Bailment: Concept And Definition

This article explains the bailment concept and definition. Bailment is a special type of contract found in Sections 148 – 181 of the Indian Contract Act 1872. Section 148 of the Indian contract act defines bailment as “ 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 section further defines the terms bailor and bailee as follows- The person delivering the goods is called the “bailor”. The person to whom they are delivered is called, the “bailee”.

For the purposes of this article, the bailment can be simply described as the delivery of goods by the owner (bailor) to another (bailee) on the condition that they will be restored by the bailee to the bailor, or according to his directions, as soon as the purpose for which they are bailed shall be answered.[1]

I. Concept of Bailment

Bailment means a relationship wherein the personal property of a person temporarily becomes the possession of another. This sort of relationship can happen because of a variety of reasons. For example giving a thing for repairing, leaving ornaments in the possession of a neighbour when you go somewhere else, delivering garments with dry-cleaning even leaving a cycle or car in a privately owned stand are examples of bailment.

To understand the concept of bailment it is vital to understand the concept of ownership and possession. All the relations in a bailment are an interplay of these two terms-being an owner and being in possession of a thing.

II. Essential features of Bailment

1. Delivery of Possession

The first important characteristics of bailment are “the delivery of possession” by one person to another.[2] A customer hung his coat while entering the restaurant and while leaving the court was gone.[3] The keeper of the restaurant was held liable for the act because the keeper had assumed the duties of a bailee because the possession was passed on to the keeper. Section 149 gives us the meaning of “delivery of possession”.

“Delivery to bailee how made.—The delivery to the bailee may be made by doing anything which has the effect of putting the goods in the possession of the intended bailee or of any person authorized to hold them on his behalf.”

Actual delivery happens when the bailor voluntarily grants the possession to the bailee. Constructive delivery, on the other hand, is the indirect action that makes a person in possession of a particular property. In Fazal v. Salamat Rai[4], the defendant was in custody of the plaintiff’s mare. The court ordered the defendant to deliver the mare back.

The defendant agreed to return the mare on the condition that the plaintiff would pay him all the charges spent in the maintenance of the mare. The mare was subsequently stolen. The court said that since the relation of the bailor and the bailee was established by therefore the defendant would be liable.

2. Delivery should be upon Contract

The relationship of a bailor and the bailee is contractual in character. The contract should expressly mention the purpose of the delivery of goods and later when the purpose is complete to return the goods to the owner.

3. Delivery should be upon some Purpose

A bailment of a good is made for some purpose and is subject to the condition that when the purpose is over the goods will be returned to the bailor or disposed of according to the mandate.[5]

To understand further the intricacies of a bailment contract it is material that we understand the rights and the duties of a bailee.

III. Duties of a Bailee

1. The bailee has a right to take due and reasonable care

Section 151 of the Indian Contract act requires the bailee to take care of the bulk, quality, and value of goods in the way any ordinary prudent person would take. If the bailee had taken the amount of care similar to any ordinary prudent person then the bailee is protected under section 152 of the Act which states that the bailee shall not be liable for the loss, deterioration or destruction of the goods. Thus the bailee has to show that the circumstances were well out of the reach of the bailee.

However, the burden of proof to prove his innocence belongs to the bailee himself. In one such case, the plaintiff’s car was lost in a fire occurring in a garage where it was discovered for the repairs and the bailees did not lead any evidence to show the incident the SC held the bailees liable.[6]

2. The bailee has a duty not to make unauthorized use or enjoyment of the goods bailed

It is a duty of the bailee to make use of the good to the extent that is mentioned in the contract of bailment. Section 154 of the Act makes the bailee liable for any such unauthorized use of the good thus making him liable to pay compensation for such use.

Similarly, the bailor has been given the right to terminate or avoid the duties that arise out of the contract of bailment if the bailee acts in excess of the terms of the conditions of bailment. This provision is enshrined in section 153 of the Act.

3. The bailee has a duty not to mix

The bailee has a duty to maintain the goods bailed separate from his own goods. Different situations can arise in this case. Either the goods are mixed with the consent of the bailor or without the consent of the bailor. If the goods are mixed with the consent of the bailor the section 155 will be applicable and the bailor and the bailee will have proportionate share to the inseparable goods thus created.

However in the case where the goods are not mixed with the consent of the bailor then two situations may arise if the resultant goods are inseparable then the bailee has to compensate to the bailor and if the goods are separable then the goods belonging to the bailor has to be returned and the bailee has to bear the expenses of the separation of goods.

4. The bailee has a duty to return the goods

The bailee has a duty to return the goods bailed to the bailor at the right time. If the bailee has not returned the goods then the bailee has to bear any loss to the goods bailed to the bailor.

5. The bailee has a duty to set up jus tertii

The bailee has to return the goods bailed to the bailor in spite of the fact that the goods belong to someone else. For example, if the bailee eventually learns that the bailor is not the actual owner of the goods bailed then the bailee cannot set up the defense of it being some other person’s good. Section 166 absolves the bailee of any liability that may arise for delivering the goods back to the bailee in such a case.

6. The bailee has a duty to return the increase

Section 163 bounds the bailee to return the increase or profit that the bailee may have accrued after using the goods bailed.

IV. Duties of a Bailor

1.Duty for Loss Suffered

Enshrined in section 164 of the Indian Contract Act 1872 the bailor has a duty to any loss that the bailee has suffered as a result of bailee’s wrong-doing.

2. Duty to Provide for Necessary Expenses

According to section 158, the bailor should repay the necessary expenses to the bailee for working upon the goods where the bailee is not entitled to receive any remuneration.

3. Duty to Remuneration

The bailor has a right to provide remuneration to the bailee for the goods bailed. if the bailor fails to do so then the bailee has a right to retain the goods thus bailed. This is enshrined in sections 170 and 171 which talks about particular and general lien.

In the day to day life, we enter into several contracts of bailment whether knowingly or unknowingly. For a law student it is essential to distinguish between normal contracts and contracts of bailment. Understanding bailment and knowing the duties that we unknowingly entre upon would save us from a lot of difficulties.

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[1] Osborn’s Concise Law Dictionary, 6th Ed, John Burke, Sweet & Maxwell, 1976.

[2] New India Assurance Co. Ltd v. DDA, (1991) 2 PLR (Del) 82.

[3] Ultzen v. Nicols, (1894) 1 QB 92.

[4] Fazal v. Salamat Rai, (1928) 120 IC 421.

[5] Gangaram v. Crown, AIR 1943 Nag 436.

[6] N.R Srinivasa Iyer v. New India Assurance Co. Ltd., (1983) 3 SCC 485.

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