Concept of Bailment

Introduction to Concept of Bailment

Concept of Bailment : In law, the word bailment is used in its technical sense which means the change in the possession of goods i.e. one person transfers the goods to another person. On the other hand, Pledge is a kind of bailment in which one person bails his goods to another person as security against loans. Both bailment and pledge are examples of specific contracts. The contract of bailment can be classified into three categories:

1. For the exclusive benefit of the bailor.
2. For the exclusive benefit of the bailee.
3. For the mutual benefit of both.

Concept of Bailment

Section 148 of the Indian Contract Act deals with the concept of Bailment, Bailor and Bailee.

A bailment is a contract in which one person transfers goods to another person with a contract that he will return the goods after completion of the purpose for which contract takes place.

The person who delivers goods to another person is known as Balior and the person to whom bailor delivered goods, is known as Bailee.

The contract of bailment is different from the contract of sale of a property. In the contract of sale of a property, after the completion of sale the ownership of the property gets transferred to the buyer. But, in bailment, only the possession of the property is transferred to the bailee and not the ownership and the possession of the property is transferred only for the period up to the completion of the purpose.

In order for bailment, the bailee must have the intention to possess the property, i.e. actual possession of the property. The bailor intends to transfer the property to the bailee for the specific period of time and after the fulfilment of the purpose, the property should be returned to the actual owner.

Kinds of Bailment

Gratuitous Bailment

Under this Bailment, anyone, either the bailor or the bailee gets the sole benefit.

For sole benefit of Bailor

In this concept, the bailor transfer the goods to the bailee for some specific purpose which result in the benefit of bailor only i.e. bailee has no expectation in return.

Illustration

A and B are the neighbours. One fine day A gave his jewellery to B to keep it safe because A is going out of town for some days. B return A’s jewellery to A when he came back. Here there is no benefit of B in keeping those goods i.e. B does not get anything in return.

For sole benefit of Bailee

In this concept, the bailor transfers the goods to the bailee for some specific purpose which result in the benefit of bailee only i.e. bailor does not get anything in return. The bailor only gets his goods back after completion of the purpose.

Illustration

A gave his bike to B for 3 hours, because B wants to go to his parents home. Here A does not get anything in return by giving his bike to B, but he will get his bike back to him after the fulfilment of the purpose.

Non Gratuitous Bailment

Under this concept, both the bailor and the bailee get some rewards in return i.e. mutual benefit of both.

When bailor transfers his goods to the bailee for some specific purpose. After the completion of that specific purpose, the bailee returns the goods back to the bailor and in return gets the payment for his services.

Illustration

If A gives his car to B for repairing purpose. After the complete repair, B returns A’s car to him and A will pay B for his service.

Essentials of Valid Bailment

1. Agreement
2. Delivery of Goods
3. Purpose
4. Return of Goods

Agreement

For a valid contract of bailment, both the bailor as well as bailee have to enter into an agreement that the bailor will transfer goods to the bailee for a specific purpose and after the completion of the purpose bailee will return the goods to the bailor and bailor will pay to the bailee for his services.

Illustration

If A and B want to enter into the contract of bailment with the purpose that B will repair A’s car, they have to enter into an agreement, which includes all the instruction and orders of A regarding the repairs and usage of his property etc.

Delivery of Goods

For a valid bailment, it is necessary that the bailor will transfer i.e. deliver his goods to the bailee so that bailee can act towards completion of the purpose. The possession should be voluntary i.e. not by force, coercion, undue influence etc.

Delivery of possession of goods can be actual or constructive

Actual delivery means when the bailor transfer the goods to the bailee that transfer should be in physical nature.

Illustration

If A wants B to repair his car, so A has to transfer the physical possession of the car to B, because without the physical possession B is unable to complete the purpose for which bailment took place.

Constructive delivery is the opposite of actual delivery. In constructive delivery, the document which shows the title of goods gets transferred, due to which indirectly the possession gets transferred.

Illustration

If A has a railways receipt i.e. document of title to goods, transfers the receipt to B, here B indirectly has the possession of goods, as he has the document of title to goods.

