Contract of Bailment

 

INTRODUCTION

There are many instances of bailment in our daily lives – when we deliver our goods to another person for a purpose for a period of particular time and then expects to receive the goods back after that particular period gets over and the purpose is achieved. Contracts of Bailment are a special class of contract. Bailment is a process where the owner of certain goods places them in a temporary possession of another person. In simple words, bailment means that a person puts his goods into the custody of another person for a particular time and for a specific purpose and when this purpose is achieved the goods are returned to the person who bailed them.

These are dealt within Chap. IX from S.148 to 181 of the Indian Contract Act, 1872 deals with the general concept of bailment. The circumstance in which this happens are numerous. Delivering a cycle, watch or any other article for repair, delivering gold to a goldsmith for making ornaments, delivering garments to a drycleaner, delivering goods for carriage, etc. are all familiar situations which create the relationship of ‘Bailment’.

DEFINITION

The word ‘bailment’ is derived from the French word ‘bailer’ which means ‘to deliver’

Bailment-Section 148 defines ‘Bailment’ as “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 off according to the directions of the person delivering them”.

The person delivering the goods is called ‘Bailor’ and the person to whom goods are delivered is ‘Bailee’.

Explanation – If a person is already in possession of the goods of another contracts to hold them as a baliee, he thereby becomes the bailee and the bailor becomes the bailor of such goods although they may not have been delivered by way of bailment.

Justice Blackstone’s defines Bailment as ‘a delivery of goods in trust, upon contract, either expressed or implied, that the trust shall be faithfully executed on the part of the bailee’.

NATURE OF BAILMENT

Bailment is a type of special contract and thus, all basic requirements of contract like consent of parties, competency etc. are applicable to any contract of Bailment. In bailment neither the property not the ownership of the goods involved is transferred at any point. Only the temporary possession of the bailed goods is transferred and the ownership of such goods remains with the bailor. The bailor can demand to have the property returned to him at any time.

SUBJECT MATTER OF BAILMENT

Bailment implies a sort of one person temporarily goes into the possession of another. Only ‘goods’ can be bailed and thus, only movable goods can be subject matter of bailment. Current money or legal tender cannot be bailed. Deposition of money in a bank is not bailment as money is not ‘goods’ and the same money is not returned to the client.

ESSENTIALS FEATURES

Section 148 of the Indian Contract Act, 1872 makes it very clear that there are three essential features of Bailment, namely

  1. Delivery of Possession:

The possession of goods must transfer from one person to another. Delivery is not same as custody. For example, a servant holding his master’s umbrella is not a bailee but only a custodian. The goods must be handed over to the bailee for whatever is the purpose of the bailment.

Types of DeliveryAs per section 149, the delivery to the 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 authorized to hold them on his behalf.  This means that the delivery can be made to either the bailee or to any other person whom the baliee authorizes. This person can be the bailor himself. This gives us two types of delivery – Actual and Constructive.  

In actual delivery, the physical possession of the goods is handed over to the bailee while in constructive delivery the possession of the goods remains with the bailor upon authorization of the bailee. In other words, the bailee authorizes the person to keep possession of the goods.

Mere custody of goods is not the same as delivery possession. A guest who uses the goods of the host during a party is not bailee as held in Reaves vs. Capper [1838 5 Bing NC 136]

  1. DELIVERY UPON CONTRACT

For a valid bailment, the delivery must be done upon a contract that the goods will be returned when the purpose is accomplished. If the goods are given without any contract, there is no bailment. In Ram Gulam vs. Govt. of UP AIR 1950, plaintiff’s ornaments were seized by police on the suspicion that they were stolen. The ornaments were later stolen from the custody or police, the plaintiff sued the government for returning the ornaments. It was held that the goods were not given to the polce under any contract and thus there was no bailment.

However, this decision was criticized and finally, in State of Gujarat vs. Menon Mohammad AIR 1967, SC held that bailment can happen even without an explicit contract. In this case, certain motor vehicles were seized by the State under Sea Customs Act, which were then damaged. SC held that the govt. was indeed the bailee and the State was responsible for proper care of the goods.

Exception to the delivery upon contract:

A finder of goods is treated as a bailee even if there is no contract of Bailment or delivery of goods under a contract. A finder of the goods is a person who finds the goods belonging to some other and keeps them under his protection till the actual owner of the goods is found. In such case an involuntary contract of bailment establishes and the finder automatically becomes bailee even in absence of actual contract of bailment.

  1. Delivery for a purpose and Return of Goods:

For bailment of goods there has to purpose and it is compulsory that after the purpose is accomplished, the goods have to be returned to the bailor or be disposed off of according to the bailor’s instructions. If there is no agreement to return the goods then the relationship between them is not bailment.

DUTIES OF BAILOR

According to Section 150, which deals with the duties of Bailor, bailor are of two kind’s i.e.

