Business

Lien is an implied Pledge – Explanation

Lien is an implied Pledge – Explanation

Lien is an implied Pledge – 

A lien is the right of a creditor in possession of goods, securities or any other assets belonging to the debtor to retain them until the debt is repaid, provided that there is no contract express or implied, to the contrary. It is a right to retain possession of specific goods or securities or other movables of which the ownership vests in some other person and the possession can be retained till the owner discharges the debt or obligation to the possessor.

It is a legal claim by one person on the property of another as security for payment of a debt. A legal claim or attachment against property as security (right) for payment of an obligation.

In Halsbury’s Laws of England, it is stated:

“Lien is, in its primary sense, a right in one man to retain that which is in his possession belonging to another until certain demands of the person in possession are satisfied. In its primary sense, it is given by law and not by contract.”

In Chalmers on Bills of Exchange, the meaning of the Banker’s Lien is stated:

“A bankers’ lien on negotiable securities has been judicially defined as ‘an implied pledge’. A banker has, in the absence of an agreement to the contrary, a lien on all bills received from a customer in the ordinary course of banking business in respect of any balance that may be due to front such customer.”

It should be noted that the lien extends only to negotiable instruments which are remitted to the banker from the customer for the purpose of collection. When the collection has been made the process may be used by the banker in a reduction of the customer’s debit balance unless otherwise earmarked. It confers upon him the power to sell the goods and securities in case of default by the customer. Such right of lien thus resembles a pledge and is usually called an implied pledge.