Bailment and Pledge

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1. Galaxy4u Avinash Murkute | Pune | M: 9637796308 1
Welcome to Learning Session on
BAILMENT & PLEDGE
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Under
The Indian Contract Act, 1872

2. Galaxy4u 2
Galaxy4u: We do Legal Documentation!
Avinash Murkute | Pune | M: 9637796308

3. Galaxy4u 3
Bailment Defined
AccordingtoSection148ofTheContractAct–“Abailmentisthe
deliveryofgoodsbyonepersontoanotherforsomepurpose,upona
contractthattheyshall,whenthepurposeisaccomplished,by
returnedorotherwisedisposedofaccordingtothedirectionsofthe
persondeliveringthem.”Thepersondeliveringthegoodsiscalledthe
‘bailor’,thepersontowhomtheyaredeliverediscalledthe‘bailee’,
andthetransactioniscalled‘bailment.’A‘bailment’isthusa
deliveryofgoodsonconditionthattherecipientshallultimately
restorethemtothe‘bailor’ordisposeofthemaccordingtothe
directionsof‘bailor.’Commonexamplesare-hiringofgoods,furnitureora
cycle,deliveringofclothtoatailorformakingasuit,deliveringawatchorscooter
forrepair,depositinggoodforsafecustody,etc.
Avinash Murkute | Pune | M: 9637796308

4. Galaxy4u 4
Essential Features of Bailment
1.ItisDELIVERYofmovablegoodsbyonepersontoanotherperson(notbeinghis
servant).Section149explainsthemodeofdeliverytothebaileeandstatesthatthe
deliveryofgoodsmaybeeither‘actual’or‘constructive’.Whenthebailorhandsoverto
thebaileephysicalpossessionofthegoodsthatiscalled‘actualdelivery.’‘Constructive
delivery’,ontheotherhand,doesnotinvolvehandingoverthephysicalpossession,but
somethingisdonewhichhastheeffectofputtingthegoodsinthepossessionofthe
bailee.Forexample,goodsstoredinagodowncanbedeliveredbyhandingoverthekey
ofthegodown,orgoodsintransitforexample,whentheyareatseaoronrailway,can
bedeliveredbyhandingoverthebillofladingortherailwayreceiptrepresentingthe
goods.
2.ThegoodsaredeliveredforsomePURPOSE.Whengoodsaredeliveredbymistake
withoutanypurpose,thereisnobailmentwithinthemeaningofthedefinition.
3.Thegoodsaredeliveredsubjecttotheconditionthatwhenthepurposeis
accomplishedthegoodsaretoRETURNEDinspecieordisposedofaccordingtothe
directionsofthebailor,eitherintheiroriginalformorinalteredform.
Avinash Murkute | Pune | M: 9637796308

5. Galaxy4u 5
Essential Features of bailment
Itistobeemphasizedthatbailmentisconcernedwithonlymovable
goods.Moneyisnotincludedinthecategoryofmovablegoods.Thus
adepositofmoneywithbankerisnotabailmentbecausethereisno
obligationtoreturntheidenticalmoney.Butifnotesandcoinsare
depositedinaboxforsafecustody,itisbailmentastheyaretobe
returnedinspecie.
Avinash Murkute | Pune | M: 9637796308
DELIVERY PURPOSE RETURN

6. Galaxy4u 6
Kinds of Bailment
Bailmentmaybeclassifiedfromthepointofview(i)benefitand(ii)
rewardtotheparties.
Kindsfrom‘benefit’pointofview.
1)Bailmentfortheexclusivebenefitofthebailor,e.g.bailorleavesgoodsinthe
safecustodyofthebaileewithoutanycompensationtobepaid.
2)Bailmentfortheexclusivebenefitofthebailee.Forexample,aloanofsome
article.ThuswhereAborrowsB’sfountainpentouseintheexaminationhall,
thebailmentisforthesolebenefitofA,thebailee.
3)Bailmentforthemutualbenefitofthebailorandthebailee.Itisthemost
commontypeofbailment.Contractsforrepair,hireetc.,fallwithinthisclass,
whereinthebailorreceivesthebenefitofserviceandthebaileebenefitsby
thereceiptoftheagreedcharges.
Avinash Murkute | Pune | M: 9637796308

