PLEDGE or PAWN, in law, a "bailment of goods by a debtor to his creditor to be kept till the debt is discharged" (Jones on Bailments). The term is also used to denote the property which constitutes the security. Pledge is the pignus of Roman law from which most of the modern law on the subject is derived. It differs from hypothecation and from the more usual kind of mort gage in being confined to personal property, and also in that the pledge is in the possession of the pledgee. A mortgage of personal property, in the majority of instances, takes the name and form of a bill of sale (q.v.). In the case of a pledge, it is held that a spe cial property passes to the pledgee, sufficient to enable him to maintain an action against a wrongdoer, but the general property, i.e., the property subject to the pledge, remains in the pledgor. As the pledge is for the benefit of both parties, the pledgee is bound to exercise only ordinary care over the pledge. He must, however,
insure against loss by fire (35/36 Vict. ch. 93, s.36). The pledgee has the right of selling the pledge if the pledgor makes default in payment at the stipulated time.
The law of Scotland as to pledge generally agrees with that of England, as does also that of the United States. The main differ ence is that in Scotland and in Louisiana a pledge cannot be sold unless with judicial authority. Chattel mortgages, which differ from pledges in that the owner retains possession of the article, are uniformly required to be recorded in order to be valid against third parties, but except for a few States and aside from the Factors acts, a pledge, for the validity of which possession must be transferred to the pledgee, will be enforcible against third parties without being recorded. (See also FACTORS and PAWN BROKING.)