Bailment: Essentials, Duties of Parties and Case Laws

The article 'Bailment' by Milind Garg aims to demystify the concept of bailment by explaining what are the essentials of bailment, and the duties of parties along with citing the relevant case laws.

Contracts are of immense importance for society as they legally bind the parties together and they help in the fulfilment of legal promises and help in the facilitation of business trade. In this article, the author has discussed bailment. It is a special type of contract that involves delivering the possession of goods to another for some purpose. Here only possession is transferred and not the ownership of property. In our day-to-day life, we encounter different instances of Bailment. For example, we give our watch for repair, our motorbike for services, our clothes for alterations, etc. All these constitute Bailment as goods or chattels are delivered only for a specified purpose like repair, alteration, and service. Other examples of Bailment can be putting the goods in a cloakroom, entrusting your car to valley parking, or giving your laptop for repairs.

Bailment has to be distinguished from mere custody. In custody, the goods are transferred for look after only and custody can be with a servant or a guest. There is no specific purpose or usage for which goods are transferred unlike in Bailment. Here the person giving the goods is called the bailor and the person receiving the same is called the bailee. Bailment laws define the duty and rights of each party and specify the role that they play. In the absence of them, a party may enjoy the goods at the cost of the other. It says that goods can be used for only a specified purpose only upon which they were delivered.

What is Bailment?

Chapter IX (Section 148-181) talks about the provisions of bailment in the Indian Contract Act, 1872. The word ‘bailment’, is derived from ‘bailer’, a French word which means ‘to deliver’.

Section 148 of the Indian Contract Act defines Bailment as follows,

" 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’.

So, the essentials can be:

1) Delivery of goods by the Bailor to Bailee

2) Delivery of the goods must be made for some purpose

3) There should be a valid contract between the parties

4) On the fulfil of purpose, goods are to be returned or disposed of by the bailee.

An illustration of bailment can be delivering of a watch for repairs to a shopkeeper. The purpose of bailment here is the repair of the watch.

In the case of M/S Rasiklal Kantilal & Co v. Board Of Trustee of Port of Bombay, the court held

“Title to the goods is irrelevant even in the cases of a bailment arising under a contract. Any person who is capable of giving physical possession of goods can enter into a contract of bailment and create a bailment. It can be seen from Section 148 of the Contract Act that bailment is (ordinarily) a contractual relationship and bailment can be created by any person who is in possession/custody of goods but not necessarily the owner of the goods. When the purpose of bailment is accomplished, the goods are to be returned or otherwise disposed of according to the directions of the person (bailor) delivering them”.

Types of Bailment

On the basis of remuneration, the bailment may be classified as a) Gratuitous Bailment & b) non-gratuitous bailment. In case of gratuitous bailment, the bailee or bailor is to receive no benefit from the goods bailed. It is a bailment without any consideration. In non-gratuitous bailment, the bailment is for some reward. Here there is a consideration for bailment. An example can be lending a horse for some fee.

Delivery of Goods

An essential element in a bailment is the delivery of the goods. Section 149 of the Indian Contract Act, 1872 talks about how the delivery is to be made. It says,

“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.”

Delivery of goods can be actual or constructive. In actual delivery, the goods are physically delivered to the bailee. Transferring possession of a car in a garage can be an example of actual delivery. In constructive delivery, possession can be transferred without any alteration in the ownership or custody of the goods. A person holding goods on behalf of another can be an example of constructive delivery.

In the case of Governor General of India in Council v. Jubilee Mills, Ltd., the Bombay high court held that. “So far as the railway administration itself was concerned, there was clear evidence on the record that it had accepted the custody of the goods, the same having been brought in with the consent and authority of the station master and having been stacked on the down platform at his instance. All the conditions therefore were satisfied and the goods were in fact delivered to the railway administration for carriage within the meaning of section 72 of the Railways Act and the liability of the railway company as bailee of the goods came into existence.”

Duties of Bailor

There are five duties of the bailor as mentioned in the Contract Act. The duties are

A. Duty to disclose all known defects (Section 150)

In Section 150, where the bailment is gratuitous, the bailor has to disclose to the bailee the only defaults in the goods which are known to him. But if the bailment is not gratuitous, i.e., bailor for reward, the bailor is responsible for damage to the bailee, whether he was or he was not aware of the defects in the goods.

For e.g., A takes B’s car for a trip upon the fulfilment of which he would return the car to him. B made A aware of the possible defect in the front right tyre of the car. Soon when B went on his trip, the brakes of the car failed and A rammed into a truck as a result of which he was injured. Here B is not liable as the bailment was gratuitous and B was not aware of the fact.

B. Duty to bear necessary and extraordinary expenses (Section 158)

According to Section 158, the bailee is entitled to the necessary cost which is incurred by him for the purpose of bailment. In the case of gratuitous bailment where no remuneration is made, the bailee is entitled to the necessary costs. But in gratuitous bailment, the goods are used for the purpose of the bailee, and then he can ask for no expenses. For instance, if A takes B’s car for a trip for his own purpose, then he himself has to bear the cost of fuel and other expenses.

C. Duty to indemnify loss for premature termination of bailment (Section 159)

Where some goods are gratuitously lent by the bailor to the bailee, the bailor may ask for the restoration of the goods even before the stipulated period hasn’t expired. But Section 159 also says that where the bailee acted on the faith of the time period and made subsequent advances or plannings and as a result of the return of goods he may face loss, he is entitled to be indemnified for the loss which exceeds the benefit from the bailor.

D. Duty to indemnify the bailee against the defective title of the bailor (Section 164)

Section 164 says that where the bailor was not entitled to make bailment, and as a result of which the bailee suffers losses the bailee is entitled to recover the same from the bailor.

