Difference between Contract of Bailment and Contract of Pledge
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Basis |
Contract of Bailment |
Contract of Pledge |
|---|---|---|
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Meaning |
A Bailment is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. | The bailment of goods as security for payment of a debt or performance of a promise is called a Pledge. The Bailor in this is called the Pawnor and the Bailee is called Pawnee. |
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Purpose |
The bailee is required to return the property in the same condition and the purpose is typically for safekeeping, storage, or a specific use of the property. | Securing the payment of a debt is the aim of a pledge; ie., security against a debt. |
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Compensation |
If there is a bailment, the amount of compensation is often negotiated separately. It’s possible that the bailee won’t get paid for their labor. | Until the obligation is settled, the pawnee is permitted to keep the pledged goods. The pawnee may sell the pledged property to recover the loan if the debtor defaults. |
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Return of Property |
Unless otherwise agreed upon, the bailee is usually expected to return the item in the same condition as it was received. | After the debt is paid back, the pawnor receives their goods back. The pawnee may sell the property to pay off the loan if it is not paid back. |
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Use of Property |
The property may be used by the bailee for the specified purpose but, any usage that goes beyond the parameters of the agreement may need the bailor’s consent. | Unless the pawnor specifically grants it or it’s required for the property’s safety, the pawnee is not entitled to use the pledged assets. |
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Termination |
The bailment may end by mutual consent, the accomplishment of the goal, or the passage of the agreed time frame. | Once the obligation is repaid, the commitment is cancelled. The pawnee may sell the pledged property and end the pledge if the debtor is unable to make payments. |
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Third-Party Rights |
Bailment’s obligations and rights only apply to the bailor and the bailee. | In the event of the pawnor’s default, the pawnee’s rights and interests may be claimed against other parties. |
Difference between Contract of Bailment and Contract of Pledge
Contract of Bailment and Contract of Pledge are the two types of special contracts that are regulated under the Indian Contract Act, 1872. Contract of Bailment refers to when certain goods are transferred from one party to another for a specific purpose; whereas, Contract of Pledge implies when certain goods are transferred from one party to another as a security against a debt. Both contracts safeguard the best interest of both the parties involved and are very crucial for business transactions.
Table of Content
- What is a Contract of Bailment?
- What is a Contract of Pledge?
- Difference between Contract of Bailment and Contract of Pledge
- Conclusion