Q: A, not being an original owner of the car, pledges it to B. By elaborating the situation when non-owners can validly pledge, briefly comment on the given problem.

  

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Questions

A, not being an original owner of the car, pledges it to B. By elaborating the situation when non-owners can validly pledge, briefly comment on the given problem.

Or,

Write a short note on pledge by non-owners.

 

Answer

For reading general description about pledge, click here.

There are certain circumstances in which non-owners can make a valid pledge. these are:

 

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1.      Pledge by a mercantile agent, (section 178 of ICA):

The person who is given the authority by the owner to sell or consign goods on his behalf in front of the third party is referred to as an agent. Such agent with the consent of principle can make a valid pledge.

Conditions necessary to be fulfilled:

A.      Possession with the owner’s consent, and should be free from fraud, misrepresentation, or coercion.

B.      The agent should have acted in the ordinary course of business.

C.      Pawnee should have accepted the pledge in good faith, and at the time of pledge, unaware with the fact that pawnor has no authority to pledge.

 

2.      Pledge by person in possession under voidable contract, (section 178A):

Person having possession under voidable contract can make a valid contract of pledge of goods, provided that the:

A.      Contract has not been cancelled at the time of pledge and

B.      The Pawnee has acted in good faith and without knowledge of pledger’s defective title.

Example: A, under the fear of death, purchased a car with B, and pledged it to Z, before the contract is cancelled with the defense of voidable contract. The pledge will be deemed valid. C will get a good title to the car and B can only claim damages from A.

 

3.      Pawnor having Limited interest, (section 179 of ICA):

Where a person pledges goods in which he has limited interest, the pledge is valid to the extent of his interest. thus, a person having a lien over goods can pledge it up to the extent of his interest.

 

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4.      Co-owner in possession:

where there are two or more co-owners in possession of same goods, anyone of them can make a valid pledge after taking consent of other one.

 

5.      Seller in possession of goods after sale (section 30 of sale of goods act):

A seller of goods, left in possession of goods sold, is no more the owner of goods but a pledge created by him will be valid, provided the Pawnee acted in good faith and had no knowledge of the sale of the goods to the buyer.

 

Therefore, in given problem, if A falls under any of aforementioned categories, then it can be safely concluded that he can validly pledge the car, even he is not the true owner of the same.

 

 

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