LEGAL PRINCIPLE: COMMERCIAL LAW – Bailment – Bailee’s Unauthorised Pledge – Right of Bailor Against Transferee

A bailee who pledges the bailed goods without authority commits an act inconsistent with the bailment. This act terminates the bailment or entitles the bailor to terminate it. The bailor then has the right to immediate possession and can sue both the bailee and any transferee (pawnee) for recovery of the goods. The transferee cannot claim protection as a bona fide purchaser because the bailee had no authority to transfer title. The principle protects the bailor’s ownership rights. The transferee’s remedy is against the bailee for breach of warranty of authority. The bailor’s right is paramount. The rule applies to documents of title as well as goods.