QS Study

A pledge is a bailment that conveys possessory title to property owned by a debtor (the pledgor) to a creditor (the pledgee) to secure repayment for some debtor obligation and to the mutual benefit of both parties.

A pledgee is a person to whom a pledge is given or with whom something is deposited as a pledge. He is a person who lends money and accepts a pledge for the loan.

Rights and obligations of a banker as a pledgee:

Rights of a banker: The banker has the following rights as a pledgee. Pledgee shall not be liable for the collapse to collect or appreciate upon the Obligations or any collateral security or guaranty, therefore, or any part thereof, or for any delay in so doing, nor shall Pledgee be under any obligation to take any action whatsoever with regard thereto.

(a) Right to retain goods. The pledgee has the right to retain the goods pledged not only for the payment of the debt but also for the interest and other expenses incurred by him.

(b) Right to recover extraordinary expenses. If the banker (pledgee) has incurred extraordinary expenses on the loan advanced, he has the right to recover the same from the pledger.

(c) Default in payment. If the pledger makes default in making payment, the pledgee can dispose of the pledged goods after giving proper notice to the pledger.

(d) The right of the full value of goods. The pledgee has the right of the full value of pledged goods till such time; the entire debt is not discharged.

Obligations of a banker as pledgee:

  • A pledgee is required to take reasonable care of goods pledged with him.
  • The pledgee or anyone else is not authorized to make use of goods pledged with him.
  • The pledgee is required to return the goods pledged after the full payment of debt.
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