Purpose

Bailment takes place when the bailor transfers constructive to the bailee, the main reason why bailor transfer his goods is the performance of a specific purpose. And when that purpose gets completed the bailor return the goods to the bailee.

Illustration

If A and B want to enter into the contract of bailment, A should transfer his goods and provide some purpose to B, so that B can act to complete that purpose.

Return of Goods

The contract of bailment comes to an end when the bailee after fulfilment of the purpose return the goods to the bailor or disposed of as per the direction of the bailor.

Illustration

If Ram transfers his gold to Shaam so that Shaam can make a ring from that gold. Shaam has to return the gold ring to Ram after the purpose for which they enter into an agreement gets accomplished.

Duties and Rights of Bailor

Duties of Bailor

Duty to disclose any defect

Section 150 of the Indian Contract Act states that, when the bailor transfers the possession of his goods to the bailee, he has to disclose the defect in goods while transferring them to the bailee. There are two conditions regarding the bailor’s duty to disclose the defect:

In the case of Gratuitous Bailment

In the case of gratuitous bailment, it is the duty of the bailor to disclose the defect which he knows about the goods to bailee while delivering the goods. If he fails to disclose the defect to the bailee and bailee suffered an injury due to that failure makes bailor liable. But if bailor was also unaware of the defect, in that situation he will not be held liable.

Illustration

• If A, the owner of the scooter allows B to use his scooter. A knows that brakes of the scooter are not working, he does not disclose the information to B. B met with an accident, A is liable to compensate B for the injury he suffered.
• If A was also unaware of the defect in the scooter that he gave to B, in this case, A is not liable for the injury B suffered.

In case of Non-Gratuitous Bailment

This concept deals with the goods given on hire. Under this concept when the bailor gives his goods on hire to the bailee and if he fails to disclose the defect in the goods to the bailee. The bailor will be held liable, even if the bailor is also unaware of the defect. It is the duty of the bailor to keep his goods fir and ready to use.

Illustration

If A hires a car from B, the gearbox of the car is not in good condition and suddenly the gear gets stuck. Due to that, A met with an accident. Here, even though B also does not know about it, he is liable.

In this case, the plaintiff is the bailee and the defendant is the bailor. Plaintiff took the carriage cart on hire from the bailor. While the journey the carriage met with an accident because the carriage is not ready or fit for that journey. Here the defendant is held liable because it is his duty to keep his good fit and should disclose the defect in the goods to the bailee i.e. plaintiff.

Duty to bear expenses

In the case of Gratuitous Bailment

It is the duty of the bailor to repay the amount which bailee incurred and paid in carrying and keeping the goods safe.

Illustration

If A gives his horse to B for two days. A should pay to B all the expenses, like the expenses incurred in feeding horse or any other expenses.

In case of non-gratuitous bailment

In the case of non-gratuitous bailment, the ordinary expenses incurred on goods should be paid by the bailee only. But, the extraordinary expenses have to be paid by bailor

Illustration

If A hires a car from B. the expenses incurred in refuelling the tank of the car should be paid by A only. But, If A paid any expenses like the fine if car’s papers are not there, or any expenses paid like for repairs, B has to repay that amount to A.

Duty to indemnify bailee

If the bailee has suffered any loss because of the goods bailed by the bailor. It is the duty of the bailor to indemnify bailee against that loss.

Illustration

If A, a friend of B asked B to give his cycle. Instead of giving his cycle, B gave C’s cycle to A. while riding, C caught A and handovers A to police. A has to pay fine. Here B has to indemnify i.e. to pay A against the loss incurred.

Rights of Bailor

Right to claim Damages

When the bailor transfers the possession of his goods to the bailee and if bailee fails to protect the goods of the bailor, the bailor has the right to claim damages against bailee.

Illustration

If A gave his book to B for binding. If due to the fault of B, the book got damages i.e. some pages were missing. Here B is liable and A has a right to claim damages.

