Bailment

Presented By: Ajitav Acharya

MEANING OF BAILMENT
 The word bailment is derived from French
word „bailer‟ which means “to deliver”.
 Section 148 of the Indian Contract Act
reads: A bailment is the delivery of goods
by one person to another for some
purpose, upon a contract that they shall,
when the purpose is accomplished, be
returned or otherwise disposed of
according to the directions of the person
delivering them.
 The person delivering the goods is called
the “bailor”.
 The person to whom they are delivered is
called the “bailee”.
 For example, you deliver some gold to a
jeweller B to make bangles for your sister.
In this case you are bailor and B is bailee
and by delivering gold to B, a relationship
of bailment is created between you and
the jeweller.
Essentials of Valid Bailment
 i) Agreement:
 For creating a bailment the first essential
requirement is the existence of an
agreement between the bailor and the
bailee.
 As you have read just now bailor is the
person who bails the goods and bailee is
the person to whom the goods are bailed.
 The agreement between the bailor and
bailee, may be either express or implied.
ii) Delivery of goods
 For bailment, it is necessary that the goods should be
delivered to the bailee. It is the essence of the contract
of bailment.
 It follows that bailment can be of movable goods only.
 It is further necessary that the possession of the goods
should be voluntarily transferred and is in accordance
with the contract.
 For example, A, a thief enters a house and by showing
the revolver, orders the owner of the house to
surrender all ornaments in the house to him. The
owner of the house surrenders the ornaments. In this
case although, the possession of goods has been
transferred but it does not create bailment because the
delivery of goods is not voluntary.
 Delivery of possession may be actual or constructive.
Actual delivery means actual physical transfer of
goods from one person to another.
 For example, when a person gives his scooter for
repair to workshop, it is actual delivery.
 When physical possession of goods is not actually
given but some such act is done which has the effect
of putting the goods in the possession of bailee, or
putting the goods in the possession of any other
person authorized by the bailee to hold them on his
behalf, it amounts to constructive delivery.
 This also amounts to constructive delivery of the
goods. A railway receipt is a document of title to
goods, a transfer of the railway receipt effects a
constructive delivery of the goods.
iii) Purpose
 In
a bailment, the goods are delivered for
some purpose.
iv) Return of the goods:
 Itis important that the goods which form
the subject matter of the bailment should
be returned to the bailor or disposed of
according to the directions of bailor, after
the accomplishment of purpose or after
the expiry of period of bailment.
Examples
 A watch is given for repairs, or diamonds are
given for being set in a gold ring. In both
these cases, the same watch or the same
diamonds, should be returned after the
purpose for which they were given, has been
fulfilled.
 Again, where money is deposited by a
customer with a bank in a current, savings or
fixed deposit account, and, therefore, there is
no obligation to return the identical money
but an equivalent of it, it is no bailment.
KINDS OF BAILMENT
 Bailment may be classified on two bases, i.e., reward and
benefit.
A) On the Basis of Reward:
 Bailment can be classified as gratuitous and non-gratuitous
bailment on the basis of whether the parties are getting or not
getting some value out of the contract of bailment. When
there is no consideration involved in the contract of bailment
it is called a gratuitous bailment.
 For example, when you lend your cycle to your friend so that
he can have 3 ride or when you borrow his books to read, it is
a case of gratuitous bailment because no exchange of money
or any other consideration is involved. Neither you nor your
friend would be entitled to any remuneration here.
 A contract of bailment which involves
some consideration passing between
bailor and bailee, is called a non-
gratuitous bailment. For example, if your
friend hired a cycle from a cycle shop or
you borrowed a book from a bookshop on
hire, this would be a case of non-
gratuitous bailment.
B) On the Basis of Benefit
a) Bailment for the exclusive benefit of the
bailor:
 This is the case where a contract of
bailment is executed only for the benefit
of the bailor, and the bailee does not
derive any benefit from it. For example, if
you are going out of station and leave
your valuable goods with your neighbour
for safety, it is you as bailor, who alone is
being benefited by this contract.
b) Bailment for the exclusive benefit of the
bailee:
 This is the case where the contract of
bailment is executed only for the benefit of
the bailee and the bailor does not derive any
benefit from the contract. For example, if
you lend your books to a friend, without
charge, So that he can study for his exams, it
is your friend as the bailee, who alone is
going to be benefited by this contract.
c) Bailment for the mutual benefit of bailor
and bailee:
 In this case both the bailor and the bailee
derive some benefit from the contract of
bailment. For example, if you give your
shirt to be stitched by the tailor, both of
you are going to be benefited by this
contract, while you get a stitched shirt, the
tailor gets the stitching charges.
DUTIES OF BAILOR
A) Duty to disclose defects:
 The law of bailment imposes a duty on bailor to disclose the defects
in the goods bailed. Bailor is under an obligation to inform those
defects in the goods which would interfere with the use of the goods
for which the goods being bailed or would expose the bailee to
some risk. Bailment of goods may be either gratuitous (in which
neither bailor nor the bailee gets any reward) or non-gratuitous
(bailment for reward).
