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Commercial Law Pooja, Lovely Professional University

Notes Unit 11: Contract of Pledge

CONTENTS
Objectives
Introduction
11.1 Pledge as a Special Kind of Bailment
11.1.1 Delivery Essential
11.1.2 Advantages of Pledge
11.2 Pledges by Non-owners

11.3 Rights and Duties of a Pledgor and a Pledgee
11.3.1 Rights of Pledgee
11.3.2 Duties of a Pledgee
11.3.3 Rights of a Pledgor
11.3.4 Duties of a Pledgor
11.4 Summary
11.5 Keywords
11.6 Self Assessment
11.7 Review Questions
11.8 Further Readings

Objectives

After studying this unit, you will be able to:
Discuss the pledge as a special kind of bailment
Explain the rights and duties of pledgor and pledgee

Introduction

In last unit, you studied about contract of bailment. At one time or another, we enter into a legal
relationship called pledge. Traders often store their surplus goods in warehouses; and utilize
the services of cold storages for keeping their goods to be taken back as and when required; and
factory owners often send machinery back to vendors for repairs. Also, goods are pledged for
securing loans. The sections quoted in this unit refer to the Indian Contract Act, 1872.

11.1 Pledge as a Special Kind of Bailment

Section 172, defines a pledge as the bailment of goods as security for payment of a debt or
performance of a promise. The person, who delivers the goods as security, is called the ‘pledgor’
and the person to whom the goods are so delivered is called the ‘pledgee’. The ownership

remains with the pledgor. It is only a qualified property that passes to the pledgee. He acquires a
special property and lien which is not of ordinary nature and so long as his loan is not repaid, no
other creditor or ‘authority’ can take away the goods or its price. Thus, in Bank of Bihar v. State of

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