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CONTRACTS OF BAILMENT & PLEDGE
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CONTRACTS OF BAILMENT & PLEDGE

Feb 24, 2016

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Page 1: CONTRACTS OF BAILMENT & PLEDGE

CONTRACTS OF BAILMENT & PLEDGE

Page 2: CONTRACTS OF BAILMENT & PLEDGE

INTRODUCTION

The word bailment is derived from the French word bailer which means to deliver. It means any kind of handing over of goods from on person to another. Bailment implies voluntary change of possession from one person to another. A contract of bailment like any other contract, is a special type of business contract. The rules governing the contracts of bailment & pledge are defined in sections 148-181 of the Indian Contract Act.

Page 3: CONTRACTS OF BAILMENT & PLEDGE

MEANING

In our daily life we frequently use the concept of bailment. In everyday life there are many instances of entrustment of goods or movable property from one person to another person. When we borrow some books, magazines, or even pen from someone & return them after use, when we borrow some scooter or motorcycle from some neighbourer or friend & return them after using it. Similarly we go out of station & put our costly items with our friend for their safety & take them back after coming to home. In all these cases the delivery or entrustment of goods by one person to another is known as bailment.

Page 4: CONTRACTS OF BAILMENT & PLEDGE

DEFINITION

According to section 148 of the Indian Contract Act, “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 persons delivering them.“

Page 5: CONTRACTS OF BAILMENT & PLEDGE

ESSENTIALS OF BAILMENT

The following are the essential features of the bailment:

Bailment Of Goods Only Transfer Of Possession Of Goods

i. Actual Deliveryii. Constructive Deliveryiii. Symbolic Delivery

Contract Temporary Purpose Return Of Goods

Page 6: CONTRACTS OF BAILMENT & PLEDGE

IS BANK A DEPOSIT

Actually the amount deposited by a person in various accounts like saving, current, recurring, etc. is not treated as bailment. In regard a view is given that money is not considered as goods. So, it cannot be covered in the area of bailment. Further the deposit of money in bank does not considered bailment since the bank is not bound to return the identical coins or currency notes which are deposited. The relationship of a banker & a customer is that of a creditor & a debtor, not that of a bailor & a bailee. This has been stated in the various decision given by the judges in different cases from time to time. But if a person keeps of his valuable items like jewellery etc. in the bank locker for safe custody, it is stated as a case of bailment.

Page 7: CONTRACTS OF BAILMENT & PLEDGE

TYPES OF CONTRACTS OF BAILMENT

Bailment may be broadly be classified under the following four heads: On The Basis Of Objectivea. Bailment for safe custodyb. Bailment for usec. Bailment for repaird. Bailment for carriagee. Bailment for alteration in shapef. Bailment by pledge

Page 8: CONTRACTS OF BAILMENT & PLEDGE

On The Basis Of Intention Of Partiesa. Voluntary Bailmentb. Involuntary Bailment

On The Basis Of Interest Of Partiesa. For The Benefit Of The Bailor Onlyb. For The Benefit Of The Bailee Onlyc. For The Benefit Of Both

On The Basis Of Considerationa. Gratitutous Bailmentb. Non Gratitutous Bailment

Page 9: CONTRACTS OF BAILMENT & PLEDGE

DUTIES & RESPOSIBILITIES OF A BAILOR

Delivery Of The Goods To The BaileeTo Disclose Faults In The Goods BailedTo Repay The Necessary Expenses Liability On The Breach Of Bailment Before

The Expiry Of The Time FixedTo Indemnify The BaileeTo Pay The Remuneration Of the BaileeTo Take The Goods Back

Page 10: CONTRACTS OF BAILMENT & PLEDGE

RIGHTS OF BAILORRights Of Indemnity For The Losses Due To

Negligence By BaileeTermination Of ContractCompensation On Unauthorised Used By The

BaileeCompensation On Mixing The Goods By

Bailee, With His Own GoodsRight To Take Back Goods At Any Time In Case

Of Gratituous BailmentRight To Get The Goods BackCompensation On Non Return Of GoodsEntitled To Get Profit From Goods Bailed

Page 11: CONTRACTS OF BAILMENT & PLEDGE

DUTIES & RESPONSIBILITIES OF BAILEE

To Take Care Of The GoodsNot To Do Any Act Inconsistent With The Terms

Of BailmentNot To Make Unauthorised UseNot To Mix Bailor’s Good With His Own GoodsTo Return The Goods BailedTo Return Any Accretion Or ProfitNot To Set UP Any Adverse Title

Page 12: CONTRACTS OF BAILMENT & PLEDGE

RIGHTS OF BAILEE

Right Of Compensation On Account Of Faults In Goods Bailed

Right To Receive Necessary ExpensesPre-mature Termination Of Contract Of

BailmentCompensation In Case Of Defective TitleDelivery OF Goods To One Of The Joint OwnerRight To InterpleadRight Of Particular LienRight Of General LienRight Against Third PartyRight To Get Share In Compensation

Page 13: CONTRACTS OF BAILMENT & PLEDGE

FINDER OF THE GOODS LOST

According to the section 71 of the Indian Contract Act, “A person who finds goods belonging to another & takes him into his custody, is subject to the same responsibility as bailee.” In this situation the law imposes a contract of bailment between the finder of goods & the true owner of the goods.

