Contract of Bailment - NIU

Contract of Bailment

Baidya nath Mukherjee

Assistant Professor

Noida International University

[email protected]

Bailment

• French word “Ballier” which means “to deliver”.

• Etymologically, it means any kind of “handing over”.

• In legal sense, “it involves change of possession of goods

from one person to another for some specific purpose”.

• Importance- One can’t reasonably exist in the society

without contract of bailment. A man is not self-sufficient.

He has to depend on other. A person enters into many

contracts in a day as per his requirements. For ex: giving

clothes to washerman for washing, watch/mobile/laptop for

repair, parking the car/bike etc.

• So, when goods deliver to some other person for some

specific purpose is called the Bailment. And when

immovable property given then it is called Lease.

• Remember these Universal Rules- they will

never be changed. Always remain the same

anywhere in the Universe.

1. No Consideration = No Contract under ICA

2. No Price = No Sale under SOGA

3. No Contract= No Partnership under IPA

4. No Delivery= NO Bailment under COB.

• Examples of Bailment:-

– A car owner delivers his car in the service center for

servicing. This is a contract of Bailment where the car

owner is the Bailor and Service centre is the Bailee.

– A delivers a piece of cloth to B, a tailor for stitching.

This is a contract of Bailment where A is the Bailor and

B is the Bailee.

– A gives his suit for dry-cleaning to B.

– A gives his watch for repairing to B.

– Leaving car in the car parking.

Definition u/s 148

• “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 who delivered the goods is called

“Bailor”.

• The person to whom the goods are delivered is

called “Bailee”.

Essentials of Bailment

1. Two Parties- A bailment is usually created by agreementbetween the bailor and the bailee.

2. Delivery- voluntary transfer of possession of goods from oneperson to another is known as delivery. Involuntary transferis no delivery. It is different from Custody as the deliveryshould be Animus Corpus i.e Handing over the possession +Intention to leave. But in custody, Intention is absent andonly possession is present. Examples of Custody-

1. If I give my mobile to Mukesh Ji for charging.

2. Mukesh ji gives me a glass of water.

3. The luggage put by the passenger on the roof of the bus as the busconductor has provided only space for keeping the goods. The goodsare not in his possession.

Three Types of Delivery

1. Actual/Physical Delivery- when there is changing of person+changing of place of goods while handing over to another person iscalled Actual Delivery.

2. Symbolic Delivery- when there is only change of person and notthe place then it is called Symbolic Delivery. For ex: giving onlythe keys of the car while car-parking. In this, control given notactually by handing over the goods but by handing over thesymbol.

3. Constructive Delivery- also called Delivery by Acknowledgmentor Bailment by Legal Fiction. For ex: possession already inpossession of goods of other contracts to hold them as a bailee. Asold his car to B. Price not paid. Car left in possession of A tillprice paid by B. But, B has become the owner of the car. Now, A isBailee and B is Bailor.

Case Laws on Delivery

1. Jagdish Chandra Trikha v. Punjab National Bank (1998)- In

this case, the court held that the position of the bank was that of

the bailee and it failed in its duty to take care of the goods

(jewellery) and return them to the plaintiff. The bank was held

liable to pay the sum of Rs. 3, 72, 400 alongwith interest @

12% p.a.

2. National Bank of Lahore Ltd. v. Sohan Lal Sehgal- Held that

bank liable as a bailee for ornaments kept in the locker.

But, suppose customer has taken the loan from the bank and

doesn’t pay, then there can’t be lien on the locker because it is

for particular purpose i.e safety & security of the ornaments.

Moreover, the lien can be only for general balance of accounts.

3. Ultzen v. Nicols (1894)- In this case, A went to a hotel for

dinner. The waiter took of his coat and put on the hanger. After

dinner, coat found lost. A sued. Held that the hotel owner is

liable for compensation as a bailee. If written “AT YOUR

RISK” then no liability of hotel owner.

4. New India Assurance Co. v. DDA- Contractor of parking is a

bailee.

5. R. Ezekial v. Province of Bengal- Parking at owner’s risk is

no bailment because contractor is not charging.

