CONTRACT OF BAILMENT

The word ‘Bailment’ is derived from the French word ‘Bailer’ which means to deliver. The etymological meaning of bailment is “handing over” or “change of possession of goods”. In legal sense, it involves change of possession of goods from one person to another for some specific purpose.

Bailment is a delivery of goods on condition that the recipient shall ultimately restore them to the Bailor or dispose of them according to the direction of the Bailee or dispose of them according to the direction of the Bailor.

ACCORDING TO SECTION 18 OF INDIAN CONTRACT ACT, 1872
“It 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 bailor and the person to whom they are delivered is called bailee”.

ACCORDING TO ENGLISH AUTHOR DAVID A.G. SARRE
“Bailment is the delivery of goods by one person called the bailor to another, called the bailee on the conditions that same goods shall be redelivered by the bailee to or on the directions of the bailor”.

Thus, the contract of bailment is a contract between two persons under which one person called the bailor delivers some goods for some purpose to another, called the bailee on the condition that the same goods shall be returned by the bailee to the bailor or according to his order on the fulfillment of the stated purpose.

Example: If A gives his car to B his neighbor for 10 days, but at the same time he keeps one key with himself and during this period of 10 days he used to take the car. Now this will not be a case of bailment as A is keeping control over the property bailed.

ESSENTIAL FEATURES OF CONTRACT OF BAILMENT

A contract of bailment has the following essential features:

CONTRACT
The first condition is that there must be a contract between the two parties for the delivery of goods. Such contract may be express or implied, written or oral.

DELIVERY OF GOODS
This contract is for the delivery of some movable goods from one person (bailor) to another person (bailee) or to his authorized agent. If the goods are immovable the contract will not be a contract of bailment.

CHANGE OF POSSESSION
The possession of goods must be affected by such contract. Mere custody without possession is not a contract of bailment.

PURPOSE OF DELIVERY
The delivery of the goods is for temporary purposes. It may be for safe-custody, repair, carriage or for gratuitous use by the bailee.

NUMBER OF PARTIES
There is two parties tinder such contract e.g., the bailor and bailee. The person delivering the goods is called the bailor and the person to whom the goods are bailed is called the bailee.

RIGHT OF OWNERSHIP
In a contract of bailment, the right of ownership remains with an owner (bailor) and is not changed. If the ownership is transferred, the contract will be a contract of sale and is not of bailment.

CHANGE OF FORM
If the goods bailed are altered in form by the bailee, such as cloth. is converted into a shirt still, the contract is one of bailment.

GOODS IN POSSESSION OF BAILEE
The delivery of the goods is not essential if the goods are already in the possession of the person who enters into the contract as bailee.

REDELIVERY OF GOODS
Under such contract, the goods are redelivered to the bailor or according to his directions upon the fulfillment of the purpose by the bailee.

RIGHT OF REWARD
In a contract of bailment, both the parties bailor and the bailee can get a reward but it depends on the nature of the transaction.

KINDS OF BAILMENT

A contract of bailment may be of the following kinds:

BAILMENT FOR SAFE-CUSTODY
When the bailor delivers his goods to the bailee only for keeping it. in his safe-custody, the bailment is said to be bailment for safe-custody.
EXAMPLE: A delivers his camera to B to keep it in his safe-custody for six months. This will be the bailment for safe-custody.

BAILMENT FOR USE
If the bailor delivers, the goods to the bailee to use it. The bailment will be the bailment for use.
EXAMPLE: A delivers his bicycle to B to use it for two days. This will be the example of bailment for use.

BAILMENT FOR REWARD
Where the bailment is for use or for sate-custody and the bailee or bailor can charge for his services, then it will be the case of bailment for
EXAMPLE: A delivers his bicycle to B to use it for two days for Rs.50 daily. This will be the bailment for a reward because Bailor (A) will get a reward for the use of a bicycle.

GRATUITOUS BAILMENT
Where the bailment is for safe-custody or for use and bailee does not charge anything, the bailment is a bailment for gratuitous.
EXAMPLE: A delivers his bicycle to his friend B to use it for two days without reward. It will be the case of gratuitous bailment.

BAILMENT FOR LOST GOODS
When a person finds out the lost goods of another has the same responsibilities as the bailee has against the goods the bailor. such implied bailment Will be the case of bailment of lost goods. Under such conditions, the bailee is entitled to retain the goods until he receives compensation for the trouble and expenses he has to bear in order to find but the owner of the lost goods.
EXAMPLE: A found the lost horse B and redelivered it to B. It will be the bailment for last goods.

