BAILMENT
BAILMENT
CONTRACT OF
BAILMENT
Points to be Covered
• Definition and Essentials
• Parties to a contract of Bailment
• Rights and Duties of Bailor and Bailee
• Finder of goods—as a Bailee
• Liability towards the true owner
• Obligation to keep the goods safe
• Rights to dispose of the goods
• Lien of a Bailee
• Particular lien
• General lien
General Meaning
• “The temporary control over articles/ goods for a purpose”
• “It is generally a contractual relationship either expressly or implied,
between two parties to act according to particular terms.”
• “Transfer of possession of the property not ownership interests.”
• “Once the purpose for which the property has been delivered is
accomplished, the property is returned to the owner or disposed as per
the contract.”
BAILMENT UNDER ICA
Sec 148: 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".
Duties –
• To disclose faults in the goods bailed (S. 150)
• Repayment, by bailor, of necessary expenses (S. 158)
• Restoration of the Goods lent Gratuitously and Indemnity (S. 159)
• Responsibility Towards Bailee (S. 164)
DUTIES OF THE BAILOR
To disclose faults in the goods bailed (S. 150)
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) If the 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.
If you hire a zoom car and met with an accident due to faulty brakes, but the
bailor company was not aware of the defaults. Can you claim Damages?
- you can claim damages.
Illustrations
• A lends a horse, which he knows to be vicious, to B. He does not disclose the
fact that the horse is vicious. The horse runs away. B is thrown and injured. Is A
responsible to B for damage sustained?: Yes
• A hires a carriage of B. The carriage is unsafe, though B is not aware of it, and
A is injured. Is B responsible to A for the injury? : Yes
2) Repayment by bailor of necessary expenses- S. 158.
Where, by the conditions of the bailment, the goods are to be kept or to be carried, or
to have work done upon them by the bailee for the bailor, and the
bailee is to receive no remuneration,
the bailor shall repay to the bailee the necessary expenses incurred by him for the
purpose of the bailment.
Eg. A wants to supply rice to a company. B, his friend, volunteers to keep the rice in
his godown for a month before sale. After storing the rice, A gives the keys to B to
keep it safely.
B undertakes measures to keep godown rodent free. He is further asked by A after a
month to deliver the rice to his shop in the other village as he is travelling.
Repayment?
- B can recover both the costs of maintenance as well as delivering the rice.
Where Bailment is for the benefit of Bailee, in reference to the
expenses : If in using the thing the borrower is put to any expense this
must be borne by himself, bailee compellable to bear ordinary expenses
Discussion: A lends his car to B for a trip to Goa. Can B recover the
expenses incurred by him in getting the cleaning and servicing of the car
done?
3) Indemnity in cases of Restoration of goods lent gratuitously S. 159.
The lender of a thing for use may at any time require its return, if the loan
was gratuitous, even though he lent it for a specified time or purpose.
But, if, on the faith of such loan made for a specified time or purpose,
the borrower has acted in such a manner that the return would cause him
loss exceeding the benefit actually derived by him from the loan,
the lender must, if he compels the return, indemnify the borrower for the
amount in which the loss so occasioned exceeds the benefit so derived.
Eg: You and your friends have planned a road trip to Goa during the Diwali
holiday. Your car breaks down and so you borrow your friend’s spare car for the
road trip. You make all your bookings and travel arrangements. 20 th October
your friend calls for the car back. You inform him about your trip but he
compels you to return the car. Can you seek indemnification?
He has a duty under S. 159 to indemnify you.
4) Bailor' s responsibility to bailee – S. 164 -
The bailor is responsible to the bailee for any loss which the bailee may sustain by
reason that the bailor was not entitled to make the bailment, or to receive back the
goods or to give directions, respecting them.
Eg. A is not the owner of the good and the original owner sues the bailee, the bailee is
entitled to recover costs from A.
Illustration : A lets to B, for hire, a car for his own driving. B runs the car
as a taxi. Can bailment be terminated? Yes
Section 154 Read with S. 153 – If bailee does not conform to the terms
of the contract – the contract is voidable at the option of the bailor.