6. Rampal Singh v. Murray & Co.- Guest lodging in a hotel as bailee of things provided by hotel owners. Breaking of glass, furniture, TV etc or missing of any good will make the guest liable as a bailee.

7. State of Gujarat v M.M Haji Hassan (1967)- Seizure of goods by custom authorities, who after seizure are in the position of a Bailee.

8. Shiv Nath v Union of India (1965)- Acceptance of goods by a transport company or railway authorities for carriage, who after accepting in the position of a Bailee.

9. Income Tax Commissioner v. P M Rathod (SC)- Carrier i.e Post office or courier companies are bailee.

10.Kaliaporumal Pillai v. Visalakshmi (1938)- If the owner

maintains control over the goods, there is no Bailment.

11. Indra Kumar v. UP- Held that, the bus owner will not be

held liable as a bailee, if goods are kept by the passenger on

the roof of the bus because the possession and the control of

the goods is still with the passenger only.

12. Sri Hanuman Seed Rolling Mills v. CESC Ltd.- Held that,

Electric meter provided by the Government is not bailment of

goods rather services provided to its consumers. If the meter

turns out to be defective or breaks then the consumer will not

be held liable as a bailee.

3. Goods [S.2(7)]- Goods- Bailment can be made of goods only. TheGoods is defined u/s 2 (7) of the Sale of Goods Act, 1930 means“every kind of movable property other than money and actionableclaims”. So, money deposited in the bank by the customers willnot make the bank bailee as the money is not goods rather r/s ofcreditor & debtor arises.

4. For Some Purpose - The goods must be delivered for some purpose.If goods are delivered by mistake to a person, there is no bailment.

5. Return or disposal of Specific Goods- It is agreed between thebailor and the bailee that as soon as the purpose is achieved, thegoods shall be returned or disposed of according to the directionsof the bailor. If the goods are not to be specifically returned, thereis no bailment.

6. Upon a Contract- so, Contract is must.

Q. Can there be a Bailment without

contract?

Ans. S.148 says- Upon a contract which means contract

is must for bailment. There can’t be a bailment

without contract.

1. Ram Ghulam v. UP- In this case, a person accused of

theft, ornaments seized by police. After case, the

accused asks for ornaments, it was found that

ornaments lost. Filed against on police as a bailee.

But, J Seth held that “as there was no contract made

between the accused and the police. So, police not

liable as a bailee.

2. State of Gujarat v. Hazi Memon Mohd (1967 SC)- In this case, trucks

and goods seized by custom authorities. After prosecution has been over,

the owner asked for truck and the goods. It was found that truck was

completely damaged and goods lost. Owner filed a suit on State of Gujarat

as a bailee.

The SC interpreted the phrase of S.148- “Upon a Contract” as S.148 deals

with bailment which is made by contract. It doesn’t mean that there can’t

be bailment otherwise. There can be bailment without contract also. S.148

it is limited to contractual bailment. There can be non contractual bailment

also. So, Govt. held liable as bailee though there is no contract of

bailment.

Rationale- Goods can’t be left at the mercy of govt. authorities. Equity

requires that govt. must take the responsibilities.

The SC also quoted that S.71 & 72 ICA where Finder of Goods & thing

delivered under mistake to the other person are bailee.

Other instances where there can be a bailment without

contract-

3. When necessaries deposits are made under peculiar stress of

emergency like fire, flood, earthquake etc. – it is bailment.

4. There may be delivery of goods by person mentally incapable

of appreciating what he is doing- it is bailment.

Under English Law- Chesire and Anson write that there can be a

bailment without contract and the case law is Howard v.

Harris.

Types of Bailment

Gratutious or Voluntary

1. When bailment is madewithout hire.

2. Ex: A lends his book to hisfriend, no charges paid. Itis GB.

A gives his house/ car/biketo his friend for riding.

3. Bailor is liable tocompensate the loss ifdefect is known to thebailor

Non- Gratutious

1. If the bailment is on hire,then that is Non-Gratutious.

2. Ex: Giving watch for repair.

3. Bailor is liable tocompensate irrespective ofwhether the defect is knownto the bailor or not.

Duties of Bailor

1. To disclose Known faults (S. 150)- It is the first and foremost duty of the

bailor to disclose the known faults about the goods bailed to the bailee,

otherwise he shall be liable of damages for any loss caused to the bailee.

