In simple terms, bailment refers to hand over or assignment the goods, which involves change in possession but not in the ownership of goods. It is the transfer of goods from one party to another party for some specific purpose. It is not same as pledge, which is just a variant of bailment. Pledge implies a contract, in which an article is delivered or say deposited with the money lender, as security for repayment of a debt owed by him/her or performance of promise.
The main difference between pledge and bailment lies in the use of goods, i.e. the use of goods is prohibited in pledge, whereas in the case of bailment the party to whom the goods are being handed over can use them. To further understand the difference between these two, take a look of the given article.
Content: Bailment Vs Pledge
|Basis for Comparison||Bailment||Pledge|
|Meaning||When the goods are temporarily handed over from one person to another person for a specific purpose, it is known as bailment.||When the goods are delivered to act as security against the debt owed by one person to another person, it is known as the pledge.|
|Defined in||Section 148 of the Indian Contract Act, 1872.||Section 172 of the Indian Contract Act, 1872.|
|Parties||The person who delivers the goods is known as the Bailor while the person to whom the goods are delivered is known as Bailee.||The person who delivers the goods is known as Pawnor while the person to whom the goods are delivered is known as Pawnee.|
|Consideration||May or may not be present.||Always present.|
|Right to sell the goods||The party whom goods are being delivered has no right to sell the goods.||The party whom goods are being delivered as security has the right to sell the goods if the party who delivers the goods fails to pay the debt.|
|Use of Goods||The party whom goods are being delivered can use the goods only, for the specified purpose.||The party whom goods are being delivered has no right to use the goods.|
|Purpose||Safe keeping or repairs, etc.||As security against payment of debt.|
Definition of Bailment
A contract in which the goods are handed over by one party to another party for a specific reason, which is expressed or implied for a short period. The person who delivers the goods is termed as bailor whereas the receiver of the goods is termed as bailee.
When the purpose of delivering the goods is accomplished, the bailee should return the goods to its actual owner. Here the word goods may include all the movable items, but property and money do not come under the definition of goods. While the transfer of goods the ownership of goods remain with the bailor only the possession of goods transfers for a limited period.
The receiver of the goods should take good care of the goods as he takes care of his own goods as well as he should not use the goods without the permission of its owner except for the purpose specified. It is the duty of the bailor to tell the faults in the goods.
The delivery of goods can be done in three ways: Actual Delivery, Symbolic Delivery, Constructive Delivery. The Bailment is divided into two categories:
- Gratuitous Bailment – Either for the sole benefit of Bailor or Bailee.
- Non-gratuitous Bailment – For the Mutual Benefit of both the parties.
Example: Clothes given in laundry for cleaning are an example of bailment.
Definition of Pledge
The pledge is a variety of bailment in which goods are transferred from one party to another party as security for the payment against debts owed by him. The person who delivers the goods is known as Pawnor whereas the receiver of goods is known as Pawnee.
When the objective of the transferring the goods is completed or say when the payment for debt for which goods are pledged, is met, then the receiver shall return the goods to its real owner. However, if he fails to redeem the goods within a reasonable time, then the receiver has the right to sell the goods after giving a proper notice to its owner.
It is the duty of the Pawnee to take good care of the goods, as he takes care of his own goods as well as he should not use the goods without the permission of its owner. Moreover, the pawnor must tell the all the defects in the goods.
Example: Money taken as debt from the money lender by pledging gold as security against it is an example of Pledge.
Key Differences Between Bailment and Pledge
The following are the major differences between Bailment and Pledge
- A Bailment is a contract in which goods are transferred from one party to another party for a short period for a specific objective. The Pledge is a kind of Bailment in which goods are pledged as security against payment of debt.
- A Bailment is defined under section 148 while Pledge is defined under section 172 of the Indian Contract Act, 1872.
- In bailment, the consideration may or may not be present, but in the case of a pledge, the consideration is always present.
- The objective of bailment is safe custody or repairing of goods delivered. On the other hand, the sole purpose of delivering the goods is to act as security against the debt.
- The receiver has no right to sell the goods in case of bailment whereas if Pawnor does not redeem the goods within the reasonable time, the Pawnee can sell the goods after giving notice to him.
- In bailment, the goods are used by the bailee only for the said purpose. Conversely, in pledge, Pawnee has no right to use the goods.
We all have no idea, when we enter into these type of contract in our life especially the contract of bailment because all of us has left our car or motorcycles in the service center for repairs, it is bailment. The pledge has a limited scope as compared to bailment; many businessmen take a loan from the financial institution by pledging their stock as security. In short, we can say that every pledge is a bailment, but every bailment is not a pledge. So, both of them are very important at their places and we must know their differences.