Test: Contract of Pledge - CLAT PG MCQ

The pawnee has a duty to take reasonable care of the pledged goods, which means they must manage and protect the goods as a prudent person would do with their property. This responsibility is essential because it helps maintain the value of the goods until the pawnor can fulfill their obligation, thereby ensuring fairness in the transaction.

The pawnee is required to give reasonable notice to the pawnor before selling the pledged goods. This notice serves to inform the pawnor of the intended sale and gives them an opportunity to settle their debt, thereby protecting their interests.

The key difference between a pledge and hypothecation is that a pledge involves the transfer of possession of the property to the creditor, while in hypothecation, the debtor retains possession of the property. This distinction is significant as it influences the rights and responsibilities of both parties. In a pledge, the creditor can sell the property to recover the loan, whereas in hypothecation, the debtor can continue to use the property while being obligated to adhere to the terms of the loan agreement.

If the sale proceeds exceed the amount due to the pawnee, the excess amount must be returned to the pawnor. This provision ensures fairness in the transaction and protects the pawnor from losing more than they owe, thereby fostering trust in the pawning process.

The pawnor is obligated to pay the debt or fulfill the promise as specified in the pawn agreement. This means that the pawnor must ensure that their financial obligation is met in order to reclaim the pledged goods. Understanding this obligation is crucial for anyone engaging in a pawn transaction, as it defines the legal responsibilities of the parties involved.

Constructive delivery refers to a situation where the actual physical transfer of goods does not occur, but possession is transferred in a way that is legally recognized. For example, handing over the keys to a storage facility where the goods are kept constitutes constructive delivery, as it allows the pledgee to access and control the goods without them being physically moved.

A tenant in possession of a furnished property cannot pledge the furnishings because they do not own the items and typically lack the authority to pledge them. Valid pledgers include the actual owner, authorized agents, and co-owners who have the consent of other owners. This restriction protects the rights of the true owners of the property.

A pawner has the right to redeem the pledged goods at any time before they are actually sold, even if they have defaulted on payment. However, they must also cover any expenses incurred due to their default. This right emphasizes the importance of the pawnor's ability to reclaim their property, promoting a fair resolution even in cases of financial difficulty.

If the sale proceeds exceed the amount due, the pawnee must return the surplus to the pawnor. This ensures that the pawnor is not unjustly enriched or penalized beyond their original obligation. Such regulations help to maintain equity in pawn transactions and protect the rights of both parties involved.

A mortgage differs from a pledge primarily in that it transfers both possession and certain legal rights associated with the property, including the right of enjoyment. In contrast, a pledge only transfers possession without granting the same level of rights. In a mortgage, the borrower retains some rights while securing the loan, but the lender gains significant rights over the property in case of default, which can include foreclosure.

A pawnee can only retain pledged goods for the specific debt or promise that the pledge was made against. This right ensures that the pawnee cannot unjustly retain goods for unrelated debts, thus providing protection to the pawnor's rights.

The pawnee can sue the pawnor for reimbursement of extraordinary expenses incurred while preserving the pledged goods. However, this right does not allow the pawnee to retain the goods solely for the recovery of these expenses, reinforcing the principle that the obligation to pay is separate from the right to retain the goods.

The primary legal implication of a lien is that it grants the creditor a personal right to retain the property until the debt is paid, but does not provide the right to sell the property. This contrasts with a pledge, where the creditor can retain and sell the property if the debtor defaults. The lien is therefore less comprehensive in terms of the creditor's rights compared to a pledge.

The pawnor has the right to redeem the pledged goods by repaying the debt or fulfilling the promise made. This right allows the pawnor to reclaim the goods before they are sold by the pawnee, emphasizing the pawnor's interest in recovering their property. Once the actual sale occurs, this right is extinguished.

A pledgee holds specific rights regarding the pledged property, including the right to retain possession, sue for recovery of the loan amount, and sell the property if the debtor defaults on the loan. This provides the pledgee with a secured interest in the property, ensuring they can recoup the loan amount through these rights.

The pledgee, also known as the pawnee, is the party that receives the goods as security for a debt or obligation. While the ownership of the goods remains with the pledger, the pledgee has a special property right that allows them to possess the goods and sell them if the pledger defaults on repayment. This arrangement protects the interests of the pledgee while ensuring that the pledger retains ownership.

If a pawner defaults on a loan, the pawnee has the right to sell the pledged goods, but they must provide reasonable notice to the pawnor before the sale. This requirement is a legal safeguard to ensure the pawnor is informed and has an opportunity to remedy the situation before the goods are sold, thus promoting fairness in the process.

If the pledger defaults on the repayment of the debt, the pledgee has the right to sell the pledged goods to recover the owed amount. This right is essential as it provides the pledgee with a means to secure their financial interest and ensures that they can mitigate potential losses resulting from the default.

When a document of title, such as a railway receipt, is delivered in a pledge agreement, it signifies the delivery of the goods it represents. This legal principle allows the pledgee to claim the goods without needing to physically handle them, thereby providing a practical way to secure interests in goods that may be stored or transported elsewhere.

Hypothecation is particularly beneficial for debtors who wish to secure a loan while retaining possession of their movable property. This arrangement allows them to continue using the property in their business or personal affairs while still having access to the funds needed. It is a flexible option that does not require the debtor to part with their property, unlike a pledge.