2.2 Difference of Contract of Bailment with Pledge, and Hypothecation vs Sale(2.2–2.3)

PointBailmentPledgePurposeAny lawful purpose (safekeeping, repair, use, carriage)Security for a debt or performancePartiesBailor–baileePawnor–pawnee (a secured creditor)Default powersBailee retains for charges; no sale power as suchPawnee may (per agreement/law) appropriate or sell on defaultRelationshipThe genusThe species — "pledge is bailment as a security"Hypothecation vs. sale: | Point | Hypothecation | Sale | |---|---|---| | Ownership | Stays with the chargor (borrower) | Transfers to the buyer | | Possession | Stays with the chargor (a charge without delivery) — banks' hypothecation of stock-in-trade, vehicles, receivables | Passes to the buyer (with the property) | | Function | Security for credit | Exchange — goods for price | | Creditor's right | To seize and realise on default (per the charge's terms and law) | No creditor — the seller's right is to the price | Hypothecation is the middle house between bailment (possession shifts) and mortgage (immovable security — Property Law, Semester 3): the Banking andFinancial Institutions Act 2073 expressly authorises banks to lend "on collateral of project and hypothecation" — the statute's own vocabulary (stated from the Act's functions list, without section numbers). Sale is not a security device at all — it is transfer of ownership (Unit 7).