BCOC-133 BUSINESS LAW CHAPTER -10 BAILMENT AND PLEDGE

 

BCOC-133 BUSINESS LAW CHAPTER -10 BAILMENT AND PLEDGE

MEANING OF BAILMENT
Bailment is the delivery of goods from one Person(Bailor) to another (bailee) for a specific purpose , with an agreement that the goods will be returned or disposed of according to the bailor’s instruction

Essential for valid bailment:

1. Agreement:- there must be an agreement between the bailor and bailee, either express or implied

2. Delivery of goods:- the goods must be voluntarily transferred from bailor to bailee

3. Purpose:- goods are delivered for a specific purpose contemplated by both parties

4. Return of specific goods:- the goods must be returned or disposed of as per the bailor’s directions after the purpose is accomplished

KINDS OF BAILMENT:

On the basis of reward
vGratuitous Bailment:- no consideration is involved; it based on trust or friendship v Non-Gratuitous Bailment:- involves consideration or a reward of the bailee

On the basis of Benefit:
1. Bailment for the exclusive benefit of the Bailor
2. Bailment for the exclusive benefit of the Bailee
3. Bailment for the mutual benefit of Bailor and Bailee

DUTIES OF BAILOR

1. Disclosure of defects:- inform the bailee of defects that could affect the use or pose risks

2. Bear expenses:- generally bear usual expenses in keeping or carrying goods; repay necessary expenses to the bailee

DUTIES OF BAILEE

1. Take responsible care :- exercise the same care as an ordinary prudent person would with their own goods

2. No unauthorised use:- use the goods on according to the terms of bailment; unauthorised use can void the contract

3. Not mix goods:- keeps bailor’s goods separate; if mixed with consent, share interest proportionally; without consent , bear separate expenses

4. Non set up adverse title:- do not claim ownership or rights inconsistent with the bailor’s title

5. Return goods:- return or deliver goods as per bailor’s instructions; liable for loss if failed to do so

RIGHTS OF BAILOR :

1. Enforcement of Bailee’s duties :- the bailor can ensure the bailee fulfills their duties

2. Right to claim damages

3. Right to avoid contract :- if the bailee acts inconsistently with the term of

   bailment, the bailor can avoid the contract

4. Right to claim compensation:- bailor can claim compensation for

   unauthorized use or mixing of goods by the bailee

5. Right to demand return of goods:- the bailor can compel the bailee to

   return the goods when the bailment period ends or the purpose if ful8illed

RIGHTS OF BAILEE:

1. Right to claim damage :- the bailee can sue the bailor if goods are bailed without disclosing defect causing the losses

2. Right to claim reimbursement: - in non-gratuitous bailment, the bailee can recover necessary expenses incurred for bailment purposes

3. Right to recover losses:- the bailee can recover losses if the bailor was not entitled to make the bailment

4. Right to deliver goods to joint bailors :- if the goods owned by multiple persons, the bailee can deliver them to any joint owner

5. Right to deliver goods despite defective title:- if the bailee, in good faith, returns goods to the bailor with a defective title , the bailee is not liable

RIGHTS OF BAILOR AND BAILEE AGAINST WRONGDOER:

If a third person wrongfully deprives the bailee of the use or possession of the goods, either the bailor or the bailee can sue for deprivation or injury

FINDER OF GOODS: a person who find the goods which do not belong to him

Rights of Finder of Goods:

• Right of lien:- the finder has the right to keep goods until paid for expenses incurred in finding the owner

• Right to sue for reward
• Right of sale:- the finder can sell under specific circumstances

Duties of Finder of Goods:

• Take care of the goods
• No personal use
• No mixing of goods
• Find the Entrust or Real Owner

TERMINATION OF BAILMENT:

vExpiry of 8ixed period :- if goods are bailed for fixed time, the bailment ends at the end of the period

v Fulfillment of object:- the bailment terminates upon achieving specific purpose
v Inconsistence of use:- if the bailee uses the goods against the terms, the bailor may

terminate it
v Destruction of subject matter:- termination occurs if the subject matter is destroyed

or becomes unusable
v Termination of gratuitous bailment:- a gratuitous bailment can be terminated by the

bailor at any time v Death

MEANING OF PAWN OR PLEDGE:
“PAWN or PLEDGE” is a specific type of bailment where a movable item is given as a security for the repayment of a debt or the performance of a promise. The person taking the item as security is called “Pawnee” and the person providing the security is the “Pledger” or “Pawnor”. Ownership of the pledged goods remains with the pledger , but the pawnee has a special property right in them
Key points:

1. Purpose:- the goods are given as security for a debt or promise

2. Ownership:- the general ownership stays with the pledger , but the pawnee has a

   special property right

3. Delivery:- delivery of the pledged goods is necessary for the creation of a valid

   pawn

4. Possession:- the pawnee may have actual or constructive possession

5. Sale:- the pawnee has the right to sell the pledged goods on default after giving

   reasonable notice

Rights of Pawnee:

vRights of retainer until payment is made
vRight to recover extraordinary expenses from the pawnor
vRight to sell the goods on default, after giving notice
vRight against the true owner if the pawnor had a voidable contract, and the pawnee

acted in good faith

Duties of Pawnee:

v Take responsible care of the pledged goods
v Not make unauthorized use of the goods
vReturn the goods when the debt is repaid or promise is fulfilled                                          v Not mix the pledged goods with their own

Rights of Pawnor

1. Right of Redemption: Pawnors can reclaim their pledged item by repaying the loan, interest, and fees within the agreed period.

2. Right to Receive Notice: Pawnors should receive written notice detailing loan terms, interest rates, fees, and the redemption deadline to ensure transparency.

3. Right to Confidentiality and Security: Pawnors expect pawnbrokers to handle their items with care and maintain transaction confidentiality.

4. Right to Dispute Terms: Pawnors can dispute transaction terms or item conditions through legal or arbitration processes.

5. Right to Fair Treatment: Pawnors are entitled to fair treatment, including fair item valuation and compliance with laws.

Duties of a pawnor:

1. Provide Accurate Information: Give correct details about yourself and the item you're pawning.

   

2. Pledge Legal Ownership: Only pawn items that you legally own.

3. Keep Pledged Item Safe: Maintain the item in good condition while it's with the pawnbroker.

4. Pay Back Loan and Fees: Repay the loan amount, interest, and fees on time.

5. Follow Agreement Terms: Stick to the rules in the pawn agreement you sign.

6. Redeem Pledged Item: Retrieve your item within the agreed timeframe to avoid losing it.

7. Stay in Touch: Keep in communication with the pawnbroker if you have questions or issues.

 PLEDGE BY N0N-OWNERS

1. Pledge by a mercantile agent:- with the owner’s consent, a mercantile agent can pledge goods in the ordinary course of business

2. Pledge by a person in possession under a voidable contract:- if the contract is not rescinded at the time of pledge, and the pawnee acts in good faith

3. Pledge where the pledger has a limited interest:- valid to the extent of the pledger’s interest

4. Pledge by co-owner in possession:- with the consent of other owners, a co-owner can make a valid pledge

5. Pledge by a seller or buyer in possession:- a seller or buyer can make a valid pledge if the pawnee acts in good faith and has no knowledge of defects in title