Unit 8 - Bailment & Pledge

• Bailment


  Delivery of goods by one person to another for some purpose, to be returned or otherwise disposed of according to the directions of the person delivering them
• Essential elements for bailment

  • Agreement between bailor and bailee (express or implied)
  • Delivery - transfer of possession of goods by bailor to bailee
• Types of delivery


  1. Actual delivery - physically handing over goods

  2. Constructive delivery - without any change in custody or possession

  3. Symbolic delivery - for bulky goods incapable of actual delivery
• Delivery of goods for some purpose constitutes bailment
• Return of goods or disposed off according to directions of bailor after purpose is accomplished
• In bailment, possession of goods changes but ownership continues with bailor
• Classification of bailment


  • Benefit exclusive to bailor
  • Benefit exclusive to bailee
  • Mutual benefit
  • Gratuitous (without consideration)
  • Non-gratuitous (with consideration)
• Duties of bailor


  Disclose known faults in goods<|>Indemnify bailee<|>Bear expenses
• Rights of bailor


  Terminate bailment<|>Demand return of goods<|>Claim accretion or increase<|>Sue third party<|>Sue bailee<|>Claim compensation
• Duties of bailee


  Take reasonable care of goods<|>Not make unauthorised use<|>Not mix goods<|>Return goods as per directions<|>Return accretions<|>Not set up adverse title
• Rights of bailee


  Deliver goods to joint owners<|>Indemnification<|>Compensation for faults<|>Claim damages<|>Sue third party<|>Apply to court for title<|>Lien
• Lien


  Right to retain goods until claim is satisfied<|>General lien - retain goods for any debt<|>Particular lien - retain goods for debt related to those goods
• Right to claim damages (Sec. 158)


  Where the bailment is non-gratuitous, extraordinary expenses are to be borne by the bailer. In case of gratuitous bailment, even necessary expenses are to be borne by the bailor.
• Right against third party (Sec. 180)


  A bailee can sue a third person who wrongfully prevents the use or possession of the bailed goods, or causes any injury to them.
• Right to Apply to Court the title to the goods (Sec. 167)

  If the goods bailed are claimed by a person other than the bailor, the bailee may apply to the court to decide the title of the goods.
• Right to Lien (Sec 170 & 171)

  The bailee has a right to retain the goods delivered to him until the charges due to him are paid by the bailor.
• Types of Lien


  • General Lien (Sec. 171)
  • Particular Lien (Sec. 170)
• General Lien (Sec. 171)

  Right to retain the goods not only for the demands arising out of the particular transaction, but for a general balance of account in favour of the bailee, in the absence of a contract to the contrary.
• Particular Lien (Sec. 170)


  Right to retain only the particular goods for the claim due in respect of which the goods are retained.
• Modes of Termination of Bailment

  • Expiry of stipulated period
  • Accomplishment of specified purpose
  • Bailee does anything inconsistent with the conditions
  • Gratuitous Bailment can be terminated by the bailor at any time by giving notice to the bailee
  • Death of either the bailor or the bailee
  • Destruction of subject matter
• Finder of lost goods


  A person who finds goods belonging to another and takes them into his custody, subject to the same responsibilities as a bailee.
• Duties of finder of lost goods

  • Take reasonable care of the goods
  • Not to mix them with own goods
  • Must try to find the owner
  • Not to use the goods for his own purposes
• Rights of finder of lost goods

  • Right to Lien (Sec. 168)
  • Right to claim reward (Sec. 168)
  • Right to sale of Goods (Sec. 169)
• Pledge


  The bailment of goods as security for payment of a debt or performance of a promise.
• Parties in a Pledge

  • Bailer is called the 'Pawnor'
  • Bailee is called the 'Pawnee'
• Rights of Pawnee


  • Retain the pledged goods for payment of debt and interest (Sec. 173)
  • Retain the goods for subsequent debts (Sec. 174)
  • Recover extraordinary expenses (Sec. 175)
  • Right to sell the goods on default by Pawnor (Sec. 176)
• Rights of Pawnor


  • Same as that of bailor
  • Terminate bailment
  • Demand return of goods any time
  • Claim accretion
  • Right against third party
  • Right to redeem the goods before sale (Sec. 177)
• Duties of Pawnee


  • Same as bailee for non-gratuitous bailment
  • Use of goods
  • No unauthorised mix of goods
  • Return the goods
  • Return accretions
• Duties of Pawnor


  • Same as bailor for non-gratuitous bailment
  • Pay debt
  • Disclose all faults
  • Indemnify Pawnee
  • Pay extraordinary expenses
  • Pay deficit if Pawnee sells goods on default
• Pledge by Non-Owner


  • Pledge by Mercantile Agent (Sec 178)
  • Pledge by person in possession under voidable contract (Sec. 178A)
  • Pledge where Pawnor has only limited interest (Sec. 179)
  • Pledge by co-owner in possession (Sec. 179)
  • Pledge by seller or buyer in possession