ASSIGNMENT: 2

CONTRTACT LAWS IN PAKISTAN

Pakistani Contract Act, 1872 contains the law relating to contracts. It provides the rules relating
to commercial transactions.

Law of Contract is applicable not only to business but also to all day to day personal dealings. In
fact, each one of us enter into a number of contracts from sunrise to sunset.

Purchases and sales of daily routine things like bread, milk, news papers or using the facilities of
bus, taxi, train or plan, the general law of Contract relates to these events.

It is essential to know the rules of performance and discharge of a contract and the remedies
available to the aggrieved party in case of breach of contract.

DEFINITION OF CONTRACT.

“ An agreement enforceable by law is a contract.”

“ A contract is an agreement creating and defining obligations between the parties.”

“ An agreement between two or more persons which is intended to be enforceable at law and is
constituted by the acceptance by one party of an offer made to him by the other party to do or to
abstain from doing some act.”

FORMULA: CONTRACT = AN AGREEMENT + ENFORCEABLITY

Contract is an agreement between two or more persons creating rights and duties between them
and which is enforceable by law.

CONTRACT
!---------------------------------!---------------------------!
Agreement Enforceability of an agreement
!--------------------! !
Offer or Proposal Acceptance of offer or proposal !
!
Legal Obligations arising out of an agreement

CONTRACT CONSISTS OF TWO ELEMENTS

AN AGREEMENT, II. AGREEMENT SHOULD BE ENFORCEABLE BY LAW.

What is agreement?
“ every promise and every set of promises, forming the consideration for each other is an
agreement.”

It means an AGREEMENT IS AN ACCEPTED PROPOSAL.

An agreement, therefore, comes into existence only when on one party makes a proposal or offer
to the other and that other signifies his assent (i.e. gives his acceptance) thereto.

In short, every agreement is the result of a proposal from one side and its acceptance by the
other. It means Promise is an agreement.

PROPOSAL/OFFER: “An offer by one person to another, of terms and conditions with
reference to some work or understanding, or for the transfer of property.”

“ when one person signifies to another his willingness to do or to abstain from doing anything,
with a view to obtain the assent of that other to such act or abstinence, he is said to make a
proposal.”

ACCEPTANCE: “ when the person to whom the proposal is made signifies his assent thereto
the proposal is said to be accepted.”

PROMISE: “A proposal , when accepted, become a PROMISE.

A Contract is an AGREEMENT; an agreement is a PROMISE and a promise is an

ACCEPTED PROPOSAL.

EVERY AGREEMENT, IS THE RESULT OF A PROPOSAL FROM ONE SIDE AND

ITS ACCEPTRANCE BY THE OTHER.

For an agreement there must be:

a). PLURALITY OF PERSONS: There muyst be two or more persons.

b) CONSENSUS AD IDEM: both the parties to an agreement must agree about the subject
matter of the agreement in the same sense and at the same time. (identity of mind)

II.ENFORCEABLITY: is the second requirement of contract. An agreement is regarded as

Contract when it is enforceable by law. It is a Contract, which can be enforced by either of the
parties to the contract. If one of the parties refuses to perform the Contract, the other party can
take an action in a court of law against such party.

ALL CONTRACTS ARE AGREEMENTS BUT ALL AGREEMENTS ARE NOT

CONTRACTS.

i). Social Agreements: social agreements do not enjoy the benefits of law. They are not
enforceable because they do not create legal obligations between the parties.
ii) Legal agreements are contracts because they create legal obligations between the parties. In
business agreements it is presumed that the parties intend to create legal relations so all business
agreements are in other words contracts.

CONTRACTS.
“ALL AGREEMENTS ARE CONTRACTS IF THEY ARE MADE BY THE FREE
CONSENT OF PARTIES, COMPETENT TO CONTRACT, FOR A LAWFUL
CONSIDERATION AND WITH A LAWFUL OBJECT AND ARE NOT HEREBY
EXPRESSLY DECLARED TO BE VOID.”

1.OFFER AND ACCEPTANCE. For an agreement, there must be a lawful offer by one party
and lawful acceptance of that offer from the other party. The term lawful means that the offer
and acceptance must satisfy the requirements of Contract Act. The offer must be made with the
intention of creating legal relations; otherwise there will be no agreement.

