Distinguish between the following giving suitable illustrations: Bailment and Agency

Question: Distinguish between the following giving suitable illustrations: Bailment and Agency [RJS 1974]

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Answer

Bailment, as defined under Section 148 of the Indian Contract Act, 1872, refers to a contractual relationship where one person (called the bailor) delivers goods to another person (called the bailee) for a specific purpose, with the understanding that the goods will be returned or disposed of in accordance with the bailor's instructions. The goods are to be held by the bailee for a certain period of time or until a particular event occurs, upon which the bailee is obligated to return the goods to the bailor or dispose of them as agreed.

To illustrate the concept of bailment, let's consider the following scenario:

Suppose A is going on vacation and wants to keep their valuable jewellery safe. A approaches B, who operates a secure storage facility, to store the jewellery during their absence. A and B enter into a bailment agreement, where A becomes the bailor and B becomes the bailee.

In this illustration, the jewellery is the subject matter of the bailment. A, the bailor, entrusts the jewellery to B, the bailee, for safekeeping until A's return. The purpose of the bailment is to ensure the security and protection of the jewellery during A's absence.

In the case of Kaliaperumal Pillai v. Visalakshmi, AIR 1937 Mad 32, the plaintiff hired the defendant to make new jewellery for her. Her old jewels had to be melted and the gold obtained from that was to be used to make this new jewellery. Every evening, the defendant would return the half-made jewellery to the plaintiff. Plaintiff would lock that jewellery in her box and leave it in the defendant’s room. However, the Plaintiff took the key to that box. One night, the jewels were stolen. The defendant was held liable by the plaintiff as he was the bailor of the goods. It was held that the respondent was not liable as he did not have legal possession of the goods while they were stolen. The relationship was of bailment between both the parties but it ended as soon as the plaintiff locked the goods in the box and took the keys with herself. Merely leaving the box at the defendant’s house does not constitute bailment.

Moreover, agency is defined under Section 182 to Section 238 of the Indian Contract Act, 1872. Section 182 states that an "agent" is a person employed to do any act for another person or to represent another person in dealings with third parties. The person for whom such act is done or who is so represented is called the "principal." The relationship between the principal and the agent is known as agency, and it is based on the mutual consent and agreement between the parties.

To better understand the concept of agency, consider the following example:

A, a business owner, wants to expand their operations into a new market. However, A does not have the time or expertise to handle all the tasks involved in establishing and running the new business. A approaches B, an experienced and trustworthy individual, and enters into an agency agreement. A is the Principal. B is the Agent. A and B enter into an agreement where A authorizes B to act on their behalf in carrying out specific tasks. B owes a fiduciary duty to A. Under this agency relationship, A remains the owner of the business and retains control over major decisions

Hon’ble Justice Bhagwati in the case of Lakshminarayan Ram Gopal & Sons Ltd v. Govt of Hyderabad, 1954 AIR 364, has held that the power to enter into a contract for his/her master is specifically only enjoyed by an agent. He/she possesses the authority to represent the principal on their behalf to a third party in signing a contract, but when we talk about a servant, such authority is generally absent.

Distinction between Bailment and Agency