  1. Gratuitous bailor
  2. Bailor for reward

Gratuitous bailor:A person, who lends his articles or goods without any charge, is called a “Gratuitous Bailor”. His duty is naturally much less than that of a Bailor for hire or consideration

DUTY OF GRATUITOUS BAILOR

To disclose known faults:It is the first and foremost duty of the Bailor to disclose the known faults about the goods bailed to the Bailee. If he does not make such disclosure, he is responsible for any damage caused to the Bailee directly from such faults.

To indemnify bailee for the loss in case of premature termination of Gratuitous bailment: A Gratuitous Bailment can be terminated by the bailor at any time even though the bailment was for a specified time or purpose. But in such a case, the loss accruing to the bailee from such premature termination should not exceed the benefit he has derived out of the bailment. If the loss exceeds the benefit, the bailor shall have to indemnify the bailee. For example, ‘A’ lends an old guitar to ‘B’ gratuitously for two months, ‘B’ incurs Rs. 150/- on its repairs. If ‘A’ asks for the return of guitar after one month, he will have to compensate ‘B’ for expenses incurred by ‘B’ in excess of the benefit derived by him.

BAILOR FOR REWARD

Contrary to gratuitous bailment, a non-gratuitous bailment or bailment for reward is one that involve some consideration passing between the bailor and the bailee. Obviously in this case the delivery of goods takes place for the mutual benefit of both the parties.

For example, “A” hires “B’s” car. Here B is the bailor and receives the hire charges and A is the bailee and enjoys the use of the car. Similarly, when you give your PC or laptop for repair to some techie, both you and the computer techie are going to be benefited by this contract – while you get your computer repaired, he gets his fees or charges.

To bear extraordinary expenses of Bailment: the Bailee is bound to bear ordinary and reasonable expenses of bailment but for any extraordinary expenses the bailor is responsible

To receive back the goods:It is the duty of the Bailor to receive back the goods when the Bailee returns them after the expiry of the term of the Bailment or when the purpose for which Bailment was created has been accomplished. If the Bailor refuses to receive back the goods, the entitled to receive compensation from the Bailor for the necessary expenses of custody.

To indemnify the Bailee:Where the title of the Bailor to the goods is defective and the Bailee suffers as a consequence, the Bailor is responsible to the Bailee may sustain by reason that the Bailor was not entitled to make Bailment, or to receive back the goods, or to give directions respecting them

DUTIES OF BAILEE

Duty to take reasonable care:n English law the duties of a gratuitous and non-gratuitous bailee are different. However, in Indian law, Section 151 treats all kinds of bailee’s the same with respect to the duty. It says that in all cases of bailment, 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 bailee must treat the goods as his own in terms of care. However, this does not mean that if the bailor is generally careless about his own goods, he can be careless about the bailed goods as well. He must take care of the goods as any person of ordinary prudence would of his things.

Duty not to make unauthorized use (section 154):Section 154 says that if the bailee makes any use of the goods bailed which is not according to the conditions of the bailment, he is liable to make compensation to the bailor for any damage arising to the goods from or during such use of them.

Duty not to mix (Section 155- 157): The bailee should maintain the separate identity of the bailor’s goods. He should not mix his goods with bailor’s good without bailor’s consent. If he does so, and if the goods are separable, he is responsible for separating them and if they are not separable, he will be liable to compensate the bailor for his loss

Duty to Return (Section 160): Section 160It is the duty of the bailee to return or deliver according to the bailor’s directions, the goods bailed, without demand, as soon as the time for which they were bailed has expired or the purpose for which they were bailed has been accomplished.
If the bailee keeps the goods after the expiry of the time for which they were bailed or after the purpose for which they were bailed has been accomplished, it will be at bailee’s risk and he will be responsible for any loss or damage to the goods arising howsoever.

In Shaw & Co vs. Symmons & Sons 1971, the plaintiff gave certain books to the defendant to be bound. The defendant bound them but did not return them within reasonable time. Subsequently, the books were burnt in an accidental file. The defendants were held liable for the loss of books

Duty to return increase (section 163): As per Section 163, in absence of any contract to the contrary, the bailee is bound to deliver to the bailor, or according to his directions, any increase of profit which may have accrued from the goods bailed.

Duty not to set up jus tertii (Section 166):As per Section 166 if the bailor has no title and the bailee, in good faith returns the goods back to the bailor or as per the directions of the bailor, he is not responsible to the owner in respect of such delivery.  Thus, once the bailee takes the goods from the bailor, he agrees that the goods belong to the bailor and he must return them only to the bailor. He cannot deny redelivery to the bailor on the ground that the bailor is not the owner.If there is true owner of the goods, he can apply to the court to stop the delivery of the goods from the bailee to the bailor. This right is given to the true owner in section 167.

 

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