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.
DEFINITION OF BAILMENT
Bailment is a kind of activity in which the property of one person temporarily goes into the possession of another. The ownership of the property remains with the giver, while only the possession goes to another. Several situations in day to day life such as giving a vehicle for repair, or parking a scooter in a parking lot, giving a cloth to a tailor for stitching, are examples of bailment.
Halsbury defines Bailment as ‘delivery of personal chattels in trust on a contracr, express or implied, that the trust shall be duly executed and chattels redelivered in either their original or altered form, as soon as the time of use, or conditio on which they had been bailed has elapsed or been performed respectively.
Bailment can also be described as ‘the delivery of goods to another person for a particular use and for a particular time’.
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.
Section148 of the Indian Contract defines bailment as follows,
Abailment is the delivery of goods from 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 person delivering the goods is called the bailor, and the person to whom the goods are delivered is the bailee.
Explanation: It is to be noted that if a person is already in possession of goods of another contracts to hold them as bailee, he thereby becomes the bailee and the owner of the goods as bailor, though the goods are not delivered by way of bailment.
DELIVERY OF GOODS
Delivery of possession, as required for bailment, can be made in two ways – Actual or Constructive.
Actual Delivery: in actual delivery the bailor hand overs the possession of goods to the bailee. Constructive delivery: In Constructive delivery, the physical possession of the goods may not be handed over. The possession of the goods may remain with the bailor with the consent or authorization of the bailee.
TYPES OF BAILMENT
Gratuitous Bailment:A person, who lends his articles or goods without any consideration, is called a “Gratuitous Bailor”.In this kind of bailment neither the bailor, nor the bailee is entitled to any remuneration or reward. His duty is naturally much less than that of a Bailor for hire or consideration. In this case the bailor delivers the goods for the exclusive benefits of the bailee and does not gain anything from the contract himself.
Non- gratuitous Bailment: A non-gratuitous bailment or bailment for reward is one that involve some consideration passing between the bailor and the bailee. Obviously in this case the delivery of goods takes place for the mutual benefit of both the parties
Pledge is a special kind of bailment in which a person transfers the possession of his property to another for securing the loan taken from the other. 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.
Section 172 of the Indian Contract Act 1872, defines pledge as follows,
The bailment of goods as s security for the payment of the debt or performance of a promise is called Pledge. The bailor in this case is called Pawnor and the bailee is called Pawnee.
J shelat in Lallan Prasad vs. Rahmat Ali AIR 1967, observed that pledge is a bailment of personal property as a security for some debt or engagement
- It is a special kind of bailment. In other words, it is referred to as a species of bailment
- A pledge can be of movable property only but those goods which cannot be the subjected to sale cannot be pledged.
- The purpose of pledge is to make the goods bailed to as security for the payment of a debt or performance of a promise.
- The pledgee is bound to return or redeliver the goods pledged on the satisfaction of the debt or the performance of the promise.
DIFFERENCE BETWEEN PLEDGE AND BAILMENT
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.
SIMILARITIES BETWEEN BAILMENT AND PLEDGE
- Both are created by agreements between the parties
- Both involve transfer of possession of goods
- Both bailment and pledge have movable goods as subject matter of contract
- In both the cases, the right to lien may be exercised by the concerned parties, i.e. the bailee and the Pawnee.
- In both the cases, goods are to be returned
In pledge, by the pledgee on satisfaction of the debt or
In bailment, by the bailee on accomplishment of the purpose or expiry of the time of bailment.