2. LEGAL RELATIONSHIP. The parties to an agreement must create legal relationship. It

arises when parties know that if one of them does not fulfill his part of promise, he shall be liable
for the failure of a contract. Agreements of a social or domestic nature do not create legal
relations and as such cannot give rise to a contract. It is presumed in commercial agreements that
parties intend to create legal relations.

3. LAWFUL CONSIDERATION. The third essential of a valid contract is the presence of

consideration. Consideration is “something in return”. It may be some benefit to the other party.
Consideration has been defined as the price paid by one party for the promise of the other. An
agreement is enforceable only when both the parties get something and give something. The
something given or obtained is the price for the promise and is called consideration.
Consideration is the reason of an agreement. Only those considerations are valid which are
lawful.

According to Section 23, of the contract act, the consideration of an agreement is lawful, if it is
not forbidden by law; fraudulent, involves injury to the person or property of another, immoral or
opposed to public policy. (Bribe)

4. CAPACITY OF PARTIES. An agreement is enforceable only if it is entered into by parties

who possess contractual capacity. It means that the parties to an agreement must be competent to
contract. According to section 11 of contract act, in order to be competent to contract the parties
must be of the age of majority and of sound mind and must not disqualified from contracting
by any law to which they are subject. A contract by a person of unsound mind is void ab-inito
( from the beginning)

If one of the parties to the agreement suffers from minority, madness, drunkenness etc., the
agreement is not enforceable at law. (Few exceptions)
5. FREE CONSENT. It is another essential of a valid contract. Consent means that the parties
must have agreed upon the same thing in the same sense. For a valid contract, it is necessary that
the consent of parties to the contract must be free.

According to section 14 of contract act, consent is free when it is not obtained by coercion,
undue influence, fraud, misrepresentation or mistake. If the consent of either of the parties is
not free, the agreement cannot become a contract.

6. LAWFUL OBJECT. It is also necessary that agreement should be made for a lawful object.
The object for which the agreement has been entered into must not be fraudulent or illegal or
immoral or opposed to public policy or must not imply injury to the person or property of other.

According to section 23 of contract act every agreement of which the object or consideration is
unlawful, is illegal and therefore void.

7. WRITING AND REGISTRATION. A contract may be oral or in writing. Although in

practice it is always in the interest of the parties that the contract should be made in writing so
that it may be convenient to prove in the court. But a verbal contract if proved in the court will
not be considered invalid merely on the ground that it is not in writing. It is essential for the
validity of a contract that it must be in writing, signed and attested by witness and registered, if
so required by the law. The contracts of sale, mortgage, lease or gift of immovable property are
required to be in writing and registered according to the transfer of property act.

8. CERTAINTY. According to section 29 of contract act, “agreements, the meaning or which is

not certain or capable of being made certain, are void”.

In order to give rise to a valid contract the terms of agreement, must not be vague or uncertain.
For a valid contract, the terms and conditions of an agreement must be clear and certain.

9. POSSIBILITY OF PERFORMANCE. The valid contract must be capable of performance.

If the act is legally or physically impossible to perform, the agreement cannot be enforced at law.
Thus where the goods being the subject matter of the contract are damaged through faults of
nobody the contract cannot be enforced.

According to section 56 of contact act, “an agreement to do an act impossible in itself is void.”

10. NOT EXPRESSLY DECLARED VOID. An agreement must not be of those, which have
been expressly declared to be void by the act. An agreement in restraint of trade and an
agreement by way of wager have been expressly declared void.

Section 24-30 explains certain tyhpes of agreements, which have been expressly declared to be
void.
DISCHARGE OF CONTRACT

When the rights and obligations arising out of a contract come to an end, the contract is said to
be discharged or terminated. A contract may be discharged in any of the following ways:
1. DISCHARGE BY PERFORMANCE. Performance is the natural mode of discharge.
When the parties to a contract perform their share of the promises, the contract is discharged. If
only one of the several parties performs the promise, the alone is discharged. Performance may
be;
2.
a). Actual Performance: When each party to a contract fulfils the obligations arising under the
contract according to the terms and conditions of the contract, it is called Actual Performance of
the contract and the contract comes to an end.

b). Offer of Performance or Tender: When one of the parties to the contract offers to perform the
contract but the other party does not accept it, there is offer of performance. It is called
“TENDER” or “ATTEMPTED PERFORMANCE”. It is not a actual performance but is
equivalent to actual performance. In case of offer of performance the promisor is then excused
from performance and is entitled to sue the promises for breach. The object of tender is to show
that the party was ready to perform the contract but was prevented from doing so by the other
party.

