A pledge is a type of bailment in which the bailor delivers possession of goods to the bailee as security for a debt or obligation. The bailee has a right to keep the goods until the debt or obligation is paid, but they must also take care of the goods.
The pledge is a common law bailment, which means that it is created by the law and does not require any express agreement between the bailor and the bailee.
The pledge is a possessory security interest, which means that the bailee has physical possession of the goods. This gives the bailee a strong legal position in case the bailor defaults on the debt or obligation.
The pledge can be terminated in a number of ways, including:
- The debt or obligation is paid in full.
- The bailor redeems the goods by paying the bailee a sum of money.
- The goods are lost or destroyed.
- The bailee becomes bankrupt.
MCQs on Pledge
- Which of the following is not a characteristic of a pledge?
- It is a bailment.
- It is a possessory security interest.
- It is created by the law.
- It requires an express agreement between the bailor and the bailee.
- Answer: It requires an express agreement between the bailor and the bailee. A pledge is a common law bailment, which means that it is created by the law and does not require any express agreement between the bailor and the bailee.
- The pledge is a possessory security interest. What does this mean?
- This means that the bailee has physical possession of the goods. This gives the bailee a strong legal position in case the bailor defaults on the debt or obligation.
- The pledge can be terminated in a number of ways, including:
- The debt or obligation is paid in full.
- The bailor redeems the goods by paying the bailee a sum of money.
- The goods are lost or destroyed.
- The bailee becomes bankrupt.
- All of the above.
- Answer: All of the above. The pledge can be terminated in any of these ways.