Learning Objectives

• Bailment: Definition; Essentials; Kinds

• Duties and Rights of a Bailor, and Bailee
• Termination of Bailment
• Lien: particular; general; entitlement of parties to
general lien
• Finder of Goods: rights and duties of finder of goods
• Pledge: Definition; who can pledge
• Pledge Differentiated from Bailment pledge and
Hypothecation
• Rights and Duties of Pawnee and Pawnor
• Pledge By Non-owners
 Chapter 12
BAILMENT AND PLEDGE

In both bailment and pledge, there is a

delivery of (moveable) goods which is
delivered back to the bailor or pawnor
after accomplishment of purpose or expiry
of stipulated time. However, bailment has
a general purpose whereas pledge has a
specific purpose i.e., repayment of a debt
or performance of a promise.
 Learning
Objectives
• Bailment: Definition; Essentials; Kinds
• Duties and Rights of a Bailor, and Bailee
• Termination of Bailment
• Lien: particular; general; entitlement of parties to
general lien
• Finder of Goods: rights and duties of finder of goods
• Pledge: Definition; who can pledge
• Pledge Differentiated from Bailment pledge and
Hypothecation
• Rights and Duties of Pawnee and Pawnor
• Pledge By Non-owners
 BAILMENT Defined

A bailment is a situation wherein the owner of goods entrusts their

possession into the care of another for some purpose briefly .
Legal Definition:
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 . (S 118)
• The person delivering the goods is called the ‘bailor’.
• The person to whom they are delivered is called the ‘bailee’.
Example
A delivers his car to B for repair. Here a relationship of bailment is
created between A and B where A is the bailor and B is the bailee.
 Some Common Examples of Bailment

• Giving watch, TV or a radio set, computers etc. for repair.

• Leaving car or scooter for service/repairs or at a parking lot.
• Delivering cloth to tailor for stitching a suit.
• Hiring car, AC, tent, etc.
• Delivering goods to transporter for dispatching and
delivering them to the consignee.
• Leaving diamonds with goldsmith for being studded in gold
jewellery.
• Placing important documents in safe custody at a bank.
• Handing over valuables or pets to the safe custody of a
friend or neighbour while leaving station.
• Leaving luggage at cloakrooms.
 Essentials of Bailment

1. Contract
Bailment is based upon a contract between two persons namely, bailor and the bailee.
The contract, may, however be implied in some cases such as, finder of goods, seizing of
someone’s goods by the State in the exercise of its powers under various Acts.
2. Subject matter - moveable goods
Goods form the subject matter of the bailment. As per section 2(7) of the Sale of Goods
Act, ‘goods’ means every kind of movable property other than money and actionable
claim. Thus, depositing money in a bank account does not constitute bailment.
3. Delivery of goods
Delivery of goods is the essence of bailment. The term ‘bailment’ signifies change of
possession in law. In bailment, therefore, possession of goods must change. Placing of
ornaments or other valuables in a bank locker on this account does not create a
bailment, as ornaments are never delivered to the banker. It is further necessary that
the goods change hands temporarily, voluntarily and in accordance with the contract.
For example, if somebody obtains the possession of someone’s goods under undue
influence, threat or fraud, it does not amount to bailment of goods. Similarly, a servant
or a guest having access to or use of goods is not a bailee.
 Essentials of Bailment

4. Delivery may be actual or constructive

Delivery of goods may be actual or constructive. Actual delivery implies physical transfer of goods from
one person to another. For instance, when a student borrows a book from a library, there is actual delivery.
When possession of goods changes by doing anything, which has the effect of putting the goods in the
possession of the bailee, or of any person, authorized to hold them on behalf of the bailor, or the
owner, it amounts to constructive delivery. For example, where the key of a warehouse is handed over to
another person, it amounts to delivery of goods in the store. Similarly, transfer of railway receipt being
document of title to goods, effects a constructive delivery of the goods.
5. No change in ownership
Ownership is not transferred. Bailment signifies change of possession of goods from one person to
another. But there is no change in the ownership. The bailor continues to be the owner of the goods.
6. Purpose
The bailor delivers his goods to the bailee for some definite purpose. The purpose for which the goods are
delivered is usually in the contemplation of both the parties.
7. Return of goods
Every bailment pre-supposes a condition that the goods bailed would be returned to the bailor, or
otherwise be disposed of according to the directions of the bailor, on the accomplishment of the purpose,
or after the expiry of period of bailment. On this account, it is important to note that in order to discharge
his duty, a bailee is supposed to return the goods bailed,out and not any other goods although of an equal
or even higher value. On this account, a banker is not a bailee for the deposits accepted from his
customers, as he is not obliged to return the same currency notes but an equivalent of it, and at times,
even interest on the deposits.
 Kinds of Bailment

