Duties of a Bailee and a Bailor: Indian Contract Act, 1872

The article discusses the concept of bailment under The Indian Contract Act, 1872. The author also lists out the duties of a bailee and a bailor.

Introduction

Bailment is a concept primarily used in common law countries. Under most common law systems, Bailment is defined as the process of placing one’s personal property or their goods in the temporary custody or the temporary control of another person.

The term Bailment originated from the French word ‘Bailer’ which simply translates to the phrase ‘to deliver’. The person who delivers the said goods is known as the “Bailor” whereas the person to whom these goods are delivered is called the “Bailee”. In the Indian context, the concept of Bailment is discussed in Chapter IX of the Indian Contract Act, 1872.

For an agreement of Bailment to be valid under the Indian Contract Act, it needs to fulfil certain conditions essential to the section of Bailment in the said statute. They are stated in the following section:

Essentials for Bailment

• There has to be delivery of Goods – For the agreement of bailment to be legally valid, it is necessary that the goods be delivered from one party (person) to another party (person). This essentially means that the possession of goods has to be changed.
• The delivery made should be because of a valid purpose – In the contract of such a nature, it is important to show that there was an intention and purpose for which the goods are delivered.
• The goods must be returned or disposed of – For a contract of Bailment to be valid, it is essential to return or dispose of the goods when the purpose of Bailment is accomplished.

Duties of a Bailee and a Bailor

There are several duties imposed on both the Bailee and the Bailor by the Indian Contract Act, 1872. These duties shall be discussed extensively in the subsequent sections.

I. Duties of the Bailee

1. Duty to take Reasonable Care

Section 151 of the Indian Contract Act states that –

“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.”[1]

This essentially imposes the reasonable man standard on the Bailee with respect to taking care of the goods bailed to him, which means that the culpability of the Bailee in case of any mishap with regards to the goods would be tested on the basis of whether the Bailee took as good care of the goods as a reasonable man of ordinary prudence would have taken.

Furthermore, the obligation of the Bailee also includes the responsibility of taking reasonable care to avoid any damage that had occurred to the goods in the past, provided that the Bailee was aware of the same.[2]

2. Duty when Unauthorized use of the Goods occur

This aspect is dealt with in Section 154 of the Indian Contract Act, which states that –

“If the bailee makes any use of the goods bailed which is not according to the conditions of the bailment, he is liable to make compensation to the bailor for any damage arising to the goods from or during such use of them.”[3]

The said section imposes the liability on the Bailee in a situation wherein the goods are used beyond the authority designated. This means that the Bailee cannot use the goods for his personal benefits or for any other reason beyond authority designated wherein the Bailor suffers any loss/damage.

3. Duty in case of Mixing of or Parting with the Goods

The relevant sections dealing with this aspect are Sections 155, 156 and 157 of the Indian Contract Act. The Bailee has the responsibility of taking reasonable care while dealing with the goods entrusted upon him by the bailor as discussed in a previous section. One subpart of that responsibility includes his duty of not mixing the goods of the Bailor with that of his own part of the goods.

If the Bailee does mix the goods with his own while having the consent of the Bailor in doing the same, the Bailor would in such a situation have interest over those goods in the proportion to the goods bailed by him. For this to happen the consent will have to be explicit in nature

In Section 156 and 157, certain conditions are mentioned describing the liability of the Bailee when he does not obtain the consent of the Bailor while mixing a part or whole of the goods bailed with those of his own. In such a situation, the liability of the Bailee is equal to the loss or damage suffered by the Bailor as a consequence of such mixing of or parting with the goods.

4. Duty to return goods

One of the primary essentials of a contract of Bailment is the fact that once the purpose for which the goods were bailed has been accomplished, the Bailee is bound to either return the goods back to the Bailor or dispose of the goods, depending on the condition set in the contract. However, according to Section 159 of the Indian Contract Act, the Bailor can ask for the goods back at any point in case the goods were provided to the Bailee gratuitously. The Bailee is bound to return the same but can claim damages for any damage accrued due to the same.

According to Section 160, when the time of bailment expires, the Bailee is bound to return the goods as per the manner demanded by the bailor, subject to reasonability. According to Section 165, in cases involving multiple owners of the goods that have been bailed, the Bailee is under the obligation to return the goods to any of the Co-Bailors as per the directions provided to him.

1. Duty in case of failure to return the goods – Section 161 of the Indian Contract Act stipulates that in the event the Bailee fails to return the goods in the stipulated or reasonable time depending on the terms of the bailment, the liability is upon the Bailee to make good any loss or damage caused to the Bailor due to delay in the return of the goods or the failure to return the goods at all.
2. Duty to return the increase or Profit derived from the goods – Section 163 of the Indian Contract Act says that in the absence of any contrary contract or agreement stating otherwise, the Bailee is under the obligation to completely deliver the increase or profit which has been accrued from the bailed goods back to the Bailor of the goods.

Now that we have discussed the duties imposed upon the Bailee, we turn our attention to the Duties imposed upon the Bailor of the Goods by virtue of the Bailment agreement –

II. Duties of the Bailor

1. Duty to disclose defects in goods

The bailor of the goods is duty-bound to disclose the defects, if any, in the goods being bailed to the Bailee while the agreement of Bailment is being agreed upon.

2. Duty to repay expenses

The duty is upon the Bailor of the goods to make good any expenses in any form which have been incurred by the Bailee for the purpose of the bailment of the goods.

3. Duty towards the Bailee in specific situations

The Bailor is responsible to the Bailee for any loss or damages caused, which is borne by the Bailee in a specific situation as stated below –

• When no right to make Bailment exists – The Bailor of the goods is responsible to the Bailee for any loss caused which the Bailee has to bear because the Bailor was not entitled to make bailment.
• When no right to retrieve back bailed goods exist – The Bailor of the goods is responsible to the Bailee for any loss caused which the Bailee has to bear because the Bailor was not entitled to get back bailed goods.
• When no right to give directions to the Bailee exists – The Bailor of the goods is responsible to the Bailee for any loss caused which the Bailee has to bear because the bailor was not entitled to give the directions.

Contributed By: Aman Jha

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References

[1] Section 151, Indian Contract Act, 1872

[2] Lakhichand Ramchand v. G.I.P. Rly. Co., (1912) 14 Bom. LR 165

[3] Section 154, Indian Contract Act, 1872

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