In this case, the plaintiff has delivered valuable gold for decorating goddess to the defendant. Due to the negligence of the defendant, the ornaments were lost. Here the plaintiff demanded the compensation from the defendant. The court allowed the petition and as per section 151 of ICA, held the defendant liable.

Right to terminate the bailment

According to Section 153 of the Indian Contract Act, when the bailor transfers his goods to the bailee for some specific purpose and if bailee does any act which is against the terms and conditions on which bailor transfer his goods, the bailor has a right to terminate the contract of bailment.

Illustration

If A gave his car to B for personal use. B started using it as a taxi. Here, A has a right to terminate the bailment.

Right to get back the possession of the Goods

The bailor transfers his goods to the bailee for some specific purpose, when bailee complete that purpose, the bailor has a right to get the possession of goods back from the bailee.

Illustration

If A went to a hotel and gave his key to the guard for valet parking. Here A has a right to demand his car back when he wants to leave.

Duties and Rights of Bailee

Duties of Bailee

Duty to take reasonable care

According to Section 151 of the Indian Contract Act, when the bailor transfers his goods to the bailee for some specific purpose. It is the duty of the bailee to keep those goods safe and protected. He has to ensure to take standard care as a prudent man. If the bailee fails to keep the goods safe and protected he is liable to pay compensation to the bailor.

Illustration

If A bailed his gold to B, B has a duty to take proper care and protect the gold of A, like his own gold. If B fails to protect the gold or any damage occurred, B has to pay/ compensate A.

A broker after the sale of wools retained it in his store with the consent of the buyer. The store was wooden and surrounded by the fence having large gaps between them. An intruder enters the shop through the gaps i.e. from between the fence, put fire in the store, all the wools gets destroyed. Here, the broker as a bailee having the possession of goods of the bailor is liable to pay compensation to the bailor because he fails to keep the goods safe.

Duty to not to make unauthorized use of goods

As per according to section 154 of the Indian Contract Act, 1872, when the bailor transfer the possession of the goods to the bailee for some specific purpose, it is the duty of the bailee to not to make unauthorized use of goods of bailor without his consent. If the bailee makes unauthorized use of the goods, he will be held liable to pay compensation to the bailor and as per section 153 of the contract act, the bailor can terminate the contract of bailment.

Illustration

If A gave his scooter to B for the purpose of repairing. B use that scooter for personal use. Here B is liable for unauthorized use of the good. A is entitled to get compensation and has a right to terminate the bailment contract.

Duty to not mix the goods

It is the duty of a bailee to not mix the bailor’s goods with his goods.

As per Section 155 of the Indian Contract Act, 1872, when the bailee mixes the goods of the bailor with his goods with the consent of the bailor, then the interest in mixed goods shall be shared in proportion.

Illustration

If A bails his goods to B. B with A’s consent mixed A’s goods with his goods. Here B will not be liable, as he has A’s consent.

Section 156 and 157 of the Indian Contract Act, 1872, deal with the condition when bailee mixes the goods without bailor’s consent.

There are two situations:

When goods can be separated (Section 156)

If goods mixed by the bailee can be separated, then the bailee has to bear the cost of separation.

Illustration

If A bails 100 packets of Lays chips to B. B without consent of A, mixed it with his 50 Diamond chips packets. Here B will be held liable for the cost incurred in separating the goods.

When goods cannot be separated (Section 157)

If goods mixed by bailee cannot be separated, then the bailee has to compensate to the bailor.

Illustration

If A bails 2lts. of petrol to D. D without consent of A mixed petrol with oil. Here, it is impossible to separate petrol from oil. B has to compensate A.

Duty to Return the goods

According to Section 160 of the Indian Contract Act, when the bailor transfers his goods to the bailee for some specific purpose, after completion of that purpose, it is the duty of the bailee to return goods to the bailor.

Illustration

If A gave his book to B for Binding. It is the duty of B as a bailee to return the book after binding. If B fails to fulfil his duty, he will be held liable.

Duty to deliver the bailor increase or profit if any on the goods bailed

According to Section 163 of the Indian Contract Act, when the bailor transfer the goods to the bailee for some specific purpose and during the bailee possession, any increment happens to goods, it is the duty of the bailee to return that increment to the bailor.