Bailment may broadly be classified into two categories, namely,

• Gratuitous bailment, and
• Non-gratuitous bailment
• Gratuitous bailment
A bailment with no consideration is called a gratuitous bailment. In this kind of
bailment neither the bailor, nor the bailee is entitled to any remuneration or reward.
Such a bailment may be for the exclusive benefit of either party i.e., the bailor or
bailee:
 Bailment for the exclusive benefit of the bailor In this case the bailor delivers
the goods for his exclusive benefits and the bailee does not derive any benefit out of
it. For example, A leaves his pets with B, his neighbour to be looked after during A’s
absence. In this case, A alone is being benefited by the bailment.
 Bailment for the exclusive benefit of the bailee This is the case where a bailor
delivers the goods to the bailee for the exclusive benefits of the bailee and does not
gain anything from the contract himself. For example, you lend your book to a friend
of yours for a week without any charge or favour.
• Non-gratuitous bailment
Contrary to gratuitous bailment, a non-gratuitous bailment or bailment for reward is
one that involves 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. For example, A hires B’s car. Here B is the bailor and receives the
hire charges and A is the bailee and enjoys the use of the car.
 Duties and Rights of the Bailor
Duties . The bailor owes the following duties to bailee in respect of the
goods bailed out by him.
1. Duty to disclose faults. Bailor is bound to disclose to the bailee faults in
the goods bailed, of which he is aware, and which materially interfere with
the use of them, or could expose the bailee to extraordinary risks. If he
does not make such a disclosure, he is responsible for the damage arising
to the bailee directly from such faults.
Example 1. A lends his horse, which he knows to be frisky, to B. He does
not disclose the fact that the horse is frisky. When B tries to ride it, the
horse throws him off its back , and B is injured. A is responsible to B for
injury sustained.
Example 2. A hires a carriage of B. The carriage is unsafe, though B is not
aware of it, and A is injured. B is still responsible to A for the injury.
2. Duty to repay bailee’s expenses A bailor is duty bound to repay to the
bailee expenses incurred by him for work done on the goods received
under conditions of bailment, and for which he he is not receiving any
remuneration.
 Duties of the Bailor
3. Duty to indemnify the bailee . The bailor is bound to make good the
loss suffered by the bailee that is in excess of the benefit actually derived,
where he had delivered the goods gratuitously and compelled the bailee
to return them before the expiry of the period of bailment.
4. Duty to compensate bailee for breach of warranty. Every contract of
bailment warrants the bailee about the bailor’s title being defect free.
Thus, if bailee subsequently suffers any loss by the reason of the bailor’s
title being defective, it is the duty of the bailor to compensate the bailee
for breach of warranty.
5. Duty to claim back the goods The bailor is bound to accept the goods
upon being returned by the bailee in accordance with the terms of
bailment. If he refuses or fails to accept back the goods, if offered at a
proper time and at a proper place, without any reasonable ground, he
shall be responsible for any loss or damage to the goods and not the
bailee. Moreover, the bailee, in such a case, can also claim from the bailor
all necessary and incidental expenses that he might have incurred to keep
and protect the goods.
 Duties and Rights of the Bailor
Rights of the Bailor. A bailor has the following rights:
1. Right to enforce bailee’s performance. Since the bailor delivers goods to the bailee for some specific
purpose, the former, especially in case of non-gratuitous bailment, has an elemental right to achieve
that purpose or obtain the benefit (i.e., performance) through the latter.
2. Right to claim damages. . In all cases of bailment the bailee is bound to take as much care of the goods
bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods
of the same bulk, quality and value as the goods bailed. This gives bailor a right to claim for damages
against the loss, if any, caused to the goods bailed due to the bailee’s negligence or misconduct.
3. Right to claim compensation against unauthorized use of goods. If the bailee makes any use of the
goods bailed, which is not according to the conditions of the bailment, the bailor has a right to claim
compensation from the bailee in respect of any damage arising to the goods from or during such use of
them.
4. Right to terminate the contract. Bailor has a right to terminate the contract if the bailee does any act
with regard to the goods bailed, inconsistent with the conditions of the bailment. For example, A lets to
B, for hire, a horse for his own riding. B drives the horse in his carriage. He A can terminate the contract
immediately.
5. Right to demand return of goods alongwith accretion to, if any. The bailor enjoys exclusive right to
have the goods bailed delivered back to him in the safe and sound condition after time of bailment has
expired or the purpose behind the bailment has been achieved. Moreover, in the absence of any
contrary term in the contract, the bailor is also entitled to any accretion to the goods bailed occurred
while goods were in the study of bailee. For example, A leaves his hen in the custody of B to be taken
care of for a week. The hen has laid eggs and thereby hatched the chicks. A is entitled not only to the
hen but also to the chicks.
 Duties and Rights of the Bailee