Duty of Bailee and Right of the Bailor
2. Right to claim increase in profit
S. 163 - Bailor entitled to increase or profit from goods bailed-
In the absence of any contract to the contrary, the bailee is bound
to deliver to the bailor, or according to his directions, any increase
or profit which may have accrued from the goods bailed.
3. Right to Subrogation and sue–
S. 180 - Suit by bailor or bailee against wrong-doer-
If a third person wrongfully deprives the bailee of the use or possession of
the goods bailed, or does them any injury, the bailee is entitled to use such
remedies as the owner might have used in the like case if no bailment had
been made; and either the bailor or the bailee may bring a suit against a
third person for such deprivation or injury.
Discussion: If A gives a watch to B and C steals it from B, who has the right to
sue?
- Both. The right to sue is of the bailee and he can file for all such actions
which the bailor has under the law and similarly, the bailor can without the
bailee suing, sue C for theft.
RIGHTS & DUTIES OF THE BAILEE
Duties –
1. To take care of the goods (S. 151)
2. To act in conformity with the terms and conditions of the contract
(S. 153)
3. Not to make unauthorized use of the goods (S. 154)
4. Not to mix the goods which bailed with his own goods (S. 155,
156, 157)
5. To return the goods bailed, after the purpose is accomplished (S.
160)
6. Responsibility when the goods are not duly returned (161)
7. Duty to return increased profits on the goods bailed (163)
1) S. 151 - Care to be taken by bailee –
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.
No cast- iron standard can be laid down for measure of care due from a bailee
and nature and amount of care must vary with the posture of each case
The burden of proof that he took reasonable care and did not act negligently
lies on the bailee: if the bailee places before court evidence to show that he
undertook all reasonable care, to avoid damages reasonably foreseeable or
had taken reasonable precautions to obviate risks reasonably apprehended,
he would be absolved
Gopal Singh Hira Singh vs Punjab National Bank ( AIR 1976 Delhi 115)
Section 154 Read with S. 153 – If bailee does not conform to the terms
of the contract – the contract is voidable at the option of the bailor.
Duty of Bailee and Right of the Bailor
3) In a contract of bailment the bailee should maintain the identity of the
bailor’s goods.
S. 155 - Effect of mixture with bailor's consent of his goods with bailee's -
If the bailee, with the consent of the bailor, mixes the goods of the bailor with
his own goods, the bailor and the bailee shall have an interest, in proportion to
their respective shares, in the mixture thus produced. (to the extent mixed)
S. 156 - Effect of mixture without bailor' s consent, when the goods can be
separated –
If the bailee, without the consent of the bailor, mixes the goods of the bailor
with his own goods, and the goods can be separated or divided, the property in
the goods remains in the parties respectively; but the bailee is bound to bear
the expense of separation or division, and any damage arising from the mixture.
Illustration
157. Effect of mixture, without bailor' s consent, when the goods
cannot be separated –
If the bailee, without the consent of the bailor, mixes the goods of the
bailor with his own goods, in such a manner that it is impossible to
separate the goods bailed from the other goods and deliver them back,
the bailor is entitled to be compensated by the bailee for the loss of
the goods.
Discussion:
1. A bails 50 bags of cement of Ambuja Co. to B. without A' s consent, B mixes
the 50 bags of cement with other bags of his own from a different company.
A is entitled to have his 50 bags returned, and B is bound to bear all the
expense incurred in the separation of the bags (additional labour), and any
other incidental damage.
2. Above example – if B opened all the bags and mixed the cement with his, this
would be inseparable and now if A asks for his cement.. What will happen?
B will have to pay A for the entire cement.
4) S. 160 - Return of goods bailed on expiration of time or accomplishment of purpose-
It 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.
