Page 114 - DMGT102_MERCANTILE_LAWS_I

Mercantile Laws-I

Notes 3. The pledgee is bound to return the goods on payment of the debt.

4. Any accruals to the goods pledged belong to the pledgor and should be delivered
accordingly. Thus, if the security consists of equity shares and the company issues bonus
shares to the equity shareholders, the bonus shares are the property of the pledgor and not
the pledgee.

8.7.3 Duties of a Pledgor

There are number of duties of a pledgor. These are:
1. He must disclose to the pledgee any material faults or extraordinary risks in the goods to
which the pledgee may be exposed.
2. He is responsible to meet any extraordinary expenditure incurred by the pledgee for the
preservation of the goods.

3. Where the pledgee has exercised his right of sale of goods, any shortfall has to be made
good by the pledgor.
4. He is liable for any loss caused to the pledgee because of defects in his (pledgor’s) title to
the goods.

8.7.4 Rights of a Pledgor

There are number of rights of a pledgor. These are:
1. The pledgor has a right to claim back the security pledged on repayment of the debt with
interest and other charges.

2. He has a right to receive a reasonable notice in case the pledgee intends to sell the goods,
and in case he does not receive the notice he has a right to claim any damages that may
result.
3. In case of sale, the pledgor is entitled to receive from the pledgee any surplus that may
remain with him after the debt is completely paid off.

4. The pledgor has a right to claim any accruals to the goods pledged.
5. If any loss is caused to the goods because of mishandling or negligence on the part of the
pledgee, the pledgor has a right to claim the same.

Task X, a warehouseman, was entrusted with certain goods for safe custody. X had
taken reasonable precautions for the safety of the goods by providing a safe building, safe
locks and a competent watchman. But the goods were lost due to the negligence of the
watchman who probably did not lock or watch properly. X denies his liability urging that
there was no negligence on his part. Decide the question of X’s liability. [Hint: X is liable
to compensate the bailor for the negligence of X’s servant.].

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