Duties. The bailor and the bailee are reciprocally related to one another. Hence rights of the bailor are the
duties of the bailee and vice versa. Accordingly, the bailee owes the following duties in respect of goods
bailed to him:
1. Duty to take reasonable care of the goods whilst they are in his possession In all cases of bailment, the
bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence, under
similar circumstances, would take of his own goods of the same bulk, quality and value. The degree of care
required from the bailee is the same whether the bailment is for reward, or gratuitous.
2. Duty not to make any unauthorized use of the goods bailed. The bailee is under an obligation not to
resort to unauthorized use of the goods bailed to him. A contract of bailment is voidable at the option of
the bailor, if the bailee does any act with regard to goods bailed, inconsistent with the conditions of the
bailment. If the bailee makes any unauthorized use of the goods bailed, he is liable to make compensation
to the bailor for any damage arising to the goods from or during such use of them.
Example 1. A lets his horse to B, for his own riding. B, however, drives the horse in his carriage. It is at the
option of A, a termination of the bailment.
Example 2. A lends a horse to B for his own riding only. B allows C, a member of his family, to ride the
horse. C rides with care, but the horse accidentally falls and is injured. B is liable to make compensation to
A for the injury caused to the horse.
3. Duty not to set up jus tertii The bailee should not set up jus tertii i.e., adverse title (his own title or the
title of a third party) to the bailed goods, as the same will be inconsistent with the conditions of bailment.
Even if a third person claims a better title to the goods other than that of the bailor, the bailee is duty
bound to return the goods to the bailor only.
 Duties and Rights of the Bailee
4. Duty not to mix the goods bailed with his own goods A bailee is duty bound
not to mix the bailed goods with his own goods, without the consent of the bailor.
That is, he must keep the goods bailed to him separate from his own goods. If the
bailee, with the consent of the bailor, mixes the goods of the bailor with his own,
the bailor and the bailee shall have an interest, in proportion to their respective
shares, in the mixture thus produced.
5. Duty to return the goods in accordance with the contract It is the duty of the
bailee to return, or deliver the goods bailed, according to the bailor’s directions,
without any demand, as soon as the time for which they were bailed has expired,
or the purpose for which they were bailed has been accomplished.If by the default
of the bailee, the goods are not returned, delivered or tendered at the proper
time, he will be liable to the bailor for any loss, destruction or deterioration of the
goods from that time.
6. Duty to return any accretion to the goods In the absence of any contract to the
contrary, the bailee is bound to deliver to the bailor, or according to his directions,
any increase or profit, which may have accrued from the goods, bailed. For
example, A leaves a pregnant cow in the custody of B to be taken care of. The cow
gives birth to a calf. B is bound to deliver the calf as well the cow to A.
 Duties and Rights of the Bailee
Rights of the Bailee. Due to the reciprocity of relationships, most of the duties of
the bailor are the rights of the bailee. Accordingly, a bailee enjoys the following
rights:
1. Right to enforce bailor’s duties The bailee has a right:
• To claim damages from the bailor if he has suffered some loss due to non-disclosure
of defects in the goods on the bailor’s part. If the goods were bailed for hire, the
bailee would be entitled to recover damages from the bailor.
• To claim from the bailor all necessary expenses incurred by him for the purpose of
the bailment if the bailment was non-gratuitous .
• To be indemnified against any loss or damage sustained by him by reason of
defective title of the bailor.
2. Right of lien . Where the bailee has, in accordance with the purpose of the
bailment, rendered any service involving the exercise of labour or skill in respect of
the goods bailed, he has, in the absence of a contract to the contrary, a right to
retain such goods until he receives due remuneration for the services he has
rendered in respect of them.
Example. A delivers a rough diamond to B, a jeweller, to be cut and polished, which
is accordingly done. B is entitled to retain the stone till he is paid for the services he
has rendered.
Bankers , factors, wharfingers (Ship loaders), attorneys of a high court and policy
brokers may, in the absence of a contract to the contrary, retain as a security for
general balance of account, any goods bailed to them; but no other persons have a
right to retain, as a security for such balance, goods bailed to them.
 Duties and Rights of the Bailee
3. Right to sell the goods. If the bailor fails to take delivery
of the goods and to pay the bailee’s charges, the bailee has
a right to sell the goods after giving a notice to the bailor of
his intention.
4. Right to return the goods to any of the joint bailors. If
several joint owners of goods bail them, the bailee may
deliver them back to, or according to the directions of, one
joint owner without the consent of all in the absence of any
agreement to the contrary.
5. Right to deliver goods to the bailor without title. If the
bailor has no title to the goods, and the bailee, in good
faith, delivers them back to, or according to the directions
of, the bailor, the bailee is not responsible to the owner of
the goods in respect of such delivery.
 Termination of a Bailment

