Business Law

Bailment under Indian Contract Act, 1872

By Ashlesha Suryawanshi (Student at MNLU Mumbai)

Introduction 

Bailment is a contractual term which defines Under section 148 of the  Indian Contact act 1972, that means delivering some goods to another for purpose of safeguarding for some time after the purpose is accomplished the goods are in return to the original owner. It is regard to the movable property only. In our daily life, we used this term where we give our securities like we have our relationship with the banks,  giving our clothes to ironing,  Bailment for repair or servicing, we take a book from the library for a certain time interval, sometimes we told our neighbours to look at our house as we are out of station etc.  In Bailment the person delivering the goods is known as Bailor and the person to whom Goods are delivered is known as Bailee in which bailee is maintained control over the Goods. There are a lot of commercial contracts based on Bailment in which temporary possession of movable goods is given by the owner to another party. So areas like technology, machinery, hardware and engineering make contracts of Bailment.  In Bailment Contract ownership of goods remains with the actual owner that is bailor but possession of goods transfer to the bailee so bailee has legal right to exclusive possession. There is a legal relationship between both of them.

In two types of Bailment, Gratuitous Bailment, In this type of Bailment, no kind of reward or remuneration and advantages receive from either party. So it is bailment for exclusive benefit on the side of bailor and bailee does not receive any benefit. But in non-gratuitous bailment, there is some reward and he gets an advantage from temporary custody of goods.

Essential Elements

  1. Contract

 The first condition is that the delivery of goods must be upon a contract so there must be a contract between two people for the delivery of goods. The Contract must be expressed, or implied, written or oral. It should be a clear oral agreement So without a Contract, there is no bailment. In the case of, Ram Ghulam vs Government of U.P, Gold ornaments were stolen by the plaintiff, while he was in police custody the gold ornaments belongs to the police department and in that period they were again stolen and this time couldn’t be recovered, now plaintiff sued the government for the loss of ornaments but his action rejected by Allahabad High Court because there was no any oral or written contract of Goods possession between the parties. 

  1. Delivery of Goods by the Bailor

 Possession of goods from the bailor to the bailee for a temporary period is the main concept of bailment. So it is bailee responsibility towards goods of the bailor. Also, the bailor needs to give full possession of goods to the bailee, if the owner continues to maintain control over the goods there is no bailment.  For ex- If A gives his car to B for 10 days but if he keeps the key of the car with himself for 10 days, now there is no bailment in this case as A is keeping control over his property bailed. In the case of Ultzen vs Nicols, the plaintiff went to a restaurant to have dinner, where a waiter took an overcoat of the plaintiff as a voluntary Courtesy, after having dinner, the plaintiff search for his coat but found that his overcoat was missing so he sued the owner of the restaurant for his loss. Now, in this case,it is assumed that the waiter had take the responsibility of bailee so the owner was held liable. If there is negligence on the part of bailee to take care of bailor goods then he was liable for loss of goods.

  1. Return of Specific Goods

The bailee is bound to return the goods to bail or after the specified time for which it taken is over. If the bailee is not returning the goods then it will not be a bailment. So he needs to return the goods because he is the only temporary controller of the goods. Consideration of returning goods in which both parties should be agreed, so handling over possession of goods back to the original owner is necessary for Bailment contract.

Rights and duties of Bailor and Bailee

Bailments contracts have certain duties and liabilities with them. The proper care of goods by Bailee is assumed by the bailor also after the expiration period he except to return his goods from bailee. And bailee expects compensation or payments from the bailor.

Bailee’s Right of Lien

Bailee has the right of lien means to retain the property until some payments are unpaid. It is mention under section 170 of the Indian Contract Act 1972. In this Right, the bailee accordance with the purpose of Bailment rendered any service involving the exercise of labour or skill in respect of the goods bailed, then he receives the right to retain the goods. two types of lien are Particular lien and General lien.

Particular lien

This type of lien depends upon the bailee’s skill and labour. So a bailee gets a particular lien in respect of certain goods only when he has improved it by the exercise of his labour and skills. Here only those goods can be retained in respect of which the  bailee had rendered service. For example – A gives his car to B, a mechanic to repair a car which is accordingly done by B. Now B has the right to keep the car for himself until A pays B for the service he provided.