 In case of gratuitous bailment, the law imposes a duty on the bailor
to reveal all the defects known to him, which would interfere with
the use of goods bailed. If the bailor does not disclose the defects
and the bailee in consequence suffers some loss, the bailor would be
liable to compensate the bailee for the losses so suifered. For
example, A the owner of a scooter allows B, his friend, to take his
scooter for a joy ride. A knows that the brakes of the scooter were
not working well. A does not discloses this fact to B. Consequently,
B meets with an accident. A is liable to compensate B for damages.
 In case of Non-gratuitous bailment, i.e., bailment
for reward, the bailor has a duty to keep the goods
in a fit condition. The goods should be fit to be
used, for the purpose, they are meant. In such a
case the bailor is responsible for all defects in the
goods whether he knows the defects or not is
immaterial, and if the bailee suffers any loss, the
bailor has to bear it. For example, A hires a tractor
from B, for ploughing his field. The shaft of the
tractor is broken but B is not aware of the defect.
While A was ploughing his field because of the
defect, the tractor overturns and A is injured. B is
liable for A's losses.
B) Duty to bear expenses:
 The general rule in those bailments where the bailee is
not to receive any remuneration is that the bailor
should bear the usual expenses in keeping the goods
or in carrying the goods or to have work done upon
them by the bailee for the bailor.
 The bailor must repay to the bailee all the necessary
expenses which the bailee has already incurred for the
purpose of bailment.
 For example- if A, a farmer gives some gold to his
friend B, who is a goldsmith, to make a gold ring. B is
not to receive any remuneration for the job. But A has
a duty to repay to B any expenses incurred by him in
making the ring.
 In cases of non-gratuitous bailments (where
the bailor is to receive remuneration), bailor
has a duty to bear extraordinary expenses,
borne by the bailee for the purposes of
bailment. However, the bailor is not to bear
ordinary or usual expenses.
 For example, if a horse is lent for a journey,
the expenses for feeding the horse would be
payable by the bailee. But, if the horse
becomes sick and expenses have to be
incurred the bailor should pay those
expenses.
C) Duty to indemnify the bailee:
 It is the duty of the bailor to indemnify the bailee,
for any loss which the bailee may suffer because
of the bailor's title being defective. The reason for
this is that the bailor was not entitled to make the
bailment or to receive back the goods bailed.
 For example, A asks his friend B to give him cycle
for one hour. B instead of his own cycle gives C‟s
cycle to A. While A was riding, the true owner of
the cycle catches A and surrenders him to police
custody. A is entitled to recover from B all costs,
which A had to pay in getting out of this situation.
D) Duty to bear risks:
 Itis the duty of bailor to bear the risk of
loss, destruction of the thing bailed,
provided the bailee has taken reasonable
care to protect the goods from loss etc.
E) Duty to receive back the goods:
 It is the duty of the bailor that when the
bailee, in accordance with the terms of
bailment, returns thc goods to him, the bailor
should receive them.
 If the bailor, without any reasonable reason
refuses to take the goods back, when they are
offered at a proper time and at a proper
place, the bailee can claim compensation
from the bailor for all necessary expenses,
which the bailee undertakes to keep and
protect the goods.
DUTIES OF BAILEE
A) Duty to take reasonable care of the goods
bailed:
 As per section 151, The bailee is bound to
take as much care of the goods bailed to him
as a man of ordinary prudence would, under
similar circumstances, take of his own goods
of the same bulk, quality and value as the
goods bailed. The standard of care is same
whether the bailment is gratuitous or for
reward. So a bailee is liable when the goods
suffer loss due to the negligence on the part
of bailee.
B) Not to make any unauthorized
use of goods:
 The bailee is under a duty to use the bailed goods
in accordance with the terms of bailment. If bailee
does any act with regard to the goods bailed,
which is not in accordance with the terms of
bailment, the contract is voidable at the option of
the bailor.
 Besides it, the bailee is liable to compensate the
bailor for any damage caused to the goods by an
unauthorized use of the goods bailed. If he makes
unauthorized use of goods, bailee would not be
saved from his liability even if he has taken
reasonable care of the ordinary prudent man.
C) Duty not to mix bailor’s goods
with his own goods:
 The duty of the bailee is to keep the
goods of the bailor separate from his
own.
 If the bailee, with the consent of the
bailor, mixes the goods of the bailor with
his own goods, the bailor and the bailee
shall have an interest, in proportion to
their respective shares, in the mixture
thus produced (Section 155).
 Ifthe bailee, without the consent of the
bailor, mixes the goods of the bailor with
his goods, and the goods can be
separated or divided, the property in the
goods remains in the parties respectively;
but the bailee is bound to bear the
expense of separation or division, and any
damages arising from the mixture
(Section 156).
 Ifthe bailee, without the consent of the
bailor, mixes the goods of the bailor with
his own goods, in such a manner that it is
impossible to separate the goods bailed
from the other goods and deliver them
back, the bailor is entitled to be
compensated by the bailee for the loss of
the goods (Section 157).
D) Duty not to set up an adverse
title:
 Baileemust not set up a title adverse to
that of the bailor. He must hold the goods
on behalf of and for the bailor. He can not
deny the title of the bailor.