Essentials of a valid offer of performance or tender.

It must be unconditional. If the tender is conditional, the other party is under no
obligation to accept it.
It must be made at proper time and proper place.
It must be of the whole quantity contracted for or of the whole obligation.
If the tender relates to delivery of goods, the promisee must be given opportunity to
check that the goods are according to contract.
It must be made by a person who is able to perform the promise.
If there are several joint promisees, a tender to any one of them is valid.
In case of tender of money, exact amount should be tendered.

3. DISCHARGE BY AGREEMENT. A contract can also be discharged by the fresh

agreement between the same parties. A contract may be terminated by agreement in any of the
following ways:

a) Novation: it means replacement of an existing contract by another contract. In novation

the parties may change. If the parties are not changed then the material terms of the contract must
be altered in the new contract because a mere variation of some of the terms of a contract is not
novation but alteration.
b) Alteration: It takes place when one or more of the terms of the contract are changed. If a
material alteration in a written contract is made with the consent of all the parties the original
contract is discharged by alteration and a new contract takes place. An alteration may be a
change in amount of money, the rate of interest, or the name of the parties. Alteration results in
the discharge of the original contract.
The difference between “Novation” and “Alteration is that in case of novation there may be a
change of parties but in case of alteration parties remain the same and only terms of the contract
are changed.

c) Rescission: It means cancellation of contract by mutual consent. A contract may be

cancelled by agreement between the parties at any time before it is discharged by performance.
The cancellation of agreement releases the parties from their obligation arising out of the
contract.
d) Remission: It means the acceptance of lesser sum than what was due from promisor. A
person who has a right to demand the performance of contract may:
Remit or give up the whole or part of a debt.
Extend the time of performance.
Where a promisee remits a part of the debt and gives a discharge for the whole debt on receiving
a smaller amount, such discharge is valid.
e). Waiver: It means intentional abandonment of a right, which a person is entitled to under a
contract. A party may waive his rights under the contract, whereupon the other party is released
from his obligation.

4. DISCHARGE BY SUBSEQUENT IMPOSSIBILITY.

a) Initial impossibility: An agreement to do impossible act is void ab-initio. An agreement which

is obviously impossible cannot be binding.
b) Subsequent Impossibility: Sometimes, a contract capable to be performed after formation
becomes impossible, or unlawful and as a result void.
DOCTRINE OF FRUSTRATION OR SUBSEQUENT IMPOSSIBILITY. It means that
subsequent impossibility or illegality will make the contract void and the contract will be
discharged. A contract will remain valid, if the party to a contract feels difficulty in performing
the contract. He cannot claim to be excused from performance by the fact that performance has
become burdensome, difficult or expensive. This is known as the DOCTRINE OF
FRUSTRATION OR DOCTRINE OF SUPERVENING IMPOSSIBILITY.

Specific Grounds of Frustration:

Destruction of Subject Matter. When the parties make a contract for a particular subject
matter, the contract is discharged if the subject matter is destroyed without the fault of the
promisor or promisee.
Failure of Ultimate Purpose. Sometimes the contract is entered into between two parties
on the basis of occurrence of a particular state of things. If there is any change in the state of
things which formed the basis of the contract, the contract is discharged.
Death of Personal Incapacity. Where the performance of a contract depends upon the
personal skill, or qualification or the existence of a given person, the contract is discharged on
the illness or in capacity or the death of that person.
Change of a Law. Contracts, which are lawful when made but become unlawful later due
to change in law, become impossible to be performed. A subsequent change in law may render
the contract illegal and in such cases the contract is deemed discharged. Impossibility created by
law is valid excuse for non performance.
 Declaration of War. A contract entered into with an alien enemy during war is illegal and
void ab-initio. Contract entered into before the commencement of war is suspended during the
war. However, such contracts may be revived after the war is over if the nature of the contract
permits.
4.DISCYHAGE BY LAPSE OF TIME: A contract is discharged by lapse of time. The
LIMITATION ACT, 1908 lays down that a contract should be performed within a specified
period. If the contract is not performed and no legal action is taken by the promisee within the
period of limitation, he is deprived of his remedy at law. The contract is terminated in such a
case.