The following circumstances render a contract of bailment terminated:

1. Unauthorized use of goods bailed A bailor may terminate the
bailment where the bailee does any act with regard to goods bailed,
inconsistent with the conditions of bailment. Simply put, it means that a
baior can terminate a bailment before its term runs out in case if he
finds the bailee’s conduct, with respect to the bailed goods, contrarty to
the agreed terms.
2. Expiry of term of bailment A contract of bailment automatically
comes to an end upon the expiry of the period for which the goods were
bailed. A gratuitous bailment may, however, be terminated at any time,
even before the agreed time.
3. Accomplishment of purpose If the goods were bailed for a specific
object, the bailment comes to an end upon achievement of the said
object or purpose.
4. Death of either party A gratuitous bailment terminates by the death
either of the bailor or the bailee.
5. Destruction of subject matter A contract of bailment also comes to an
end if the goods that are the subject matter of the bailment get
destroyed or otherwise become incapable of being used for bailment
any more.
• Particular Lien and General Lien Compared
• These two kinds of liens are different from each other in the following ways:
• A particular lien is available only against a property (goods) in respect of which the skill and labour
have been exercised, while a general lien is available against any property of another and in the
possession of the person trying to exercise the lien in respect of general balance of account.
• A particular lien can be exercised when the labour or skill has been applied on the goods so as to
improve their value and in accordance with the purpose of the bailment and the terms of the
contract. Thus, a bailee in respect of feeding an animal cannot detain the animal for non-payment
of feeding expenses by the bailor but a veterinary surgeon that has performed a surgery or
otherwise treated the animal, is entitled to lien. A general lien, on the other hand, can be exercised
no matter whether any labour or skill has been expended or not in respect of the goods.
• As a general rule, particular lien can be exercised by a bailor only, whereas a right of general lien is
expressly given by Section 171 to bankers, factors, wharfingers, attorneys of a high court, and policy
–brokers provided there is no agreement to the contrary.
• Under a particular lien, the bailee can detain the goods but ordinarily has no right to sell the goods
to realize his dues. A right to sell may, however, be conferred on him by a special agreement.
Whereas under general lien, goods cannot be sold for the recovery of dues; their possession can be
retained merely until the payment of the dues.
 Lien and its Kinds
Lien refers to the bailee’s right to retain the possession of the bailed goods lest
he is not paid his dues.
Kinds of Lien . Liens are of two kinds, namely, particular and general.
Particular Lien. A particular lien is one, which is available only against the
goods in respect of which the bailee has rendered any service. Section 170
says, ‘Where the bailee has, in accordance with the purpose of the bailment,
rendered any service involving the exercise of labour or skill in respect of the
goods bailed, he has in absence of a contract to the contrary, a right to retain
such goods until he receives due remuneration for the services he has rendered
in respect of them.’
Thus, in the exercise of particular lien, only such goods can be retained on
which the bailee has exercised labour and skill. He cannot retain any other
goods belonging to the bailor, which are in his possession otherwise (Chase vs
Wetmore). As a general rule, only a bailee is entitled to particular lien.
General Lien. A general lien on the other hand is the right to hold the bailed
goods for any lawful dues. Section 171 provides, ‘Bankers, factors, wharfingers,
attorneys of a high court and policy-brokers, in the absence of a contract to the
contrary, retain as a security for a general balance of account, any goods bailed
to them; but no other persons have a right to retain, as a security for such
balance, goods bailed to them, unless there is an express contract to that
effect.’
Thus a general lien is the extension of particular lien, which entitles the bailee
to retain any goods bailed to him for any amount due to him whether in respect
of those goods or any other goods.
Parties Entitled to General Lien

