Pledge is a bailment with a special property, i.e., the bailee has a right to retain possession of the goods until the debt or obligation is discharged. The pledge is a kind of security interest, which means that the bailee has a right to take possession of the goods if the bailor defaults on the debt or obligation.
The nature of pledge can be explained by the following points:
- It is a bailment.
- It is a security interest.
- It is a possessory security interest.
- It is a conditional bailment.
- It is a bailment for value.
Pledge is a bailment. This means that the bailor delivers possession of the goods to the bailee. The bailee has a duty to take care of the goods and return them to the bailor when the debt or obligation is discharged.
Pledge is a security interest. This means that the bailee has a right to take possession of the goods if the bailor defaults on the debt or obligation. The bailee can then sell the goods and use the proceeds to pay off the debt or obligation.
Pledge is a possessory security interest. 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.
Pledge is a conditional bailment. This means that the bailment is subject to a condition, which is the repayment of the debt or obligation. If the bailor does not repay the debt or obligation, the bailee can sell the goods and use the proceeds to pay off the debt or obligation.
Pledge is a bailment for value. This means that the bailor gives the goods to the bailee in exchange for something of value, such as a loan.
MCQs on Nature of Pledge
- Which of the following is not a characteristic of pledge?
- It is a bailment.
- It is a security interest.
- It is a possessory security interest.
- It is a bailment for value.
- Answer: It is a bailment for consideration. Pledge is a bailment for value, not for consideration.
- 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.
- Pledge is a conditional bailment. What does this mean?
- This means that the bailment is subject to a condition, which is the repayment of the debt or obligation. If the bailor does not repay the debt or obligation, the bailee can sell the goods and use the proceeds to pay off the debt or obligation.