Page 14: CONTRACTS OF BAILMENT & PLEDGE

RIGHTS OF FINDER OF GOODS

Lien On Goods

Suit For Reward

Right Of sale Of Goods

Page 15: CONTRACTS OF BAILMENT & PLEDGE

DUTIES OF THE FINDER OF GOODS

To Take The Reasonable Care Of Goods

Not To Mix Goods With His Own Goods

Try To Find Out The Real Owner Of The Goods

To Return Back The Goods To The True Owner

To Deliver Any Accretion To The Goods To The True Owner

Page 16: CONTRACTS OF BAILMENT & PLEDGE

LIENLien is the right of any person to retain the

possession of goods belonging to someone else until the claims/charges due to the person in possession of goods are paid. These claim may be elated with the use of labour & skill by the bailee on those goods.

According to T.R Desai, ”Lien is a right in one man to retain that which is in his possession belonging to another, until certain demands of the person in possession are satisfied.”

Page 17: CONTRACTS OF BAILMENT & PLEDGE

CHARACTERISTICS OF LIEN

Possession Of Goods

Origin

Mode Of Possession

Continuity

Rights To Use

Right Of Stoppage Only

Limited Time Period

Page 18: CONTRACTS OF BAILMENT & PLEDGE

TYPES OF LIEN

Lien may be of two types:Specific Lien: A specific lien or a particular lien

is one which is available to the bailee only against those goods in respect of which he has rendered a service involving labour & skill in terms of time & effort.

General Lien: A general lien implies the right to retain any item till the general account of the holder is settled.

Page 19: CONTRACTS OF BAILMENT & PLEDGE

Following Persons Can Use The General Lien

Bankers

Factors

Whar-fingers

Attorney Of High Courts

Policy Brokers

Any Other Person

Page 20: CONTRACTS OF BAILMENT & PLEDGE

PLEDGE

Pledge or pawn is a special kind of bailment where a movable thing is bailed as security for the repayment of a debt or performance of promise.

Example: If you borrow Rs10,000 from X & keep your jewellery as security for repayment. It is a contract of pledge.

According to section 172of the Indian Contract Act, “The bailment of goods as security for payment of a debt or performance of a promise is called pledge.”

Page 21: CONTRACTS OF BAILMENT & PLEDGE

ESSENTIALS OF A VALID PLEDGE

Pledge Of Movable Goods Only

Delivery Of Goods

Judicial Possession Of The Goods

Saleable Commodity

Return Of Goods

Page 22: CONTRACTS OF BAILMENT & PLEDGE

RIGHTS OF PLEDGER

Right To Get The Goods Back

Right On Increase Or Profit

Right Of Compensation

Right To Get The Surplus In Case of Sale

Defaulting Pawnor’s Rights

Page 23: CONTRACTS OF BAILMENT & PLEDGE

DUTIES OF PLEDGER

To Disclose Defects In The Goods Pleged

Duty To Pay The Debt

To Pay The Necessary Expenses

Duty After sale

Page 24: CONTRACTS OF BAILMENT & PLEDGE

RIGHTS OF PLEDGEE

Right To Retain The Goods Pledged

Right To Retain For Subsequent Advances

Right Regarding Extra-Ordinary Expenses

Right To File A Suit On Pledger

Right Of Sale Of Goods

Better Title

Page 25: CONTRACTS OF BAILMENT & PLEDGE

DUTIES OF PLEDGEE

To Take Reasonable Care Of Goods

Not To Make Personal Use Of Goods Pledged

Not To Mix Pledged Goods With His Own Goods

Not To Purchase The Goods

Duty To Return The Excess Money

Return The Goods

Page 26: CONTRACTS OF BAILMENT & PLEDGE

PLEDGE BY NON-OWNER

Pledge By Mercantile Agent

Pledge By Persons Having Possession Under Voidable Contracts

Pledge Where Pledger Has Limited Interest In Goods

Pledge By Co-Owner

Pledge By Seller Having Possession Of Goods Before & After Sale

Page 27: CONTRACTS OF BAILMENT & PLEDGE

THANKS