The Indian Contract Act, 1872, recognizes special contracts that deal with specific transactions beyond ordinary agreements. Two important types under this category are Contracts of Bailment and Contracts of Pledge.
This article explains these concepts clearly and concisely, suitable for UGC NET Commerce exam preparation.
Contract of Bailment
Meaning
According to Section 148 of the Indian Contract Act, a bailment is the delivery of goods by one person to another for a specific purpose, under a contract that the goods shall be returned or otherwise disposed of as per the instructions after the purpose is achieved.
Key Idea: Bailment involves temporary transfer of possession, not ownership.
Example:
A gives his car to B for servicing. This is a contract of bailment.
Essential Features
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Delivery of goods: Physical possession must be transferred.
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Purpose: Goods are delivered for a specific reason.
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Return or disposal: The bailee must return the goods or act as directed.
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Ownership remains with the bailor: Only possession is transferred.
a. Parties to a Bailment
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Bailor: The person who delivers the goods.
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Bailee: The person to whom goods are delivered for a purpose.
b. Duties of Bailor
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Disclose faults in the goods.
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Bear expenses in case of a gratuitous (free) bailment.
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Indemnify the bailee for losses arising due to defective title.
c. Duties of Bailee
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Take reasonable care of goods.
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Not to use goods for unauthorized purposes.
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Return the goods after completion of purpose.
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Not to mix goods without consent.
d. Rights of Bailor and Bailee
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Bailor: Right to claim damages for unauthorized use or negligence.
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Bailee: Right to retain goods (bailee’s lien) until due charges are paid.
Contract of Pledge
Meaning
A pledge is a special type of bailment where goods are delivered as security for the payment of a debt or performance of a promise.
According to Section 172 of the Indian Contract Act, a pledge is a bailment of goods as security.
Key Idea: Pledge is bailment with the purpose of securing repayment or fulfillment of an obligation.
Example:
A pledges his gold jewelry to a bank to get a loan. The bank holds the jewelry until the loan is repaid.
Essential Features
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Delivery of goods: Transfer of possession as security.
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Purpose: To secure a loan or performance of a promise.
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Return on fulfillment: Goods must be returned once the debt is repaid.
a. Parties to a Pledge
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Pledger or Pawnor: The person who delivers the goods.
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Pledgee or Pawnee: The person who receives the goods as security.
b. Duties of Pawnor (Pledger)
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Pay the debt or fulfill the promise.
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Compensate the pledgee for any expenses incurred.
c. Duties of Pawnee (Pledgee)
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Take reasonable care of the pledged goods.
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Return goods after the purpose is fulfilled.
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Not to use goods without authorization.
d. Rights of Pawnee
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Retention: Retain the goods until the debt or promise is fulfilled.
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Sale: Sell the goods after giving reasonable notice to the pawnor if payment is not made.
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Recovery of Expenses: Claim expenses incurred for preservation.
Differences between Bailment and Pledge
| Basis | Bailment | Pledge |
|---|---|---|
| Purpose | For safekeeping, repair, or delivery | For securing a debt or obligation |
| Right to Sell Goods | No right to sell | Pawnee can sell after giving notice |
| Parties | Bailor and Bailee | Pawnor and Pawnee |
| Example | Giving a bike for repair | Pledging jewelry for a loan |
Quick Recap
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Bailment Example:
A gives his laptop to B for repairs. -
Pledge Example:
A pledges his watch to B to secure a loan.
Conclusion
In conclusion, Contracts of Bailment involve the delivery of goods for a specific purpose with a promise of return, while Contracts of Pledge are a type of bailment where goods are given as security for a debt or obligation. A clear understanding of these special contracts is essential under the Indian Contract Act, 1872, for students preparing for UGC NET Commerce and practical business applications.