Obligation on bailee:
a) Once the purpose is served
b) the time expired
c) The duty to deliver the goods back to the bailor or give them to whom he was
directed to under the contract
d) Even if not demanded so by the bailor
e) Unless there is a contract to the contrary – if bailee has been told to return when the
bailor demands or bailor will himself collect them (This also the Court has interpreted
to be done within reasonable time)
Rights –
1. Right to recover necessary expenses – S. 158
2. Right to recover compensation (when bailee not entitled to make the
bailment) – S. 164
3. Right against third party – Right to subrogation – S. 180
4. Instances when bailee not liable – S. 152
5. Right to delivery to one co-owner without the consent of all - 165 +
166
6. Right to Lien – S. 170 & S. 171
Rights of Bailee
5)Right to delivery to one co-owner without the consent of all
S. 165 - Bailment by several joint owners –
If several joint owners of goods bail them, the bailee may deliver them back
to, or according to the directions of, one joint owner without the consent of
all, in the absence of any agreement to the contrary.
Duty not to set up “jus tertii” : i.e to say the goods belong to someone else
S. 170 & 171 – Lien is the right to retain the goods till the dues are cleared.
Two types – General and Particular
S. 170 - Bailee' s ‘particular’ lien-
Particular – Only that good can be retained with regard to which the services were rendered
“Where the bailee has, in accordance with the purpose of the bailment, rendered any service
involving the exercise of labour or 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
the services he has rendered in respect of them.”
Essentials –
1. The bailee should have rendered some service involving exercise of labour or skill in respect
of the goods bailed (Factual)
2. Such services should be in accordance with the terms of the contract
3. No contract b/w parties excluding lien
4. Goods in possession of the Bailee
5. Services performed in due time
Right of Lien may be lost in the cases of
1. Loss of possession
2. Payment of due amount
3. Waiver of amount
4. Accepting security instead of Lien
5. Unauthorized use
Discussion: A gives, cloth to B, a tailor, to make into a coat. B promises A to deliver the
coat as soon as it is finished, and to give a three months credit for the price. Is B entitled
to ask for payment after he delivers?
B is not entitled to retain the coat until he is paid
S. 171 - General lien of bankers, factors, wharfingers, attorneys and policy-
brokers-
A right to retain all the goods for security for the general balance of account until the
full satisfaction of the claim dues whether in respect of those goods or any other
goods. Unless there is a contract to the contrary.
Available to: (1) Bankers
(2) Factors
(3) wharfingers
(4) attorneys of a High Court
(5) policy-brokers
They may retain the goods as a security for a general balance of account.
But no other persons have such a right, unless there is an express contract to that
effect.
1.Bankers –retain any of the debtor’s goods in the bank’s possession until any debt due from the
debtor, whether in connection with the retained goods/ securities or otherwise, has been paid.
Eg. Goods supplied as security for a loan and now a credit card bill is pending – the bank has the
right to exercise lien over those goods even though they have no connection with the outstanding
bill.
2.Factors - Agents entrusted with possession of goods for the purpose to sell the goods – can retain
if his charges are not paid as long as goods were given to him in the capacity of an agent in the
ordinary course of business
221. Agent’s lien on principal’s property.—In the absence of any contract to the contrary, an agent is
entitled to retain goods, papers and other property, whether movable or immovable of the principal
received by him, until the amount due to himself for commission, disbursements and services in
3.Wharfingers – Warf - permanent structure on the shore or bank of a river where
ships are docked to load and unload cargo. Wharfinger – the owner or manager of the
wharf – right to lien the goods bailed to him until his charges for use of wharf are not
paid.
4.Attorneys – BCI Rules – prohibit advocates from adjusting the fees against his own
personal liability of the client. He is entitled to money from the money paid in the
court but not by retaining papers and litigation files. ( Refer R.D Saxena vs Balram
Prasad)
Purpose: Remuneration for services Also for general balancing the debt amount
Available only when service involving Labour Available even when no such service has been
and skill has been involved rendered
• Syndicate Bank v Vijay Kumar AIR 1992 SC 1066
Bank has a general lien over all forms of securities or negotiable
instruments deposited by or on behalf of the customer in the ordinary
course of banking business
• The general lien is a valuable right of the banker judicially recognised
and in the absence of an agreement to the contrary, a Banker has a
general lien over such securities or bills received from a customer in
the ordinary course of banking business and has a right to use the
proceeds in respect of any balance that may be due from the customer
by way of reduction of customer's debit balance.
FINDER OF GOODS