Illustration

A leaves a cow in the custody of B and cow gives birth to a calf. Then B is duty bound to hand over the bailed goods along with accretion to the bailor.

Rights of bailee

Right to claim damages

When the bailor transfers the possession of his goods to the bailee, he has to disclose the defect in goods while transferring them to the bailee. If the bailor fails to disclose the defect to the bailee and if bailee suffered an injury then the bailee has the right to claim damages from the bailor.

Illustration

If A bails his car to B without disclosing the information that the brakes of the car are not working well. B met with an accident. Here B has a right to claim damages from A.

J.N. Reed v Dean G. Parrack (1949) 1 KB 188

In this case, the plaintiff enjoying his holidays hire a motor launcher to enjoy the riverside from the defendant. The motor launcher was not fit to use and caught fire, the plaintiff suffered an injury. Here the defendant was held liable.

Right to claim Reimbursement

According to Section 158 of the Indian Contract Act, if the bailee suffered any expenses to keep the goods of the bailor safe and protected, the bailee has a right to demand reimbursement from the bailor.

Illustration

If A bails his horse to B for some time. B suffers some expenses like food, shelter etc to keep the horse safe. Here B has a right to get reimbursed for all the expenses from A, which he suffered to keep the horse safe.

Right to particular lien

According to Section 170 of Indian Contract Act, when bailor fails to pay lawful payment to the bailee for his services, the bailee has a right to lien/retain the goods until the time he receives his payment.

Illustration

A bails a piece of cloth to B, a tailor, to make a coat for him. B as per the conditions makes a coat, but A fails to pay B for his service, here B has a right to lien/retain A’s coat.

Right of bailor and bailee against the wrongdoer

According to Section 180 of Indian Contract Act, when the goods of the bailor are in the possession of the bailee and any third person wrongfully deprive the bailee of using the goods, then the bailee has a right it uses remedies as the bailor might have used.

Illustration

If A bails his T.V. to B for repairs. C forcefully takes the possession of T.V. from B. here B is entitled to the remedies as similar to that of A.

Concept of Finder of Goods

When a person found some goods which do not belong to him, that person is known as the finder of goods.it is the duty of the finder of goods to not to make unauthorised use of the goods and to find the real owner and surrender him the goods. He is lawfully entitled to get reimbursement of the expenses which he incurred by him in the process of finding the owner.

Rights of Finder of Goods

Right to lien

According to Section 168 of the Indian Contract Act, 1872, the finder of goods has a right to get reimbursement of the amount which he incurred during the process of finding the owner of the goods. But if the owner denied to reimburse him, he cannot sue the owner but he can retain goods till he gets paid for the expenses incurred by him.

Illustration

If A finds a wallet of B, he incurred Rs 70 as an expense to reach B’s address to return his wallet. A has the right to get paid his Rs 70. If B fails to pay him, A can retain his wallet.

Right to Sell

A finder of goods has a right to sell the goods found by him under the following circumstances

The goods are of perishing nature

Illustration

If A finds some tomatoes which belong to B. A tried hard to find B but was unable to find him. A can legally sell those tomatoes, as tomatoes are of perishing nature and the price he gets by the sale should be returned to B.

When the owner does not pay lawful charges incurred by the finder

Illustration

If A finds B’s Watch on the road. A, to find B’s address, incurred 80 Rs. if B denied paying, A has a right to sell the watch of B and retain his payment and if he gets the extra amount, it should be returned to B.

Duties of Finder of Goods

• It is the duty of the finder of the goods to keep goods safe.

Illustration

If A finds B’s Jacket. It is his duty to keep that jacket safe.

• It is the duty of the finder of the goods to not to use the goods for his personal use

Illustration

If A finds B’s cycle. He has to keep that cycle safe and should not use it for his personal use.

• It is the duty of finder of goods to find the real owner

Illustration

• If A finds a gold ring in a party, it is his duty to find the real owner of the ring.