Pledge, Essentials, Rights and Duties

Pledge is a type of bailment in which the bailor (the lender) delivers possession of goods or valuable assets to the bailee (the borrower) as security for a debt or obligation. The bailee has the right to possess and use the pledged property, but the ownership remains with the bailor until the debt is repaid or the obligation is fulfilled. In case of default, the bailor has the right to sell the pledged property to recover the debt.

Essentials of a Valid Pledge:

• There must be a valid contract between the bailor and the bailee.
• The pledged property must be identified and delivered to the bailee.
• The pledge must be for a valid consideration.
• The pledge must be for a lawful purpose.

Rights and Duties of the Parties:

Rights of the Bailor:

1. The right to terminate the pledge after giving reasonable notice to the bailee.
2. The right to sell the pledged property if the bailee defaults on the debt or obligation.
3. The right to receive any surplus from the sale of the pledged property after the debt is repaid.

Duties of the Bailor:

1. The duty to disclose any defects in the pledged property.
2. The duty to repay the debt or fulfill the obligation in a timely manner.
3. The duty to indemnify the bailee against any losses or damages incurred while holding the pledged property.

Rights of the Bailee:

1. The right to possess and use the pledged property.
2. The right to receive compensation for any expenses incurred in maintaining the pledged property.
3. The right to receive interest on the debt.

Duties of the Bailee:

1. The duty to take reasonable care of the pledged property.
2. The duty to return the pledged property to the bailor after the debt is repaid or the obligation is fulfilled.
3. The duty to return any surplus from the sale of the pledged property to the bailor after the debt is repaid.

Discharge of the Pledge:

The pledge is discharged when the debt is repaid or the obligation is fulfilled. The bailee is then required to return the pledged property to the bailor. If the bailee fails to return the pledged property, the bailor has the right to take legal action against him/her. The pledge may also be discharged by mutual agreement between the parties, by the destruction or loss of the pledged property, or by operation of law.