General lien

The general lien gives the right to possession until the whole balance of the amount is paid so there is no necessity for skills and labour of bailee. This possession of goods is against the general balance  of the account and hence it is different from a particular lien. It is recognised through agreement so here lawful possession of goods is necessary  In the case of Mercantile Bank of India vs Rochaldas Gidumal & co, a bank received some money from the customer with instruction to transfer that money to another place but the bank could no retain it as it was not given to it for bailment purposes. 

Right to Sue Wrongdoer

Section 180 of the Indian Contract Act deals with this provision says that ” if a third person wrongfully deprives that bailee of the use of 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”.

In the case of the state of Bihar vs bank of Bihar, a sugar company pledged the entire stock of sugar for advances made by the bank to the company but the stock was seized by the government and the court held that there was no wrongful deprivation because the seizure was lawful and the commissioner recovered money lawfully and it is valid, so here the plaintiff was not entitled to claim against the State.

Bailee’s Right if Bailor not entitled to make a bailment

 Section 164 talks about bailor’s responsibility for any loss which bailee may sustain by the reason that the bailor was not entitled to make the bailment. Here, the bailor is responsible for any loss and then he has to compensate accordingly, also Bailor need to pay for any extraordinary expenses done by bailee for his goods.

Bailee’s Duty

  1. keep proper maintenance of Goods

It is the most important duty of the bailee to take proper care of goods bailed with the same value, quality and quantity as he takes care of his own goods. For any kind of negligence by bailee’s side, he will be liable for it. Though the bailment was for reward or gratuitous then also bailee need to take same degree of care. In case of an extraordinary event like acts of God, the bailee is not held liable for any loss.

  1. Prevent any unauthorised use

 Any unauthorized or illegal use of bailed goods can terminate the bailment. So as per section 153 bailee shall prevent any unauthorised use of goods, if the bailor finds any such illegal use of his goods then he can claim compensation.

  1. Return Goods

The Bailee is the temporary controller of goods so he needs to return goods after a specific time that is after the expiration of the period. If he fails to do so then the bailee shall be liable for loss of property.

Bailor’s Rights 

  1. Right to get his goods back

The Bailor is the permanent controller and owner of his goods so after the bailment period over bailor gets his goods back by bailee and has possession over his goods.

  1. Right to get Compensation

If any damages loss happens to the goods of the bailor then he has the right to claim compensation for any improper and unauthorized use of goods. While we transfer the possession of goods to another person that is bailee then liabilities are also transferred to that person and therefore any kind of damages due to negligence or poor care by bailee makes bailee liable for loss of goods.

  1. Right to terminate the contract

 In the case of Bailment, the bailor has the right to terminate the contract of Bailment if the bailee uses the goods illegally and if the bailee set an adverse title to the goods then the bailor can terminate the contract.

Bailor’s Duty

1) Disclose all Faults: Bailor needs to give all information about the Conditions of his goods if he fails to disclose any faults then he will be responsible for any damages.

2) Give expenses: It is the duty of the Bailor to give expenses to the bailee for maintenance of his goods during the Bailment period also bailor need to indemnify the bailee for the cost incurred due to some defective goods.

3) Duty to pay Damages: If the bailee suffers any Damages while the Bailment period then the bailor need to pay for such damages and the bailor accountable for the whole damages and extraordinary expenses.

Conclusion

A bailment is a contract that allows an individual to transfer possession of his property to someone else for temporary safekeeping. It creates a legal relationship between two-party that is the bailor and bailee. So that we can entrust someone and give property to that person. In bailment, the bailor gets benefited from his asset beings safeguarded and the bailee gets payments for his maintenance of goods. Bailment is different from Sales. Sales involve the exchange of property but bailment does not involve the exchange of property it involves only the transfer of custody and not ownership. It usually happens without a written contract. It is a mutual benefit of the parties created while there is an exchange of performance between the parties. Bailment promoted trust issues, by allowing the rightful possession of goods by one who was not the actual owner of the goods. Bailment laws are important because they governs the responsibilities of Bailor and Bailee and creates a link between movements of goods. The bailment plays a very important role in the carriage of goods.  it We know that all commercial businesses running because of trust, we keep money and other securities in banks without any worry because we know that they safeguard our securities therefore bailment is a more secure means of holding assets.

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