Being a privilege, the right of general lien has been

specifically conferred by Section 171 of The Indian Contract
Act on Bankers, Factors, Wharfingers, Attorneys of a high
court, and policy-brokers.
Example 1 . A obtains a personal loan amounting Rs
5,000 from a bank without any security. He later borrows a
further sum of Rs 10,000 from the same bank but provides
some gold jewellery as security this time. Even after A has
discharged the second debt of Rs. 10,000, the banker can
retain the jewellery as security in respect of the sum of Rs.
5,000, initially advanced without any security.
Example 2. In Jowitt & Sons vs Union Cold Storage Co, a
quantity of imported meat was stored with a warehouse
keeper who by a general term of the trade had a general
lien. It was held that he could retain the meat for his
charges due in respect of other goods.
 FINDER OF GOODS

A person who finds an article belonging to another is

called the finder of goods. In the eyes of law, the
position of a finder of lost goods is exactly that of a
bailee.
Section 71 provides: ‘A person who finds goods
belonging to another, and takes them into his custody,
is subject to the same responsibility as a bailee.’ It
should be noted that the finder of goods occupies the
position of bailee only against the true owner since he
keeps the goods found in trust only for the real owner.
As against everyone else, the property as regards the
goods found vests in the finder on his taking
possession of it.
 Duties and Rights of Finder of Goods: Duties

A finder of goods has the following duties:

1. To exercise reasonable care in preserving the goods

found.
2. To find the actual owner and restore the goods to
him.
3. Not to make any personal use of the goods found.
4. Not to mix the goods found with his own goods.
5. Not to set up any adverse title to the goods found.
 Duties and Rights of Finder of Goods: Rights

The law confers the following rights on a finder of goods:

1. Retain the goods A finder of goods can retain them against the owner
until he receives compensation for expenses and trouble voluntarily
incurred by him in finding out the true owner, and in preserving the
goods has found. He, however, has no right to sue the owner for such
compensation.
2. Sue the owner for reward Where the owner has offered a specific
reward for the return of the goods lost, he (finder) may sue the owner
for such reward, and may retain the goods until he receives it.
3. Sell the found articles When an article found is commonly the subject of
sale and the owner cannot with reasonable diligence be found, or if he
refuses, upon demand, to pay the lawful charges of the finder, the finder
may sell it-
– when the thing is in danger of perishing, or of losing the greater part of its
value, or
– when the lawful charges of the finder, in respect of the thing found, amounts
to two-thirds of its value.
 PLEDGE

A Pledge or pawn is a kind of bailment. It is the bailment of a

moveable thing as security for the repayment of a debt or
performance of a promise.
The bailor in this case is called the ‘Pawnor’ or ‘Pledgor’, while the
bailee is called the ‘Pawnee’ or ‘Pledgee’.
In order to enforce a contract of pledge, the property pledged
should be actually or constructively delivered to the pawnee.
Ownership of the pledged goods does not pass to the pledgee. A
pawnee has only a special property in the pledge; the general
property remains in the pawnor and wholly reverts to him on
discharge of the debt (Lallan Prasad vs Rahmat Ali ).
Any kinds of movable goods or property, valuables, documents or
securities may be pledged. The government securities should,
however, be pledged by endorsement and delivery.
 Pledge and Bailment Compared
The contracts of pledge and bailment are similar in two of the following
respects:
• In both the cases there is a delivery of moveable goods or property.
• The goods are delivered back to the bailor or pawnor after
accomplishment of purpose or expiry of stipulated time.
The two, however, differ in a number of ways such as the following:
1. Purpose Bailment has a general purpose whereas pledge has a specific
purpose i.e., repayment of a debt or performance of a promise.
2. Use of goods The pawnee has no right to make any use of the goods
pledged. On the other hand, in bailment the bailee uses the goods if the
terms of bailment so provide.
3. Right to sell The pawnee in case of pawnor’s default to repay the debt
can dispose of the goods pawned after serving him a proper notice. But
the bailee has no such right. Instead, he may either retain the possession
of the goods, or sue the bailor for his dues.
 Rights and Duties of Pawnee

