7 Difference Between Bailment and Pledge

Bailment and Pledge are very common these days. Currently, we transfer our assets and other movable things to our friends and relatives. All these acts come under the bailment and pledge. Simply means when we handed over our things or asset to others comes under the law which is known by bailment and pledge. The difference between both the terms lies in the purpose of the transfer.

Bailment is when we give our movable asset or thing to any other person for general purpose, but it involves only changing in the possession but keeping the ownership. On the other hand, when we handed over our movable asset to another person as security for loan purposes is known as a pledge. In this article, we will discuss in detail the difference between bailment and pledge, examples of bailment and pledge, their sections, etc.

Bailment Vs Pledge

Parameters	Bailment	Pledge
Definitions	It is a contract in which movable goods or Assets are transferred from the original owner to another person for general purposes for a short time period.	Pledge is also a contract in which goods or assets are handed over to another person or party as a security for the payment or loan.
Provisions	Bailment is defined under section 148 of the Indian Contract Act 1872.	Pledge is defined under section 172 of the Indian Contract Act 1872.
Consideration	Mayor may not be necessary.	Very necessary.
Parties	The original owner who transfers the assets to another person is known as Bailor. The person or party who receives the assets is Known as Bailee.	In pledge Original owner who transfers the assets to another person is known as Pawnor. The person or party who receives the assets is Known as Pawnee.
Main Purpose	Keeping safe and repair or washing.	As security for loan or payment.
Right to use of Assets	For the specified purpose, the bailee can use the assets. With the permission of the bailor, the bailee can use the Asset.	The Pawnee has no right to use the assets.
Right to sell	Bailee has no right to sell the Asset of the bailor.	The Pawnee has the right to sell the asset in case Pawnor is unable to return the payment or loan in a specified time. Before selling it is the duty of the Pawnee to give notice to the pawnor.
Liability	In section 152 it clearly mentioned bailee cannot be responsible for the loss and destruction of the asset.	In pledge, if the pledged asset has been lost or damaged by the negligence of the pawnee. In that case, the pawnee can lose the claim against the pawnor to that extent.
Example	When we give our car for repairing it is an example of Bailment.	When we take loans from the bank and kept our gold as security it is an example of a pledge.

Bailment

Bailment is like a contract in which an asset’s possession is handed over to another person for a short time period. In bailment ownership of the goods and the assets remains to the owner. A person who handed over his asset to another is known as a bailor and the person who receives the assets are known as Bailee.

Here the term used assets include all movable things but property and money don’t come under this. After the completion of the purpose, Bailee returns the Asset back to the original owner. In the bailment contract, Bailee doesn’t have the right to use the assets unnecessarily. Only by the permission of the bailor, Bailee use the asset for other works.

For example, Ravi gives his car to Yash. Because Yash wants to go with his relatives, in this case, Yash is only free to use Ravi’s car for himself. He has no right to use the car for commercial use. If Ravi allows him to use for commercial use in that case Yash will use a car for commercial use.

In bailment, it is the responsibility of the Bailee to take care of the asset. All new wear and tear of the asset in that particular period of time is the responsibility of the Bailee. Bailment is defined in section 148 of the Indian Contract Act, 1872. Bailee has no right to sell the asset.

Types of bailment

Gratuitous Bailment

Non-Gratuitous bailment

Gratuitous Bailment

In this bailment, both the bailor and Bailee get the sole benefits.

The sole benefit of the bailor.

In this bailor give or transfer the asset to the Bailee for a specific purpose in which only the bailor gets the benefit. In this Bailee get nothing in return.

Eg. Jack and chan are the neighbors. One day jack is going to the other town before going he handed over his gold to chan to keep him safe. When he came back chan returns his gold back to jack. In this case, only jack gets the benefits.

The sole benefit to Bailee

In this when the bailor gives his goods to Baillie only Bailee gets the benefit. In return, the bailor gets his asset back.

Eg. When someone gives his car to another person for personal use for some time period. In that case, the bailor doesn’t get any benefit in return he gets only his car back.

2. Non Gratuitous Bailment

In this bailment, both the bailor and Bailee get benefits in return.

For example – A give his clothes to B for cleaning purpose. After the cleaning B return the clothes to A and get payment against the cleaning of the clothes. In this case, both get the benefits.

Right to terminate the bailment

It is mentioned in section 153 of the Indian Contract Act if Bailee does not use the assets as per the bailor’s instructions. In that case, the bailor is free to terminate the bailment contract before the time period.

Pledge

It is also a contract like a bailment but the purpose of handing over the goods is different. According to section 172 of the Indian Contract Act 1872. When an asset or good is handed over to a person as security for the loan or payment and performance of a promise. That type of bailment is known as the pledge.

It is a contract of the movable assets or goods in which a person transfers the possession of the asset to another person or firm for the loan as per security. For example, gold load from the banks is the perfect example of the pledge. In pledge, the original owner or the Asset is known as the pawnor and the receiver of the asset is known as the Pawnee.

In the pledge, the Pawnee owns the special rights on the assets. The Pawnee is free to demand the extra payment against the expenses for the preservation of the asset, and the Pawnee also take interest in the landed money.  In pledge, the Pawnee has the right to sell assets in case if pawnor is unavailable to return the landed money.

The main difference between bailment and pledge

1. A bailment is a contract in which movable assets or goods are handed over to another person to use for a specific purpose for a short time period. On the other hand, the pledge is also a bailment but the prepose of handing over the Asset as a security for the payment of debt.

2. Both the terms are defined in the Indian Contract Act,1872. But bailment is defined under section 148 and Pledge is defined under section 172.

3. In pledge consideration is always present on the other hand in bailment consideration is not so much necessary.

4. In bailment, the main purpose of Baillie is to safe custody or repair of the assets. While in pledge the main purpose is to hand over the asset as security for the payment or loan.

5. In bailment, Bailee is can use Asset only for predefined purposes. But in the pledge, the Pawnee has no right to use the assets.

6. In Bailment, Bailee has no right to sell the asset. But in the pledge, the Pawnee has the right to sell the assets in case if pawnor is fail to return the loan or payment of the Pawnee.

7. An example of bailment is: when we give our vehicle for repairs. Example of the pledge: when we take gold loans from the banks against our gold.

Conclusion

Bailment and Pledge both are the contacts in which we hand over our things to the other person or party. But the handed-over purpose is different for both the terms. In bailment, we transfer assets for general purposes only. While in pledge we use our assets as security for the loans. Bailment and pledge are identical to Arbitration and Mediation.

We hope you understand the difference between bailment and pledge very well. If you have any doubt please feel free to comment on us. For more difference please visit our website.