E) Duty to return the goods:
 Itis the duty of the bailee to return or to
deliver the goods according to the
directions of bailor, on the expiry of the
time fixed or when the purpose is
accomplished. If he does not return or
deliver as directed by the bailor at the
proper time, he becomes liable to the
bailor for any loss, destruction of the
goods from that time. He is liable even
without his negligence.
F) To return any increase or profit
from the goods:
 In the absence of any contract to the
contrary, the bailee is bound to deliver to
the bailor, any increase or profit which
might have accrued from the goods
bailed.
 For example,A leaves a cow in the
custody of B to be taken care of. The cow
gives birth to a calf. B is bound to deliver
the calf as well as the cow to A.
RIGHTS OF BAILOR
A) Enforcement of bailee's duties:
 Duties of the bailee are the rights of the
bailor.
 For example, when the bailee returns the
goods bailed, he should also return all
natural increase or profit from the goods.
This is a duty of the bailee and it is the
right of the bailor to receive all natural
accretions in the goods bailed, when the
goods are returned to the bailor.
B) Right to claim damages:
 Itis an inherent right of the bailor to
claim damages for any loss that might
have been caused to the goods bailed, due
to the bailee's negligence (Section 151).
C) Right to avoid the contract:
 Ifthe bailee does any act, in respect of the
goods bailed, which is inconsistent with
the terms of bailment, the bailor has a
right to avoid the contract. For example,
A lends his car to B for B’s personal use.
B starts using the car as a taxi. A can avoid
the contract (Section 153).
D) Right to claim compensation:
 Ifany damage is caused to the goods
bailed because of the unauthorised use of
the goods, the bailor has a right to claim
compensation from the bailee. In the
same way the bailor has a right to claim
compensation, if some loss is caused to
the goods bailed, due to unauthorised
mixing by bailee, of bailee's own goods
with the goods of the bailor (Sections
154,155 and 156).
E) Right to demand return of goods:
 Itis a right of the bailor to compel the
bailee, to return the goods bailed, when
the time of bailment has expired or when
that purpose for which the goods were
bailed has been accomplished.
RIGHTS OF BAILEE
a) Right to claim damages:
 If the bailor has bailed the goods, without
disclosing the defects in the goods, and
the bailee has suffered some loss, the
bailee has a right to sue the bailor for
damages.
b) Right to claim necessary
expenses
 Where the bailee is not to receive any
remuneration for the work to be done by
him as per terms of the bailment, he is
entitled to recover from the bailor all
necessary expenses incurred by him for
the purpose of bailment.
c) Right to recover losses
 Itis a right of bailee to recover from the
bailor, all losses suffered by him by reason
of the fact that the bailor was not entitled
to make the bailment of the goods or to
receive back the goods.
d) Right to deliver goads to any one
of the joint bailors:
 Ifthe goods are owned and bailed by
more than one person, the bailee has a
right, in the absence of a contrary
contract, to deliver back the goods to any
one of the joint owners, or may deliver
the goods back according to the
directions of, one joint owner, without the
consent of all.
e) Right to deliver the goods to
bailor even if his title is defective:
 Ifthe title of bailor is defective and the
bailee, in good faith returns the goods to
the bailor or according to the directions
of bailor, the bailee is not liable to the
true owner in respect of such delivery.
f) Right to lien:
 When the bailee, in accordance with the
purpose of agreement has rendered any
service involving the exercise of labour or
skill, to the goods bailed, and his lawful
payments are not made by the bailor, the
bailee has a right to retain unless there is a
contract to the contrary, the goods bailed,
until he received his remuneration for the
services rendered by him. This right to retain
goods is known as bailee's lien (Section 170).
Finder of Goods
 A person who finds some goods, which do not belong
to him, is called, finder of goods.
 It is his duty to find out the actual owner and
surrender the goods to him.
 He has no right to sue the owner for compensation for
trouble and expenses voluntarily incurred by him, in
finding the owner and in preserving the goods found.
 But he has a right to retain the goods against the
owner until he receives such compensation from the
owner.
 If the owner has offered some specific award on the
lost goods, the finder may sue the owner for the award
and till then can exercise his right to lien over the
goods.
MEANING OF PAWN OR PLEDGE
 Pawn or Pledge is a special kind of bailment
where a movable thing is bailed as security for the
repayment of a debt or for the performance of a
promise.
 For example, if you borrow rupees one hundred
from Bikram and keep your cycle with him as
security for repayment, it is a contract of pledge.
 The person taking the loan is called the pledger or
pawnor and the person with whom goods are
pledged is called the pawnee or pledgee.
 Ownership of the pledged goods does not pass to
the pledgee.
 The general property remains with the pledger but
a “special property” in it passes to the pledgee.
 The special property is a right to the possession of
the articles along with the power of sale on
default.
 Delivery of the goods pawned is a necessary
element in the making of a pawn.
 The property pledged should be delivered to the
pawnee.
 Delivery of possession may be actual or
constructive. Delivery of the key of the godown
where the goods are stored is an example of
constructive delivery.