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CMA Foundation · Fundamentals of Business Laws and Business Communication · Meaning of Indemnity, Guarantee, Pledge, Agent

Under the Indian Contract Act, 1872, the bailment of goods as security for payment of a debt or performance of a promise is called:

The bailment of goods as security for payment of a debt or performance of a promise is called a pledge. The bailor is the pawnor and the bailee is the pawnee. Indemnity and guarantee do not require delivery of goods as security.

  1. AIndemnity
  2. BGuarantee
  3. CPledgeCorrect
  4. DAgency

Explanation

Section 172 defines pledge as the bailment of goods as security for payment of a debt or performance of a promise. Indemnity protects against loss, and guarantee concerns performing the promise or discharging the liability of a third person on default. Neither involves delivery of goods as security.

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