Pledge being a species of bailment, the rights and duties of the pawnor and pawnee are almost
similar to those of the bailor and bailee.
Rights of Pawnee . The Law confers the following rights to the pawnee.
1. Right of retaining goods The pawnee has a right to retain the goods pledged for:
• payment of the debt;
• performance of the promise; and
• all expenses incurred by him in respect of the possession or for the preservation of the goods
pledged.
2. Right as to extraordinary expenses The pawnee is entitled to receive from the pawnor
extraordinary expenses incurred by him for the preservation of the goods pledged.
3. Right to sue when pawnor makes default Should the pawnor default in payment of the debt, or
performance of the promise, at the stipulated time, the pawnee may bring a suit against the
pawnor upon the debt or promise while retaining the goods pledged as collateral security .
4. Right to sale Upon pawnor’s default as regards payment of debt or performance of the promise,
the pawnee may sell the goods pledged, on giving the pawnor reasonable notice of the sale. If the
proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor
is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the
pawnee shall pay over the plus to the pawnor.
5. Right to have good title to the goods Where the pawnor’s title with regard to the goods pledged
by him is defective, the pawnee acquires a good title to the goods, provided he acted in good faith
and without notice of the pawnor’s defect in title.
 Duties of Pawnee

A pawnee is subject to the following duties

1. Duty of reasonable care of the goods pledged
2. Duty not to make personal use of the goods pledged
3. Duty not to mix goods pledged with his own goods
4. Duty to return the goods pledged after the debt has
been paid or the promise has been performed
5. Duty not to commit any act which is inconsistent with
the terms of pledge
6. Duty to deliver accretion (if any) to the goods pledged
 Rights and Duties of the Pawnor: Rights

Foremost of all his rights, the pawnor has a right to get

back the goods pledged plus increase thereon, if any by
him, after paying off the amount of debt in full and
other charges (if applicable), or performing the
promise.
Moreover, if a time is stipulated for the payment of the
debt, or the performance of the promise, for which the
pledge is made, and the pawnor defaults on that count
i.e, repaying the debt or performing the promise, he
may redeem the goods pledged at any subsequent
time before the actual sale of them. However, he must,
in that case, pay, in addition, any expenses which have
arisen from his default.
 Rights and Duties of the Pawnor: Duties

The Pawnor has the following duties

1. Duty to repay the debt or perform the promise The pawnee is
bound to comply with the terms of pledge. Accordingly, he must
repay the debt in full along with interest and other charges, if any
or perform the promise at the stipulated date or time.
2. Duty to disclose defects in the goods pledged The pawnor should
disclose to the pawnee, defect in the goods pledged (if any) to
which he is aware failing which he will be liable for any loss to the
pawnee due to such defect.
3. Duty to meet extraordinary expenses If the pawnee has incurred
any extraordinary expenses for preserving the goods pledged, it is
the duty of the pawnor to compensate him for the same.
 Pledge By Non-Owners

Generally only the owner or co-owner of the

goods can pledge them. But to facilitate
mercantile transactions, the law, under certain
circumstances, permits a pledge by a person who
is not the owner but is in the possession of the
goods. Accordingly, the following non-owners too
can make a valid pledge of the goods.
 A mercantile agent
 Person in possession under voidable contract
 Seller or buyer in possession after sale
 Person having limited interest
 Pledge By Non-Owners

1. Mercantile Agent. Where a mercantile agent is, with the consent of the owner,
in possession of goods or the document of title to goods, any pledge made by
him, when acting in the ordinary course of business of a mercantile agent, shall
be as valid as if he were expressly authorized by the owner of the goods to make
the same; provided that the pawnee acts in good faith and has, at the time of
pledge no notice of the fact that the agent has no authority to pledge.
2. Person in possession under voidable contract. A person who is in possession of
goods under a voidable contract can make a valid pledge provided the pawnee
has acted in good faith and without any knowledge of the defect in pawnor’s
title.
3. Seller or buyer in possession. A seller, left in possession of goods sold or
documents of title thereof, is no more the owner. But the pledge made by him
will be valid provided the pawnee acted in good faith and had no knowledge of
the defect in the pawnor’s title. On the same footing, a buyer, who with the
consent of the seller, obtains possession of goods, before sale can make a valid
contract.
4. Person having limited interest . Where a person who pledges goods in which he
has only a limited interest for example, he is a mortgagee or has a lien over these
goods, the pledge will be valid to the extent of that interest.