Bailment

The Contract Act 1872

Law of Bailment

According to sec. 148 of contract act,

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.

Definition

Bailment is delivery of goods on condition that the recipient shall ultimately restore the goods to the bailor or dispose of them according to his direction

Bailor – the person delivering the goods Bailee – the person to whom the goods are

delivered

Movable property Not money, however, notes or currency

deposited in a box for safe custody can be subject matter of bailment

Subject matter

It consists in the delivery of goods of movable property only.

The delivery must be for some temporary purpose, e.g., safekeeping, repair, carriage, gratuitous use by the bailee or pawn.

The delivery is made upon a contract, express or implied.

The contract is to the effect that the goods delivered shall be specifically returned or otherwise disposed of according to the direction of the bailor, when the purpose of the bailment is over.

Characteristics

Delivery of goods – actual or constructive For some purpose – delivery by mistake

without any purpose – no bailment Delivery is subject to the conditions attached

to the bailment agreement

Essentials

Bailment for exclusive benefit of the bailor Bailment for exclusive benefit of the bailee Bailment for mutual benefit of the bailor and

bailee Gratuitous bailment – no remuneration.

Example: loan of a book to a friend Non-gratuitous – bailment for reward; either

bailor or bailee is entitled to remuneration; eg. Motor car let out for hire

Kinds of Bailment

The Bangladeshi law provides for the following

two kinds of bailments:

1. Bailment for safe custody: when the subject matter is kept for the purpose of saving.

2. Bailment for use: when the subject matter is kept for the purpose of using it only.

Whether the bailment is for safe custody or for use, the bailee can either charge for his services or render them free.

Kinds of Bailment(Cont)

- In sale ownership is transferred to the buyer The buyer under no obligation to transfer the

goods In bailment, no transfer of ownership Bailor is under obligation to return the goods

Sale and bailment

In a contract of license, one party is permitted

to place his goods in the premises belonging to the other party

No delivery of goods to the licenser No obligation to look after the goods

Bailment and license

A bailee is entitled to recover damages from the bailor if he suffers any injury resulting from the defects of the goods bailed.

He is also entitled to be reimbursed for all legitimate expenses incurred for the purpose of the bailment.

He can also recover compensation from the bailor for any loss cause to him due to any defect in the bailor’s life.

Rights of Bailee

Bailee’s particular lien. Where, in pursuance of the

contract of bailment, the bailee has rendered services involving the exercise of labour and skill in respect of the goods bailed he has, in the absence of a contract to the contrary, a right to retain such goods until he receives due remuneration for services he has rendered(sec.170)

For example: A delivers a rough diamond to B, who is a jeweller, to be cut and polished, which is accordingly done. B is entitled to retain the stone till he is paid for the services he has rendered.

Rights of Bailee(Cont...)

To take reasonable care of goods delivered

to him Not to make unauthorized use of goods

entrusted to him Not to mix goods bailed with his own goods To return the goods To deliver any accretion to the goods

Duties of Bailee

The bailor is entitled to the return of the goods bailed as soon as the purpose of bailment is served. If the bailee defaults in so returning or tendering to return them at the proper time and place, the bailor is entitled to appropriate compensation for the loss of the goods or any damage.

The bailor may rescind the contract of bailment if the bailee does any act with regard to goods bailed which is inconsistent with the conditions of bailment. Suppose, a gives his car to B for one month for the latter’s use. B employs it for carrying passengers. A can terminate the bailment.

Rights of the Bailor

The bailor is bound to disclose to the bailee faults in

the goods bailed of which he is aware and which materially interfere with the use of them or expose the bailee to extraordinary risks;(Sec.150)

Where the conditions of the bailment are such that the goods are to be kept or to be carried or where work has to be done upon them by the bailee for the bailor, the bailee will not receive such remuneration such services, the bailor must repay to bailee all the legitimate expenses which he has to incur in connection with the bailment (Sec. 158).

Duties of Bailor

The bailor is responsible to the bailee for any loss

which the bailee may sustain by reason of the fact that the bailor was not entitled to make the bailment. For example: A gives a car to C for sale. Which is belongs to B. But C believing that the car really belongs to A, sells it to a third person. B sues C for damages for the unauthorized sale. A must compensate C for any damages that the court may award against C

Duties of Bailor(Cont...)

A contract of bailment is terminated in the following

ways:

1. When the time for which the goods were bailed has expired. E.g., A lends his plough to B for 3 months. The bailment will be discharged at the end of the stipulated period.

2. When the purpose for which the goods were bailed has been accomplished. A lend B his typewriter for typing a certain document. The bailment will terminate as soon as B has finished typing the document.

Termination of Bailment

3. A gratuitous bailment is terminated by the

death of either the bailee or bailor.

4. When the bailee does an act inconsistent with the contract of bailment, the bailor can terminate the bailment at his option.

Termination of Bailment(Cont...)