Who can create a valid Pledge?

Who can create a valid Pledge?

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. The term is also used to denote the property which constitutes the security.

The person who can create a valid pledge:

A person who is in possession of goods under a voidable contract can make a valid pledge of the goods if at the time of pledge the contract was not rescinded.

Mercantile Agent: A mercantile agent, who is, with the consent of the owner, in possession of the goods or of the documents of title to goods, can make a valid pledge of the goods while acting in the ordinary course of business of a mercantile agent.

Possession under a voidable contract: A person having possession of goods under a voidable contract can make a valid pledge of the goods so long as the contract is not rescinded.

Possession with co-owner: If one of several co-owners is in sole possession of the goods with the consent of the owners, he can make a valid pledge of the goods.

Pledge by seller or buyer in possession after the sale: A seller who has got possession of goods even after the sale can make a valid-pledge, provided the pawnees act in good faith.

Pledge by a buyer in possession of goods before the sale: Sometimes, a buyer may obtain possession of the goods with the consent of the seller before sale.

Share This Post