7. Galaxy4u 7
Kinds of Bailment
Bailmentmaybeclassifiedfromthepointofview(i)benefitand(ii)
rewardtotheparties.
Kindsfrom‘reward’pointofview:
1)Gratuitousbailment:Itisoneinwhichneitherthebailornorthebaileeis
entitledtoanyremuneration.Forexample,loanofabooktoafriend.
2)Non-gratuitousbailment:Itisalsocalledasa‘bailmentforreward.’Here,
eitherthebailororthebaileeisentitledtoaremuneration,Forexample,
motorcarletoutforhire,clothgivenfortailoringforcharges.
Avinash Murkute | Pune | M: 9637796308

8. Galaxy4u 8
Pledge or Pawn
‘Thebailmentofgoodsassecurityforpaymentofadebtor
performanceofapromiseiscalled‘pledge’.
Thebailorinthiscaseiscalledthe‘pawnor’.Thebaileeiscalledthe
‘pawnee’.
Example:KomalborrowsRs.100fromRenuandkeepshermobileas
securityforpaymentofthedebt.Thebailmentofmobileiscalledthe
pledge.
Avinash Murkute | Pune | M: 9637796308

9. Galaxy4u 9
Pledge or Pawn
Thusapledgeisonlyaspecialkindofbailment.Heregoodsare
depositedwithalenderorpromiseeassecurityfortherepaymentof
aloanorperformanceofapromise.Otherwise,likebailment,pledge
alsoinvolvesonlyatransferofpossessionofgoodspledged.The
ownershipremainswiththepledger.Thepledgeeorpawneehasonly
aspecialinterestinthegoodspledged.Thegeneralinterestremains
inthepawnorandwhollyrevertstohimondischargeofthedebt.
Further,likebailment,apledgeisconcernedwithonlymovable
goods.Themovablegoodsincludeanykindofgoods,valuableand
documentsoftitle,e.g.Railwayreceipt,billoflading,etc.Evena
passbookissuedbypostofficecanbepledged.
Avinash Murkute | Pune | M: 9637796308

10. Galaxy4u 10
Distinctions in Bailment & Pledge
1.Astopurpose:Pledgeisthebailmentofgoodsforaspecific
purpose,i.e.toprovideasecurityforaloanorforthefulfillmentof
anobligation,whereasthereisnosuchpurposeincaseofbailment.
2.Astorightofsale:Incaseofpledge,thepledgeehasarightofsale
(ofthegoodspledged)ondefaultaftergivingpropernoticetothe
pledgerbutthereisnosuchrightofsaletothebaileeincaseof
bailment.Thebaileemayeitherretainthegoodsorsuethebailor
fornon-paymentofhisdues.
3.Astorightofusingthegoods:Incaseofpledge,thepledgeehasno
rightofusingthegoodspledged,whilenosuchrestriction,existsfor
thebaileeincaseofbailmentifthenatureoftransactionso
requires.
Avinash Murkute | Pune | M: 9637796308

11. Galaxy4u 11
Rights of the Pawnee
1.Right to retainer
2.Right of retainer for subsequent advances
3.Right to extraordinary expenses
4.Righttosuethepawnororsellthegoodsondefaultofthe
pawnor.
a)Reasonable notice
b)Sell to third party
c)Cost of sale.
Avinash Murkute | Pune | M: 9637796308

12. Galaxy4u 12
Duties of the Pawnee
1.To take reasonable care of the goods pledged.
2.Not to make any unauthorized use of the goods pledged.
3.Not to mix the goods pledged with own goods.
4.Not to violate contract. E.g. Sell without sufficient notice.
5.To return the goods on receipt of his full dues.
6.To deliver any accretion to the goods pledged. Accretion remains
the property of pawnor
Avinash Murkute | Pune | M: 9637796308