E. Duty to receive back the goods

When the purpose of the bailment is finished the bailor must get back his property. If the bailor fails to retain back his property as a result of which the bailee has to keep it for an extended period, the bailor is liable for the necessary expenses for the maintenance of the things bailed. For instance, if the bailor fails to retrieve back his horse after the period of bailment is over, and the bailee is made to keep the goods for two more months, then the bailee is entitled to receive the necessary expenses that occurred in the maintenance of the horse.

Duties of Bailee

There are five duties mentioned for the bailee in the contract act.

A. Duty to take care of the good (Section 151)

The bailee is to take care of the goods bailed to him as a man of ordinary prudence would take if his own goods of the same bulk, quantity or value. It is no justification that the bailee may use the goods bailed in any way he wants. He must exercise due care while handling the goods as a reasonable person would.

For example, A gave his bike on hire to B. B drove it negligently and crashed the front portion. Here B was not making use of the bike as a person of ordinary prudence would, and he may be made liable for the same.

In the case of Taj Mahal Hotel v. United India Insurance Co. Ltd., the respondent, upon reaching the hotel, gave his car key for valley parking which bears a tag that hotel management is not responsible for any loss as the car is parked at the owner's risk. The court refuted this contention and held that “The guest has an implicit expectation that the repute and standards of 5-star hotels would entail adequate safety of the vehicles handed over for valet parking. Thus, in such a scenario, if the hotel is allowed to exclude its liability for negligence by way of a contract, the standard of care imposed under Section 151 will become illusory and virtually redundant, rendering consumers vulnerable without any remedy. The required to be taken by the hotel as a bailee under Section 151 is sacrosanct and cannot be contracted out of.”

Another case in this regard can be Union of India v. Udho Ram & Sons, M/s Radha Ram-Sohan Lal of Calcutta consigned certain goods to herself in Delhi. Of the consignment, certain articles were not delivered to M/s Udho Ram & Sons, the plaintiffs, in whose favour the railway receipt had been endorsed by the consignor. Having failed to receive the compensation for the loss suffered on account of the articles not being delivered, the suit giving rise to this appeal was instituted. The case was whether the railway was negligent in handling the goods. The court held the railway administration guilty of not handling the goods carefully as mentioned in Section 151 of the act. There is no evidence on record that the railway protection police who escorted the train were adequate in strength for the purpose of seeing that the goods were not interfered with in transit.

B. Duty not to make any unauthorized use of goods (Section 154)

This section makes the bailee liable for any loss to the goods if any unauthorized use is being made by the bailee contrary to the conditions of the bailment. For e.g., if a woman gives her dress to a tailor for alteration and the tailor wears the same in a public gathering upon which some permanent food stains are left on the dress, the tailor is to make compensation to the bailor of the dress.

C. Duty not mix bailors goods with his own goods without bailor’s consent (Section 156-157)

The bailee is not entitled to mix the goods of the bailor with his own, without consent to the contrary. When the goods are mixed by the bailee and the goods can be separated, the property in them remains in the parties. But when the goods are inseparable the bailee is to compensate the bailor for the loss of goods. In the former case, the bailee has to himself bear the cost of separation as it occurred at his fault. For e.g., if A mixes B’s high-grade apples with A’s inferior ones and they cannot be separated upon proper inspection, A is to make good the loss to B.

D. Duty to return the goods (Section 160-161)

Without the demand of goods by the bailor, the bailee is to deliver the goods to the bailor upon the fulfilment of the purpose of the bailment or upon the expiry of the period for which the goods were bailed, whichever is earlier.

Also, when the goods are not returned by the bailee at a proper time after expiration or fulfilment, the bailee is responsible for all the damages or deterioration of the goods that may occur as a result.

E. Duty to return accretions to the goods (Section 163)

The bailee is bound to return the bailor any accretions on the goods bailed to him.

Rights of Bailor

A. Section 154 says that the bailor is entitled to be compensated for any damage that occurred on any unauthorized goods by the bailee.

B. The bailor may avoid the bailment if the bailee makes any use of the bailed good if it is inconsistent with the conditions of bailment. Section 153 makes a remark about the same. For example, if A gave his laptop to B for educational purpose and B uses it to watch a movie, the contract is voidable at the option of A.

C. The bailor is entitled to any accretions or profits on the goods bailed.

Rights of Bailee

A. The bailee is entitled to get compensated for any loss suffered by him by the defects of the bailed if the bailment is for reward.

B. The bailee is entitled to receive a loss which exceeds the profit that which the bailee derived when goods lent gratuitously were retrieved back by the bailor before the expiration of the bailment period.

C. The bailee is entitled to necessary extraordinary expenses incurred by him. For example, A bailed his dog to B. Soon the dog developed some allergy on his face as a result the bailee had to incur the expenses of the medication. The bailee is entitled to recover the expenses by the bailor.

References

[1] Indian Contract Act, 1872

[2] Dr Avtar Singh: Law of Contract & Specific Relief, Eastern Book Company, Lucknow

[3] Dr R. K. Bangia: Contract, Allahabad Law Agency, Allahabad

[4] M/S Rasiklal Kantilal & Co v. Board Of Trustee Of Port Of Bombay, (2017) 11 SCC 1

[5] Governor General of India in Council v. Jubilee Mills, Ltd., 1952 SCC OnLine Bom 10

[6] Taj Mahal Hotel v. United India Insurance Co. Ltd., (2020) 2 SCC 224

[7] Union of India v. Udho Ram & Sons, (1963) 2 SCR 702

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