Pledge (law)

In law, a pledge is a type of bailment where personal property is deposited as security for a debt or obligation. It is a form of security interest. The debtor, known as the pledgor, delivers possession of the property to the creditor, known as the pledgee, but retains ownership. This differs from a mortgage, where title is transferred.

The key characteristics of a pledge are:

• Possession: The pledgee must have actual or constructive possession of the pledged property.
• Ownership: The pledgor retains ownership of the property.
• Security: The property serves as security for the performance of an obligation (usually the repayment of a debt).
• Return: The pledgee is obligated to return the property to the pledgor when the debt or obligation is satisfied.

If the pledgor defaults on the obligation, the pledgee has the right to sell the pledged property to satisfy the debt. The proceeds of the sale are used to pay the debt, and any surplus is returned to the pledgor. The pledgee must exercise reasonable care in handling the pledged property while it is in their possession.

Pledges are commonly used in various contexts, including pawnshops (where personal items are pledged for loans), loans secured by securities (such as stocks or bonds), and other transactions where collateral is required.

The law governing pledges can vary by jurisdiction, but generally addresses issues such as the creation and perfection of the pledge, the rights and duties of the pledgor and pledgee, and the procedure for foreclosure upon default.