Site navigation

A obtains goods from S under a contract voidable for misrepresentation. Before S rescinds, A pledges them to C, who takes them in good faith without notice of the defect. What is C's position under…

Question and options

A obtains goods from S under a contract voidable for misrepresentation. Before S rescinds, A pledges them to C, who takes them in good faith without notice of the defect. What is C's position under section 178A of the Indian Contract Act, 1872?

  1. C's pledge is valid against S

  2. C's pledge is void, since A's contract was voidable

  3. C's pledge binds S only if S later ratifies it

  4. C's pledge is valid once A pays S in full

Answer and explanation

Correct answer: A - C's pledge is valid against S

Section 178A of the Indian Contract Act, 1872 provides that where the pawnor obtained possession under a contract voidable for fraud, misrepresentation, coercion or undue influence, and the contract has not been rescinded when the goods are pledged, the pawnee acquires a good title, provided he acts in good faith and without notice of the pawnor's defect of title. The pledge does not depend on S's ratification or on A paying S.

Practice for these exams

Related exam syllabi

More solved explanations in Bailment & pledge