2. To bear extraordinary expenses of bailment (S. 158)- It is the duty of

the bailor to bear extraordinary expenses of bailment.

3. To indemnify the bailee for pre-mature termination (S. 159)- The

bailor shall indemnify the bailee for any loss caused to him due to pre-

mature termination of the bailment or receive the goods before the expiry

of the period of bailment.

4. To indemnify the bailee for defective title(S. 164)- The bailor shall

indemnify the bailee for any loss caused to bailee due to defective title of

bailor.

5. To receive back the goods- It is the duty of the bailor to receive back the

goods when the same returned by the bailee or when the prupose is

accomplished, otherwise he shall be liable to pay expenses of custody of

goods incurred by the bailee.

Duties of Bailee

1. To take reasonable care of the goods bailed (S.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.

2. Not to make any unauthorised use of goods bailed (S. 154) - If the

bailee uses the goods bailed in a manner which is inconsistent with the

terms of the contract, he shall be liable for any loss even though he is not

guilty of negligence and even if the damage is the result of an accident.

3. Not to mix the goods bailed with his own goods (S. 157)- The bailee

must not mix the goods of the bailor with his own goods, but must keep

them separate from his own goods. If he mixes the bailor’s goods with

his own goods without the bailor’s consent and the goods cannot be

separated, then the bailee is bound to bear the expenses for the loss of the

goods.

4. To return the goods on fulfilment of the purpose (S.160)- It’s the duty of the bailee to return the goods,without waiting for demand from bailor, if the time isspecified in the contract has expired or when thepurpose specified in the contract is accomplished. If abailee is not in a position to deliver back the goods,then the bailee will be liable for that loss.

5. To deliver profit on the goods bailed (S. 163)- In theabsence of any contract, the bailee is bound to deliverto bailor any profit which may have accrued from thegoods bailed.

Rights of Bailor

1. Terminate the bailment- If the bailee does any act

inconsistent with the terms and conditions of the

contract of bailment, then the bailment becomes

voidable at the option of the bailor.

2. Sue the Bailee- The bailor has a right to sue the

bailee for misusing the goods bailed.

3. Sue against the wrong-doer- The bailor has a right

to sue a third party who makes some damages to the

goods or deprives the bailee from using the goods.

Rights of Bailee

1. Right to recover necessary expenses incurred on bailment (S. 158)-

The bailee has a right to recover necessary expenses from the bailor. For

ex- A leaves his horse with his neighbour, B for safe custody for one

week. B is endorsed to recover the expenses incurred by him in feeding

the horse.

2. Right to recover compensation (S. 164)- The bailee has the right to

recover compensation from the bailor, if the bailor has no title to the

goods and as a consequence, the bailee suffers some loss.

3. Right of Particular Lien (S. 170)- Lien is the right of the bailee under

which the bailee can retain the goods of the bailor and refuse to deliver

them to the bailor, until his due remuneration for services in respect of

the goods bailed or the amount due is paid.

4. Right of suit against wrongdoer ( S 180)- The bailee has a right to sue a

third party who makes some damages to the goods or who deprives him

from using the goods.

Difference Between

Particular Lien [S.170]

1. The particular goods are

retained by the bailee on

which lawful charges are

due.

2. It ‘s the statutory right of

the bailee and not the

contractual right of the

bailee.

General Lien [S.171]

• Any goods are retained by

the following persons for

the general balance of

account:

Bankers

Factors

Wharfingers

Attorneys of a High Court

Policy Brokers.

Termination of Bailment

A contract of bailment is terminated in the following cases:-

1. On the expiry of the period- when the bailment is for a

specific period, it terminates on the expiry of that period.

2. On the achievement of the object- when the bailment is for a

specific purpose, it terminates as soon as the purpose is

achieved.

3. Inconsistent use of goods (S.154)- When the bailee uses the

goods in a manner inconsistent with the terms of the contract,

the bailment terminates.

4. Destruction of goods- The bailment is terminated, if the goods

are destroyed.

Thanks!