BAILMENT

PART – I – CONCEPT, ESSENTIAL FEATURES OF BAILMENT,

DUTIES OF BAILOR AND BAILEE

1. MEANING AND CONCEPT:

In general, Bailment means temporarily change of possession of goods from one person to
another for some specific purpose. The term ‘Bailment’ is derived from French word ‘bailer’
means – ‘to deliver’ or ‘handing over’.

The Indian Contract Act deals with the general principles of Contract of Bailment. There are
separate Acts to deal with specific types of bailment, eg., the Carries Act, 1865, The
Railways Act, 1890, the Carriage of Goods Act, 1925, etc.

Sec. 148 of the Indian Contract Act, defines – 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 person
delivering them.

The person delivering the goods is called the ‘bailor’. The person to whom they are delivered
is called the ‘bailee’

1.1. ESSENTIAL FEATURES OF BAILMENT

i. Delivery of goods or possession

• Case : Ultzen v. Nicolls, (1894) Mad. 32

• Kinds of Delivery:

Delivery of possession is of two kinds:

(a) Actual delivery and (b) Constructive delivery

ii. Delivery should be for some purpose
iii. Delivery of goods under contract
• In exceptional circumstances, bailment is implied by law as between finder of goods
and true owner.
• State of Gujarat v. Memon Mohemmad, (1967)
iv. Bailee bound to return goods
 Cases: United Breweries Ltd. V. State of A. P. (1997)
M/s Kalyani Breweries Ltd. V. State of W.B. ((1998)

2. DUTIES OF BAILOR:
Bailors are of two kinds –
(a) Gratuitous bailor and (b) Bailor for reward
A gratuitous bailor is one who lends his articles or goods without any charge or
consideration.
2.1. To disclose faults in goods bailed—
Sec.150 para 1: 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 risks; and if he does not make such disclosure, he is
responsible for damage arising to the bailee directly from such faults.
2.2. Duty of bailor for reward (sec. 150 para 2) –
If goods are bailed for hire, the bailor is responsible for such damage, whether he was
or was not aware of the existence of such faults in the goods bailed.
2.3. Repayment by bailor of extraordinary expenses of bailment — Sec. 158:
2.4. Restoration of goods lent gratuitously— Sec. 159
2.5. To identify the bailee for lack of title – Sec. 164
3. DUTIES OF BAILEE:
Under the Contract of Bailment, a bailor has the following duties –
3.1. Duty of reasonable care of goods bailed (Sec. 151-152) –
 Sec. 151 prescribes a uniform standard of care in all cases of bailment, i.e., a
degree of care which an ordinary man of prudence would take of his own
goods of the same type under similar circumstances. This section does not
make any difference between a bailee for reward and a gratuitous bailee.
 The bailee, in absence of special contract, is not responsible for the loss,
destruction or deterioration of the things bailed, if he has taken the amount of
care described in Sec. 151. (Sec. 152)

In United Commercial Bank v. Hem Chandra Sarkar, AIR 1990 SC 1329, where a
banker was rendering the service of receiving goods on behalf of its account holder and
hold them for the purpose of delivering to the customer of the account holder against
payment. It was held by the Supreme Court that the position of the banker was similar to
that of a bailee and the bank was liable for the account holder’s loss in as much as the
bank did not deliver the goods to his customers.

 However, where the bailor’s goods are stolen from the custody of the bailee,
he will be liable if there has been negligence on his part.
 Where the loss has been due to the act of the bailee’s servant, he would be
liable if the servant’s act is within the scope of employment.
3.2. Duty not to make unauthorized use of goods bailed – (Sec. 153-154)
 Goods must be used by the bailee strictly for the purpose for which it is bailed.
Any unauthorized use of the goods would make the bailee absolutely liable for
any loss or damage to the goods. (Sec. 154)
 If the bailee does any act with regard to the goods bailed which is inconsistent
with the conditions of the bailment, the contract of bailment is voidable at the
option of the bailor. (Sec. 153)
3.3. Duty not to mix the goods – (Sec. 155-157)
 It is the duty of the bailee not to mix his own goods with the goods of the bailor
without his consent. He must maintain a separate identity of bailor’s goods. Sec.
155 to 157 deals with the rules of mixing goods as follows –
 Sec. 155 – Effect of mixture with bailor’s consent, of his goods with bailee’s
 Sec. 156 – Effect of mixture without bailor’s consent, when goods can be
separated
 Sec. 157 – Effect of mixture without bailor’s consent, when goods cannot be
separated.
3.4. Duty to return – (Sec. 160-161, 165)
 The bailee should return the goods to the bailor without demand at the
expiration of time. (Sec. 160)
 Bailee’s responsibility when goods are not duly returned. (Sec. 161)
 If there are several joint owners, bailee may deliver goods to any of the joint
owners, without consent of all in absence of any agreement to the contrary.
(Sec. 165)
3.5. Duty not to set up adverse title – (Sec. 166 & 167)
  Bailee cannot set up against the bailor a title over goods bailed in favour of
any one including himself other than the bailor. He is also estopped from
denying the right of the bailor or to bail the goods and to receive them back.1
The bailee cannot take the defence of jus tertii.
 Jus tertii means the right of third party. It is a defence available in property
law which means when a person is sued in respect of certain property, he may
sometimes set up a defence that the title to such property is not belongs to the
plaintiff, but in third person.
 Bailee not responsible on re-delivery to bailor without title – (Sec. 166)
 Right of third person claiming goods bailed – (Sec. 167)
3.6. Duty to return the increase [S. 163]
 Sec. 163: Bailor entitled to increase or profit from goods bailed

1
Sec. 117 of the Indian Evidence Act
** Please refer the illustration attached with every provision under the Contract Act.