Who can pledge

Pledge by mercantile agent

Sec-178, Mercantile agent is a commercial agent who is a factor or broker. When a mercantile agent is having the possession of goods with the consent of the owner in the ordinary course of his business he can create a valid pledge. Provided that pawnee should act in good faith without knowing that the pawnor has no authority to pledge.

Essential conditions for the fulfilment of a valid pledge by a mercantile agent:

Pawnor should be a mercantile agent.
He should have possession of goods with the consent of the owner.
He should receive in the ordinary course of his business.
Pawnee must always act in good faith.
Even the mercantile agent can create a valid pledge even for a document of title. Sec 178, mercantile agent who is having possession of a document of title may create a valid pledge over the same. Document of the title refers to a document representing ownership. Ex dock warrant (document given by warehouse keeper ).

A person in possession under voidable contract:
“ at any instance when pawnor has got the possession of goods under voidable contract as per sec 19 or 19-A, and the contract is not rescinded[cancelled] at the time of the pledge and if the pawnee receives the goods in good faith then it's a valid pledge”.

Pledge by Pledge
“ when the pawnee receives the goods under the contract of pledge, if he at any time further pledges the goods for debt with another person, a pledge is valid to the extent

of his interest[ Amount for which the pledge is created]in the goods [pledge goods]”.If he creates pledge for the larger amount he will be liable for the amount. Buyers of goods without sale can create a valid pledge under the sale of goods Act a not contract of pledge.

Rights of Pawnee

Right of Retainer:
“Let say at any instance the pawnor stands incapable to pay the debtor is unable to perform the promise then the pawnee has all right to retain the goods of pawnor, and can claim interest over the same, also for necessary expenditure increased for the protection of the goods”. “The pawnee can retain only these goods on which any debt or promise for which they are pledged, he cannot retain any other goods “(particular lien).

Right to Extraordinary Expenses:
“ The pawnee will not be held liable for the extraordinary expenses or is not entitled to pay for the extraordinary expenses that are incurred to protect the goods of the pawnor. if at any course of nature the pawnee had to pay for such expenses, the pawnee has every right to recover such expenses”.

Right to Sell:
“If the pawnor makes default without paying the debt or without performing the promise within the agreed period, pawnee may file a suit against the pawnor and retain the goods or he may sell the goods by giving reasonable notice to the pawnor”.