5.DISCHARGE BY OPERATION OF LAW. A contract terminates by operation of law in the

following ways.
a) Insolvency. Where the court declares a person as insolvent, such person is discharge from
his liabilities incurred before his insolvency.
b) Merger. it takes lace when an inferior right available to a party merges into a superior right
available to the same party under some other contract. As a result of merger the former contract
stands discharged automatically.
c) Unauthorized Material Alteration: where a party to the contract makes any material alteration
in the contract, without the consent of the other party, the contract can be avoided by the other
party. A material alteration is one, which changes the legal identity or character of the contract or
the rights and duties of the parties to the contract.

6. DISCHARGE BY BREACH OF CONTRACT. A contract must be performed according to its

terms. But where the promisor fails to perform the contract according to the terms of the
contract, there is a breach of contract by him. Breach of contract may be of two kinds:
Actual Breach. It occurs when a party fails to perform a contract, when performance is
due. But, if a party, who has failed to perform the contract at the appointed time, subsequently
expresses his willingness to perform, he can do so after paying compensation, if time is not
essence of contract.
b) Anticipatory Breach. It occurs before the time fixed for performance has arrived. It may
happen in two ways.
Express Breach. In this case a party to the contract communicates to the other party, his
intention not to perform the contract, before the due date of performance has arrived.
Implied Breach. In this case a party to the contract does an act, which makes the
performance of the contract impossible.

Effect of an Anticipatory Breach. In anticipatory breach, the promise gets the following
rights:
The promise is excused from performance.
He may treat the contract as rescinded and sue the other party for damages immediately.
He may ignore the conduct of promisor and wait for the time of performance and then sue
the promisor.
REMEDIES FOR BREACH OF CONTRACT.

Where a party breaks the contract by refusing to perform his promise, the breach of contract
takes place.
The following remedies are available to the aggrieved party against the guilty party.

1). Suits for Rescission of the Contract. When one of the parties to a contract commits breach of
contract, the other party is released from his obligation under the contract and can file suit for
rescission of the contract.
2). Suits for Damages. The aggrieved party may sue for damages as well. The damages are
awarded to compensate the injured person.
Kinds of Damages:
i) Ordinary or General Damages: the injured party can recover from the guilty party
damages for loss, which is the direct result of such breach.
ii) Special Damages: These arises when a party makes a special contract through which he
expects a large profits.
iii)Exemplary Damages: These are such damages, which are awarded in order to punish the
guilty party for the breach and not to compensate injured party.
iv) Liquidated Damages: Where a sum has been agreed between the parties then the actual or
agreed amount whichever is less would be awarded.
v) Nominal Damages: When the aggrieved party suffers no loss, the court may award him
nominal damages in recognition of his right.
INDEMNITY AND GUARANTEE

Indemnity:

“A CONTRACT BY WHICH ONE PARTY PROMISES TO SAVE THE OTHER

FROM LOSS CAUSED TO HIM BY THE CONDUCT OF THE PROMISOR
HIMSELF OR BY THE CONDUCT OF ANY OTHER PERSON, IS CALLED A
CONTRACT OF INDEMNITY”.

PARTIES:

INDEMNIFIER: The person who promises to make good the loss is called the
Indemnifier (promisor)

INDEMNITY HOLDER: The person whose loss is to be made good is called the
Indemnity holder or indemnified (promise)
Rights of Indemnity Holder:

1). He can recover all damages which he may be compelled to pay in respect of any suit
filed against him.
2). He can recover expenses in respect of any suit filed by him with the authority of indemnifier.
3) He can recover all expenses which he may have paid under the terms of any compromise of
any such suit, provided the compromise was made with the consent of indemnifier.

Rights of Indemnifier:

It is well known principle of law that where one person has agreed to indemnify another,
He will on making good the loss, be entitled to all the ways and means by which the
Person indemnified might have protected himself against or reimbursed himself for the
Loss.

Guarantee:

“A CONTRACT TO PERFORM THE PROMISE OR DISCHARGE THE

LIABILITY OF A THIRD PERSON IN CASE OF HIS DEFAULT”.

A contract of guarantee is made with the object of enabling a person to get a loan or

Goods on credit or an employment etc. It may be either oral or written. It is a promise to pay a
debt owing by a third person in case the later does not pay. '
PARTIES:
SURETY: The person who gives the guarantee is called the surety or guarantor.
CREDITOR: The person to whom the guarantee is given.
PRINCIPAL DEBTOR: The person for whom the guarantee is given.

