Duties of the Pawnor and Pawnee
1. Duties of the Pawnor:
- Transfer of Ownership: It is the pawnor’s responsibility to provide the pawnee custody of the pledged items or property. This is an essential responsibility since a pledge differs from other security arrangements if that possession is transferred.
- Title Warranty: The pawnor guarantees that the items are free from liens or claims by third parties and that they have the legal authority to be pledged. In simpler terms, the pawnor guarantees the pawnee that the property they have pledged is theirs and can be utilized as collateral.
- Maintenance of the Collateral: It could be necessary for the pawnor to keep the pledged items in excellent shape for the duration of the promise. This guarantees the preservation of the collateral’s value.
2. Duties of the Pawnee:
- Managing Collateral Security: The pledged commodities must be kept in a secure location by the pawnee. They have to exercise reasonable caution to guard against losing or damaging the collateral.
- Inspection and Accounting: In some situations, the pawnee may also be obliged to permit the pawnor to see the pledged items and maintain a record of them. This guarantees that the collateral is handled effectively and contributes to maintaining transparency.
- Notification of Default: The pawnee is required to notify the pawnor of any failure on the loan or any breaches of the conditions of the pledge agreement. Before the pawnee asserts their rights over the collateral, this notice might offer the pawnor a chance to fix the default.
Contract of Pledge : Meaning, Features, Duties and Rights
A Contract of Pledge is a formal agreement whereby one party, referred to as the Pawnor, promises particular items or property to another, referred to as the Pawnee, as security for a debt or obligation. The Pawnor transfers ownership of the pledged item to the Pawnee under the agreement, with the understanding that the Pawnor keeps ownership and the Pawnee has a security interest.
Geeky Takeaways:
- Contract of Pledge is said to be a subset of a Contract of Bailment.
- The goods bailed here are kept as security for a debt or a performance of a promise.
- The bailor here is called Pawnor, and the bailee here is called Pawnee.
Table of Content
- What is a Contract of Pledge?
- Essential features of a Contract of Pledge
- Duties of the Pawnor and Pawnee
- Rights of the Pawnor and Pawnee
- Conclusion
- Contract of Pledge – FAQs