DIFFERENCE BETWEEN BAILMENT AND PLEDGE

In our day to day life, we make several contracts. This is such a common practice that people hardly think of any legal consequences. Bailment and Pledge are two such examples.

Bailment as per section 142 of the Indian Contract Act, 1872 “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 the ‘bailor’. The person to whom they are delivered is called the ‘bailee’.”

For example, Robert gave his shirt to the tailor for sewing a button is a contract of bailment. Here, Robert is the bailor and tailor is the bailee.

Pledge as per section 172 of the Indian Contract Act, 1872 is “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 ‘pawnee’.”

For example, Alex borrows $3000 from Robert, in return Robert will ask him to pledge his guitar as security that he will pay back the debt within a specific period.

In the contract of bailment, consideration may or may not be present in the contract whereas, in the contract of pledge, consideration is must as the whole concept of a pledge is to put the security for the debt and hence the consideration plays a vital role in the contract of pledge.

In the contract of bailment, the bailee must return the goods to the bailor and he can’t sell those goods whereas in the contract of pledge, goods are given as the security to the debt and hence pawnee can sell them if pawnor fails to pay the debt on time.

The main purpose of the contract of bailment is either the safekeeping of the goods or to get them repaired or for any other specific task whereas the main purpose of the contract of a pledge is to provide the security against the payment of the debt taken.

In the contract of bailment, bailee can use the goods to the extent allowed by the bailor whereas, in the contract of pledge, pawnee has no right to use the pledged goods, he can only keep those goods and can sell them if the party fails to pay the debt.

In the contract of bailment, bailee cannot lien the goods except for labour and service whereas, in the contract of pledge, the pawnee can lien the goods in case pawnor fails to pay back the debt.

In the case of bailment, if bailor defaults then bailee can retain the goods bailed or can sue the bailor for the same whereas in the contract of pledge, in the case of default by the pawnor, pawnee can sell the goods pledged to him as the security against the debt.

So, these are the few main differences between bailment and pledge.