ESSENTIAL FEATURES:
1). Secondary Contact: The principal contract exists between the principal debtor and the
creditor and the contract between creditor and surety is a secondary contract.
2). Consideration: Anything done, or any promise made, for the benefit of the principal debtor,
may be a sufficient consideration to the surety for giving guarantee. Essential of consideration
must be fulfilled like free consent, etc.
3). Misrepresentation: A guarantee obtained by means of misrepresentation made by the
creditor or with his knowledge and assent concerning a material part of the transaction, is
invalid.
4). Writing not Necessary: It is not necessary that contract of guarantee must be in writing.
KINDS OF GUARANTEE:
1). SPECIFIC: The guarantee which is given for a single debt or transaction. It comes to an end
as soon as the liability under the transaction ends.
2). CONTINUING GUARANTEE:
A guarantee which extends to a series of transactions. A guarantee which covers several
transactions over a period of time.
RIGHTS OF SURETY:
1). Against the Creditor:
Right to Securities: At the time of payment, can demand the securities, which the creditor has
received from the principal debtor at the time of creation of contract. Whether the surety knows
the existence of such securities or not is immaterial.
Right to Claim set off, if any: he is entitled to the benefit of any set off or counter claim, which
the principal debtor has against the creditor in respect of the same transaction. He is entitled to
use the defenses of the debtor against creditor.
2). Against Principal Debtor:
a) Right to Indemnity. It is implied promise by the principal debtor to indemnify the surety; and
the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid
under the guarantee, but not sums which he had paid wrongfully.
b) Right of Subrogation: When surety has paid the guaranteed debt on default of the principal
debtor, he is entitled to all the rights, which the creditor has against the principal debtor.
3). Surety's right against co sureties: When a debt is guaranteed by more than one surety, they
are called co sureties. In such case all the sureties are liable to make the payment to the creditor
according to the agreement among them. If there is no agreement and one of the co sureties is
compelled to pay the entire debt, he has a right to contribution from the co sureties.
A). Similar Amount: Where there are sureties for the same debt and the principal debtor has
committed a default, each party is liable to contribute equally to the extent of the default.
b) Different Amount: Where there are sureties for the same debt for different sums, they are
bound to contribute equally subject to the limit fixed by their guarantee. They will not contribute
proportionately.
DISCHARGE OF SURETY FROM LIABILITY.
A surety is said to be discharged from liability when his liability comes to an end. It comes to an
end in any one of the following ways.
1). Notice of Revocation: A specific guarantee cannot be revoked if the creditor has given the
loan. It can be revoked by notice if the liability has not been incurred. But a continuing guarantee
may, at any time, be revoked by the surety as to future transactions, by giving a notice to the
creditor.
4). Release or Discharge of Principal Debtor: The surety is discharged by any contract
between the creditor and the principal debtor, by which the principal debtor is released. Any
release of the principal debtor is a release of the surety also.
The surety is also discharged by any act or omission of the creditor, the legal consequence of
which is discharge of the principal debtor.
5). Arrangement without Surety's Consent: where the creditor, without consent of surety,
arranges with the principal debtor for composition, or promises to give him time or not to sue
him, the surety will be discharged. Provided where a contract to give time to the principal debtor
is made by the creditor with a third person, and not with the principal debtor, the surety is not
discharged.
6). Creditor's Act or Omission: If the creditor does any act which is inconsistent with the rights
of the surety, or omits to do, any act which his duty to the surety requires him to do, and the
eventual remedy of the surety himself
7). Loss of Security: If the creditor loses or, without the consent of the surety, parts with any
security given to him, at the time of the contract of guarantee, the surety is discharged from
liability to the extent of the value of security. If the security is lost due to an act of God, the
surety would not be discharged.
8). Invalidation of the Contract of Guarantee: A surety is discharged from liability.
BAILMENT AND PLEDGE.
Contract of Bailment.

The term bailment is derived from a French word “baillior” which means to deliver. It denotes a
contract resulting from delivery. It involves change of possession of goods from one person to
another and not transfers of ownership.

“A bailment is the delivery of goods by one person to another for some purpose, upon a contract
that they shall, when the purpose is accomplished, be returned or otherwise disposed of
according to the directions of the person delivering them.”

A bailment arises when one person transfers possession of goods to another: person on condition
that he will return them after the accomplishment of purpose.

A bailment can also be defined as a “voluntary transfer of the possession of goods by the owner
to another person, who is not his servant, under a contract that the other person shall do
something with the goods or hold them or return them to the owner, or deliver them according to
his order.