13. Galaxy4u 13
Rights and Duties of the Pawnor
RIGHTS
1.Enforcementofpawnee’sduties:Dutiesofpawneearepawnor’s
right.
2.Defaulting pawnor’sright to redeem. At extra expenses if any but
before the actual sale.
DUTIES
1.Tocompensatethepawneeforanyextraordinaryexpenses
incurredbyhim.
2.Tomeethisobligationonstipulateddateandcomplywiththe
termsofthecontract.
Avinash Murkute | Pune | M: 9637796308

14. Galaxy4u 14
Pledge by Non-Owners
1.Mercantileagents:Amercantileagentwhois,withtheconsentof
owner,inpossessionofthegoodsortitlecanmakeavalidpledgeof
thegoodswhileactingintheordinarycourseofbusinessofa
mercantileagent.Suchapledgewillbevalideveniftheagenthad
noactualauthoritytopledge,providedthatthepawneeactsingood
faithandhasnotatthetimeofpledgeanynoticethatthepawnor
hasnoauthoritytopledge.Servantcan’tpledge.Lockerscan’t
pledge.
2.Personinpossessionundervoidablecontract:Kalpeshthreatensto
Kumarandpurchaseshisbikeatlowprice.ThenKalpeshpledgesthis
biketoKrishna.Thisisperfectpledge,unlessKrishnarescindsthe
contract.FirstcontractisvoidableattheinstanceofKrishnaonly.
Avinash Murkute | Pune | M: 9637796308

15. Galaxy4u 15
Pledge by Non-Owners
3.Pledgerhavinglimitedinterest:Avinashhasgivensuitlengthto
tailorsayTailorwalaandsewingchargesINR1500.00.Nowon
AvinashdefaultTailorwalapledgethesuittoJaihindwalaforINR
5000.AvinashcansueJaihindwalaandrecoverthesuitlength/
dressbypayingINR1500.00
4.Sellerinpossessionofgoodsaftersale:Aseller,leftinpossession
ofgoodssold,isnomoreownerofthegoods,butpledgecreated
byhimwillbevalid,providedthepawneeactedingoodfaithand
hadnonoticeofthesaleofgoodstothebuyer.Theoriginalbuyer
canobtaindamagesfromthesellerbutcannotrecoverthegoods
fromthepledge.
Avinash Murkute | Pune | M: 9637796308

16. Galaxy4u 16
Pledge by Non-Owners
5.Buyerinpossessionofgoodsunderanagreementtosell.Wherea
buyerunderanagreementtosell,whereinthegoodstobecomethe
propertyofthebuyeronfulfillmentofcertainconditionoranexpiry
ofsometime,obtainspossessionofgoodswiththeseller’sconsent
beforethepaymentofpriceandpledgesthem,thepledgeisvalid.
OmeshagreestobuyacarifhissolicitorAvinashapprovesitand
obtainspossessionofcarfromJubileemotors.LaterOmeshpledges
ittoKomal,thisisperfectpledge.LaterAvinashadviseOmeshtogo
forlowcostcarandOmeshisnottheowner.
6.Co-ownerinpossession:Wherethereareseveraljointownersof
goods,oneoftheco-ownersinsolepossessionthereofwiththe
consentofotherco-ownersmaymakeavalidpledgeofthegoods.
Avinash Murkute | Pune | M: 9637796308

17. Galaxy4u 17
Galaxy4u: We do Legal Documentation!
Avinash Murkute | Pune | M: 9637796308

18. Galaxy4u 18
Contact in Confidence!
Q & A
Doubt is the key to knowledge!
Faculty: Avinash Murkute
(LL.M. -International Laws)
Galaxy4u, Pune India
Mobile: [phone]
E-mail: [email protected] | [email protected]
Web: www.Galaxy4u.in
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Please refer original publications(s). This presentation is for general public awareness and understandings of public at
large. User discretion and expert advice is necessary in individual matters.
Avinash Murkute | Pune | M: 9637796308