Difference between bailment and pledge
In today’s article we are going to understand difference between bailment and pledge. Before understanding the differences lets firstly break down Bailment and pledge.
Both Bailment and Pledge are special kinds of contract and both are governed by the Indian Contract Act,1872. Section 148 to 171 of the act deals with Bailment and Section 172 to 179 of the act deals with Pledge.
Bailment
Section 148 of the Indian Contract Act, 1872 defines bailment as the delivery of goods from bailor to bailee for a specified purpose and an understanding that once the purpose of bailment is fulfilled, it shall be returned to the real owner.
In simple terms, bailment means delivery of goods by one person to another for some purpose upon a contract that they shall return the goods or dispose of the goods according to the direction of the person delivering the goods when the purpose is accomplished. Parties in contract of bailment are called Bailor and bailee.
Pledge
A pledge under the Indian Contract Act of 1872 is an agreement to give goods as security for a debt or promise. It’s a type of bailment, but with the specific purpose of securing a loan or obligation
Pledge is defined in Section 172 of the Indian Contract Act,1872 as “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’.” In simple terms parties in contract of pledge are called Pledger and pledgee.
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Difference between bailment and pledge
| Basis of Difference | Bailment | Pledge |
| Meaning | When certain goods are transferred from one party to another for a specific purpose, it is called a contract of bailment. | When certain goods are transferred from one party to another as a security against a debt, it is called a contract of pledge. |
| Provisions | It is covered under section 148-171 of ICA,1872 | It is covered under section 172-179 of ICA,1872 |
| Parties | Bailor and bailee | Pledger and pledgee |
| Basics | Bailment is wider term and include pledge also | Pledge is narrow term and come under bailment |
| Purpose | Safekeeping or repair of goods | Only one purpose that is security against debt |
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| Right to sell | The goods cannot be sold by the bailee in such contracts | Pawnee can sell the goods if the pawnor fails to redeem them within a reasonable time |
| Right to use | The goods can be used by the bailee only for specific purposes known to both the parties or not otherwise | Pawnee has no right to use the goods |
| Example | When a person brings their clothes to a dry cleaner. The dry cleaner becomes the bailee, holding the clothes in trust for the owner until they are cleaned and returned | when a person takes out a loan from a bank and uses their car as collateral. The bank becomes the bailee, holding the car as security for the loan. If the person fails to repay the loan, the bank may have the right to seize and sell the car to recoup its losses. |
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