Multiple choice

Hypothecation is an implied pledge in case where

  1. constructive possession of goods is given

  2. delivery of goods is given

  3. constructive possession of obligation is given

  4. None of the above
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Explanation

In hypothecation, the possession of the property is restrained by the owner and certain rights in that moveable property are transferred to the person in whose favour the property is hypothecated. In a pledge, the possession of goods also passes to the pledgee by way of security, though the possession may be constructive. The true distinction from hypothecation is that the constructive possession of the goods in the case of pledge is specifically secured by the terms of the contract and is continued unabated throughout.

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