BAILMENT FOR PLEDGE
When any moveable goods are given as security for the debt, to creditor by the debtor, it will be bailment for pledge until the repayment
EXAMPLE: A gets a loan from B and hands over his B as security until the repayment of the loan. It will be the bailment for pledge.

RIGHTS AND DUTIES OF BAILOR AND BAILEE

The person delivering the goods is called the ‘Bailor’. He is a party to the contract of bailment.

DUTIES OF A BAILOR

1) TO PUT BAILEE INTO POSSESSION (SECTION 149)
 The delivery to be bailee may be made by doing anything which has the effect of putting the goods in the possession of the intended bailee or of any person authorised to hold them on his behalf.

2) TO DISCLOSE MATERIAL FAULTS (SECTION 150)

Section 150 of Indian Contract Act 1872 says that, The bailor is bound to disclose to the bailee faults in the goods bailed, of which the bailor is aware, and which materially interfere with the use of them, or expose the bailee to extraordinary risk; and if he does not make such disclosure, he is responsible for damage arising to the bailee directly from such faults.

Example: A lends a horse, which he knows to be vicious, to B. He does not disclose the fact that the horse is vicious. The horse runs away. B is thrown and injured. A is responsible to B for damage sustained.

3) TO PAY EXPENSES OF BAILMENT (SECTION.158)

Section 158 of the Indian Contract Act says that, where, by the conditions of the bailment, the goods are to be kept or to be carried, or to have work done upon them by the bailee for the bailor, and the bailee is to receive no remuneration, the bailors shall repay to the bailee the necessary expenses incurred by him for the purpose of the bailment.

4) TO INDEMNIFY THE LOSS (SECTION 159)

Indemnity means promise to make good the loss. According to Section 159 of the Indian Contract Act 1872 bailor has a duty to indemnify the loss suffered by the bailee under the contract.

5) TO PAY DAMAGES FOR NON DISCLOSURE (SECTION 150 )

Second part of Section 150 of the said Act says that,  …..if bailor does not make disclosure to the bailee faults in the goods bailed, he is responsible for damage arising to the bailee directly from such faults.

Example: A lends a horse, which he knows to be vicious, to B. He does not disclose the fact that the horse is vicious. The horse runs away. B is thrown and injured. A is responsible to B for damage sustained.

6) TO PAY DAMAGES FOR DEFECT IN BAILOR’S TITLE  (SECTION 164)

 The bailor is responsible to the bailee for any loss which the bailee may sustain the reason that the bailor was not entitled to make the bailment, or to receive back the goods, or to give directions, respecting them.

RIGHTS OF A BAILOR

As such Indian Contract Act, 1872 does not provide for Rights of a Bailor. But Rights of a Bailor is same as Duties of the Bailee i.e. Rights of Bailor = Duties of Bailee. So the rights of bailor are:

ENFORCEMENT OF BAILEE’S DUTY

Since the bailor delivers goods to the bailee for some specific purpose, the former, especially in case of non-gratuitous bailment, has an elemental right to achieve that purpose or obtain the benefit (i.e., performance) through the latter.

For example, if X delivers a suit length to Y, his tailor, to stitch a suit for him, X (bailor) will see that the tailor does the needful in the desired manner.

RIGHT TO CLAIM DAMAGES (SECTION 151):

In all cases of bailment, the bailor has the right to claim for damages against the loss, if any, caused to the goods bailed due to the bailee’s negligence or misconduct.

RIGHT TO TERMINATION THE CONTRACT (SECTION 153)

If the Bailee does not comply with the terms of the contract and acts in a negligent manner in such case the bailor has the right to rescind the contract.

RIGHT TO CLAIM COMPENSATION

If the Bailee uses the goods for an unauthorized purpose or mixes the goods which cause loss of goods in such case bailor has the right to claim compensation.

A good example for this is this situation, A lets B use his car but with a condition that only B shall drive. B allows C, a member of his family, to drive the car. C rides with care, but the car meets with some accident. Now B is liable to compensate for the damages caused.

RIGHT TO DEMAND THE RETURN OF GOODS

It is the duty of the Bailee to return the goods and the bailor has the right to demand the same.

RIGHT TO DEMAND RETURN OF GOODS ALONG WITH ACCRETION TO, IF ANY

The bailor enjoys the exclusive right to have the goods bailed delivered back to him in safe and sound condition after the time of bailment has expired or the purpose behind the bailment has been achieved. Moreover, in the absence of any contrary term in the contract, the bailor is also entitled to any accretion to the goods bailed if it occurred while the goods were in the study of bailee.

For example, A leaves his brooding hen in the custody of B to be taken care of for a week. The hen has hatched the chicks. A is entitled not only to the hen but also to the chicks.

