
specified purpose only. right to do it, only has the right to keep the
good/s until the repayment of debt is made.
Lien Bailee can use the lien over the good/s but Pledgee also exercises the lien over the
only for the labor and service. goods but for the non-payment of the
interest.
Rights of the  Right to compensation [section  Right to retainer [section 173-

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 pawnee & 164]:-  If the bailor has no right to 174]:- This right entails that the
bailee deliver the goods or if he didn’t give pawnee can retain the goods till the
any direction on how to use or time payment of the debt has been
maintain the goods and in response, made. It’s imperative to note that
the bailed goods lost some value, he can retain the goods only for that
then bailor shall be responsible for it debt for which it was given, not for
any other debt.
 Right to expenses [section 158]: –
When the bailee has to keep the  Right to extraordinary expenses
goods of the bailor and in return, no [section 175]: – under this right,
compensation is given, then the pawnee can claim any
bailee can ask for any necessary extraordinary expenses which he
expenses which he has incurred for has incurred in maintaining and
the performance of the bailment. preserving the goods bailed by the
pawnor.
 Right to lien [section 170-171]:- if
the bailor’s lawful expenses remain  Right to sell [section 176]: – If
unpaid then he may retain the goods pawnor fails in repayment of the
till the time charges are paid in debt, then pawnee can exercise two
respect to that property. rights under this section; either
retain the goods & sue the pawnor
 Right to sue [section 180-181]: – for the repayment of the debt or sell
Under this right, bailee can sue any the pledged goods and satisfy the
person who has wrongfully deprived debt.
him of using the goods. As per this
right, both the bailor & bailee right
against the wrongdoer is one &
same.

Who can There is as such no bar or special provisions  Mercantile agent [section
undertake provided specifically mentioning who can or 178]
pledge/bailmen cannot enter into bailment.  Pawnee can further pledge
t the goods to subsequent
Pawnee provided he shall
have the right to do so as per
his interest on the property
[section 179].

Payment In the case of bailment, the bailee can either In this case, if pawnor fails to pay the debt,
default retain the goods till the payment is made or the pawnee can sell the good entrusted upon
can sue the bailor for his outstanding dues. as security to the debt.

4.1 CONCLUSION
We can conclude the above information within three significant points.

 Bailment is the handover of goods for general purpose and Pledge used for a specific
purpose such as obtaining debt.  
 Bailee cannot sell the goods but can hold the goods if bailor doesn’t pay the service
charge and Pledgee can sell the goods pledged if pledger defaults.

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  Bailee can use the goods with the permission of the owner whereas Pledgee can’t use
the goods pledged.

5.0 SAMPLE CONTRACT OF BAILMENT

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