Difference between Pledge and Lien

Following are the points of difference between a pledge and a lien:

1. Pledge is always created by a contract, whereas no contract is necessary for a right of lien. In most of the cases, lien is created by law.

2. Though in both the cases the possession of the goods is transferred to the creditor, yet in case of a lien, the party in possession of the goods does not have in general any right to sell the goods. In case of pledge, the creditor or the pledgee has right to sell the goods in his possession on the default by the debtor.

3. Right of lien is lost with the loss of the possession of the goods. But pledge is not necessarily terminated by return of goods to the owner. The goods pledged may be redelivered to the pledger for a limited purpose.

4. Lien is purely a passive right. Lien-holder can only hold the goods till the payment is made. Lien holder cannot enforce its claim through a court of law. But a pledgee enjoys the right to sue, right of sale and the right of lien.