DUTIES OF BAILEE

Bailee has to fulfil several obligations as per Indian Contract Act, 1872. That is:

DUTY TO TAKE REASONABLE CARE (SECTION 151-152)

It is the duty of the Bailee to take care of goods as his own goods. He shall ensure all safety measures that are necessary to protect the goods. The standard of care should be such as taken care by a prudent man. The goods shall be taken care of equally whether they are gratuitous or non-gratuitous. The Bailee shall be held liable for payment of compensation if he fails to take due care. But if the Bailee has taken due care and instead of that the goods are damaged then in such a situation Bailee will not be liable to pay compensation. The Bailee is not liable for the loss of goods due to destruction by fire.

DUTY NOT TO MAKE UNAUTHORIZED USE OF THE GOODS (SECTION 153-154):

Bailee is duty bound to use the goods for a specific purpose only and not otherwise. If he uses the goods for any other purpose than what is agreed for then the bailor has the right to terminate such bailment or is entitled with compensation for damage caused due to unauthorized use.

DUTY NOT TO MIX BAILOR’S GOODS WITH HIS OWN GOODS (SECTION 155-157): 

It is the duty of the Bailee not to mix bailor’s goods with his own. But if he wants to do the same then he shall seek consent from the bailor for mixing of goods. If the bailor agrees for the mixing of the goods then the interest in the mixed goods shall be shared in proportion. In case, Bailee without the consent of bailor mixes the goods with his own then two situations arise: goods can be separated and goods can’t be separated. In the former case the Bailee has to bear the cost of separation and in the latter case since there is the loss of the goods, therefore, bailor shall be entitled with damages of such loss.

DUTY TO RETURN THE GOODS ON THE FULFILMENT OF PURPOSE (SECTION 160-161):

Bailee is duty bound to return the goods once the purpose is achieved or on the expiry of the time period for which the goods were bailed. But if the Bailee makes default in returning the goods on proper time then he will be responsible with the loss, destruction or deterioration of the goods if any.

DUTY TO DELIVER TO THE BAILOR INCREASE OR PROFIT IF ANY ON THE GOODS BAILED (SECTION 163):

The Bailee has a duty to return the goods along with increase or profit subject to contract to the contrary. Accretion that has accrued from the bailed goods is the part of the bailed goods and therefore bailor has the right over such accretions if any. And such accretions shall be handed over to the bailor along with the goods bailed. For instance, A leaves a cow in the custody of B and cow gives birth to the calf. Then B is duty bound to hand over the bailed goods along with accretion to the bailor.

RIGHTS OF A BAILEE

RIGHT TO RECOVER EXPENSES (SECTION 158):

In the contract of Bailment, the Bailee incurs expenses to ensure the safety of goods. The Bailee has the right to recover such expenses from the bailor.

RIGHT TO REMUNERATION: 

When the goods are bailed to the Bailee he is entitled to receive certain remuneration for services that he has rendered. But in case of gratuitous bailment, the Bailee is not awarded any remuneration.

RIGHT TO RECOVER COMPENSATION (SECTION 168):

At times a situation arises wherein bailor did not have the capacity to contract for bailment. Such a contract causing loss to the Bailee, therefore the Bailee has the right to recover such compensation from the bailor.

RIGHT TO LIEN (SECTION 170-171):

Bailee has the right over Lien. By this, we mean that if the bailor fails to make payment of remuneration or does not pay the amount due, the Bailee has the right to keep the goods bailed in his possession till the time debtor dues are cleared. Lien is of two types: particular lien and general lien.

In the case of Surya Investment Co. v. S.T.C, the court held that expenses incurred by Bailee during preservation of goods under lien shall be borne by bailor.

RIGHT TO SUIT AGAINST A WRONGDOER (SECTION 180):

After the goods have been bailed and any third party deprives the Bailee of use of such goods, then the Bailee or bailor can bring an action against the third party.

TERMINATION OF BAILMENT

A contract of bailment can be terminated by any of the following;

1. ACCOMPLISHMENT OF PURPOSE
When the purpose for which goods were bailed” has been accomplished, the contract of bailment is terminated and goods are returned to the bailor.

2.EXPIRY OF TIME
When the goods are bailed for a fixed time, the contract of bailment is terminated at the expiry of the time fixed.

3. DEATH OF THE PARTY
A gratuitous bailment is terminated by the death either of the bailor  

4. BAILEE’S INCONSISTENT ACT
A contract of bailment ‘is voidable (terminated) at the option of the bailee does any act with regard to the goods bailed’ with the conditions of the bailment.

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