Rights And Duties Of Pawnor And Pawnee

When it comes to secured transactions, the relationship between a pawnor and pawnee plays a vital role in protecting the interests of both parties. In such agreements, a pawnor pledges goods as security for a loan or obligation, while the pawnee holds possession of those goods until the debt is repaid. Understanding the rights and duties of pawnor and pawnee is essential to ensure legal clarity and fairness in the transaction. This article will explore the key rights and responsibilities of both parties, helping you navigate the legal framework surrounding pawning agreements with confidence.

Who Is A Pawner?

The person who offers the pawn as security for a loan is known as the pawner. While the pledged property is in the lender's custody, the pawner is still the owner of it. In addition to being responsible for returning the loan within the allotted time, the pawner usually pays interest on the amount borrowed.

Who Is A Pawnee in law?

The pawnee, also known as the lender or pawnbroker, is the person or institution that accepts the pledged item and provides the loan. The pawnee holds the item as security until the borrower repays the loan in full, including any accrued interest. If the borrower defaults on the loan, the pawnee has the right to sell the pledged item to recover the loan amount and any outstanding interest.

Essential Features Of A Pawn

Since a pawn or a pledge is a special kind of bailment, all the essentials of bailment are also the essentials of the pawn. The other essentials of the pawn are:

• There shall be a bailment for security against payment or performance of the promise.
• The subject matter of the pledge is goods, goods pledged for shall be in existence.
• There shall be the delivery of goods from pledger to pledgee.
• There is no transfer of ownership in the case of the pledge.

Exception: In exceptional circumstances, the pledgee has the right to sell the movable goods or property that have been pledged.

Who May Pawn?

• The owner, or his authorized agent, or
• One of the several co-owners, who is in the sole possession of goods with the consent of other owners, or
• A mercantile agent, who is in possession of the goods with the consent of the real owner, or
• A person in possession under a voidable contract before the contract is rescinded, or
• A seller who is in possession of goods after the sale a buyer who has obtained possession of the goods before the sale, or
• A person who has a limited interest in the property. In such a case, the pawn is valid only to the extent of such interest.

Rights And Duties Of A Pawner And Pawnee

Rights Of A Pawner

1. Right, to Redeem the Pledge: The most significant right of a pawner is the right to redeem or reclaim the pledged goods upon fulfilling the debt or obligation for which the pledge was made. According to Section 177 of the Indian Contract Act, the pawner can redeem the goods at any time before their actual sale by the pawnee. If the pawnee sells the goods without providing the pawner an opportunity to redeem, the pawner can claim compensation.
2. Right to Notice of Sale: If the pawner fails to repay the debt within the agreed time, the pawnee has the right to sell the pledged goods. However, the pawner is entitled to receive reasonable notice before such a sale occurs. This ensures that the pawner has one final opportunity to repay and reclaim the goods.
3. Right to Compensation: If the pawnee damages or misuses the pledged goods while in possession, the pawner has the right to claim compensation. The pawnee is expected to take reasonable care of the goods, and any negligence can lead to a breach of this duty.

Duties Of A Pawner

1. Duty to Repay the Loan: The primary obligation of the pawner is to repay the loan or fulfill the obligation for which the pledge was created. Failure to repay the loan within the stipulated period gives the pawnee the right to sell the pledged goods.
2. Duty to Compensate for Expenses: If the pawnee incurs expenses for the preservation of the pledged goods (e.g., storage, insurance), the pawner is liable to reimburse the pawnee for these expenses. This ensures that the pawnee does not suffer a loss for maintaining the property.
3. Duty to Deliver Possession: The pawner must deliver possession of the pledged goods to the pawnee as agreed upon in the contract. Any breach in this duty may affect the enforceability of the contract.

Rights Of A Pawnee

1. Right to Retain the Goods: The most significant right of the pawnee is to retain possession of the pledged goods until the pawner has repaid the loan or fulfilled the obligation. This right acts as a security measure for the pawnee, ensuring that they are compensated for the loan given.
2. Right to Sell the Goods: If the pawner defaults on the repayment, the pawnee has the right to sell the pledged goods to recover the debt. However, this right is subject to the condition that the pawnee provides the pawner with reasonable notice of the sale.
3. Right to Claim Deficiency: In the event that the sale of the pledged goods does not fully satisfy the loan amount, the pawnee has the right to claim the deficiency from the pawner. The pawnee is not limited to the proceeds of the sale but can demand the remaining balance of the debt.
4. Right to Recover Necessary Expenses: If the pawnee incurs expenses for the preservation or protection of the pledged goods, they are entitled to recover such expenses from the pawner. This includes costs related to storage, insurance, and necessary repairs.

Duties Of A Pawnee

1. Duty to Take Reasonable Care: The pawnee is required to take reasonable care of the pledged goods while they are in their possession. This is a legal obligation to ensure that the goods do not deteriorate or get damaged due to negligence. The standard of care is similar to that which the pawnee would take with their own goods.
2. Duty to Return the Goods: Once the pawner has repaid the loan or fulfilled the obligation, the pawnee is duty-bound to return the pledged goods. The pawnee cannot continue to hold onto the goods beyond what is necessary, as doing so would amount to wrongful detention.
3. Duty Not to Use the Goods: The pawnee cannot use the pledged goods for personal benefit unless such use is explicitly authorized by the contract. The goods are held purely as security, and using them would violate the pawnee's duties under the contract.