If a person already in possession of the goods of another person contracts to hold them,
1e becomes the BAILEE, and the owner becomes the BAILOR.

BAILOR: the person delivering the goods is called the BAILOR.

BAILEE: the person to whom the goods are delivered is called the BAILEE.

ESSENTIAL FEATURES OF A CONTRACT OF BAILMENT.

Contract: a bailment is based on a contract between bailor and bailee. The delivery of goods
should be made for some purpose under a contract that when the
is accomplished, the goods shall be returned to the bailor. If the goods are delivered without any
contract. i.e., by mistake, there is no bailment. It should also possess all the essentials of a valid
contract.

Specific Purpose: the bailment of goods is always made for some purpose and is
ubject to the condition that when the purpose is accomplished the goods will be returned to the
bailor or disposed off according to the directions of the bailor. If the person to whom the goods
are delivered is not bound to return them to the person delivering them,There is no bailment.

Delivery of Goods: The most important feature of bailment is the delivery of goods from one
person to another. Mere custody does not create relationship of bailor and bailee. A servant who
received goods from his master to take to a third person as only custody. The possession remains
with the master, so the servant cannot be called bailee. The delivery may be actual or
constructive. When the goods are physically transferred from one person to another, there is
actual delivery. But when a railway receipt is given to get the goods from railways, there is
constructive delivery.
No Change of Ownership: under bailment it is only the possession that passes from the owner
to the other and not the ownership. Mere custody without possession is not bailment, i.e., a
servant holding his master's goods. If there is a change of ownership the transaction may be a
sale or exchange but is not a bailment.
Return of Same Goods: it is essential for bailment that when the purpose is accomplished, the
goods must be returned in original form or in changed form or disposed off according to the
direction of the bailor. If the bailee has an option of paying money or of returning different
property, there is no bailment. The deposit of money with a banker is not a bailment because
there is no obligation to return the specific money as was deposited. But notes or other things
deposited in a locker provided by a bank is a bailment.
Kinds of Bailment.
1. According to the benefit. a) For the benefit of the bailee; b) for the benefit of the bailee c) for
the benefit of both.
2. According to reward: a) Bailment without reward; b) bailment for reward.
DUTIES OF BAILOR:
To disclose faults. 2To repay Necessary Expenses.3.To repay Extra Ordinary Expenses
(gratuitous no normal expenses) 4.Indemnify to return the benefit for return of goods before
time. (gratuitous) 5. To indemnify for defective title. 6. To receive back the goods.
DUTIES OF BAILEE:
1. To take reasonable Care. 2. Not to make unauthorized use. 3. Not to mi the goods. 4. To return
the goods. 5.To return increase.
RIGHTS OF BAILEE.
1) To claim damages. 2To recover Expenses. 3To claim compensation. 4To deliver the
goods.

TERMINATION OF BAILMENT:
1After expiry of time. 2After accomplishment of Purpose 3. By unauthorized use. 4. On Death of
either party. 5By Bailor's termination. 6By destruction of subject matter.
FINDER OF LOST GOODS: "A person who finds goods belonging to another and takes them
into his custody is subject to the same responsibility as a bailee."
The finder of the lost goods is not liable to take charge of such goods. But when he takes the
charge of lost goods, he becomes responsible for the goods like a bailee in a gratuitous bailment.
It should also be remembered that the finder of lost goods has a good title over the things found
and that this right is enforceable against all except the real owner.
DUTIES OF FINDER:
To find out the owner. 2To take reasonable Care. 3Not to use the goods. 4Not to mix the goods.
RIGHTS OF FINDER:
To retain. 2Lien 3. To sue Third persons. 4To sue for Reward. 5To sale.
PLEDGE OR PAWN. "The bailment of goods as security for payment of a debt or performance
of a promise is called pledge."
The bailor is called pledgor or pawnor and the bailee is called pledge or pawnee.
ESSENTIALS OF PLEDGE:
Of Moveable Property. 2For limited interest 3.Transfer or Possession 4.No transfer of ownership
5. Not by mere custody.
RIGHTS OF PAWNEE:
To retain for debt and for interest if any 2. To retain against other debts as well. 3. To claim
extraordinary Expenses but cannot retain against such expenses. 4.To sue and sell.
DUTIES OF PAWNEE:
To take reasonable Care. 2. No unauthorized use. 3. Not to Mix. 4. To return the goods. 5. To
return any increase obtained.