Law of Contract is an important subject to study not only for law students but for everyone and it’s an interesting subject too. The reason behind this, is that it is the most relatable topic we come across on a daily basis. For instance, online shopping, food home delivery, courier service, selling and buying, etc. We may not encounter laws such as Indian Penal Code, Constitutional Law, Company Law, etc. but we do enter into many forms of oral, written, implied and express contracts. Bailment is a topic which comes under Indian Contract Act which is mentioned under Sections 148 to 171.
Meaning
Bailment is defined under Section 148 of the Indian Contract Act, 1872. The word ‘bailment’ is derived from the French word ‘bailler’ which means ‘to deliver’. We may say that bailment is a temporary delivery of possession of goods but not the transfer of ownership. For example, to stand a bike in a parking lot, delivering a car in a service centre, giving clothes to dry cleaners for cleaning, borrowing a book to read, etc. Bailment can be understood by delivery of goods from one person to another for some purpose within the meaning of contract, where when the purpose has been fulfilled the goods shall be redelivered to its owner or disposed off accordingly. Bailment is only applicable to movable property. It is different from gift exchange because here possession as well as ownership is also transferred and is permanent in nature.
Who is a bailor?
Bailor is the one who transfers the possession of goods to another person, who is generally the owner.
Who is bailee?
The one to whom goods are delivered.
Modes of Delivery
There are two modes of delivery:
- Actual delivery – The physical giving of immediate and definite possession of goods to the buyer or who is authorised to accept the goods on behalf of the buyer.
- Constructive delivery – It is defined under section 149 of the Indian Contract Act, 1872. It is different from actual delivery, in a sense that others can also help in the delivery of the goods.
Essentials of Bailment
- The contract between the two parties should be valid.
- There should be delivery of possession of goods.
- There should be some purpose.
- The goods must be returned after accomplishment of the purpose, or disposal of goods according to bailor’s directions.
In the case of Ultzen v. Nichols[1], a man (plaintiff) went to a restaurant (defendant) for dining, where a waiter in that restaurant used to take the coat of a customer out of courtesy and respect and hang on a hook. Plaintiff nor consented neither he stopped the waiter to take his coat. Here, an implied contract is created. While leaving the restaurant, the plaintiff asked for his coat but the coat had been lost. It was held that the restaurant acted as a bailee here and liable for the plaintiff’s loss, because the coat was in the possession of the restaurant and due to their negligence he had lost his coat.
Bailment without a Contract
A question may arise in our mind that being an essential ingredient of bailment, is it valid to form a contract of bailment in the absence of contract ? To answer this question we have to look into some case laws.
In the case of Ram Gulam v. Govt. of UP[2], a plaintiff’s property had been stolen which was recovered by the police and again stolen which could not be recovered. HELD – The Court said that the police of a state was not to be held liable, firstly, because the state did not act as bailee and hence, is not liable as such and secondly, it is the duty of a state towards its citizens and police officer was performing his obligation imposed by the law.
In another case of L.M. Cooperative Bank v. Prabhudas Hathibhai[3], A deposited some packs of tobacco to a bank (plaintiff). The goods were remaining at A’s godown but the key of that place was given to the bank. A failed to pay some income tax dues, due to which A’s packages were ordered by the Income Tax Officer for custody and the key was given to the police. There were heavy rains, and the roof of the godown had some leakage which resulted in damage of all the goods kept in godown. HELD- It was held that in this case heavy rain did not amount to an act of God and hence, the government was held liable for all the losses as it became the bailee in the later half and was liable for taking no proper care of the goods.
Gratuitous Bailment
This bailment is defined under section 150 of the Indian Contract Act, 1872. This section fixes an obligation on the bailor. It can be stated as if anyone is already at fault and going to be bailed, it is the responsibility of the bailor to inform the bailee about the unaware risks which will come to the bailee. He must disclose all the faults attached to the bailed goods. If he hides the facts then he is liable to incur all those losses, which are caused by defective goods, beared by the bailee. For example- A lends his bike to B, which he knows to be damaged internally. He does not disclose this fact, and is met with an accident and is injured. A is responsible to B for the damage.
Duties of Bailee
Duties of bailee are the same as the rights of the bailor.
Duty to take care of the goods. (Sections 151 – 152)
The bailee is bound to take reasonable care of the bailed goods in the same manner as a man of ordinary prudence would have taken care of his own goods. This can be understood by a case of Union of India v. Udho Ram & sons[4], where it was held that the railway did not take reasonable care because firstly, the strength of police was not sufficient and secondly, the railway police protection did not keep an eye on the wagons when the train stopped, to prevent the theft. The defendants were held liable.
Duty not to make use of goods unnecessarily (Sections 153 – 154)
The bailee can use the bailed goods, for the particular purpose only and not for his personal use. If he makes unauthorised use of the goods bailed, bailor have two option against the bailee:
(i) bailor can terminate the contract of bailment ( S.153),
(ii) bailor can demand compensation for the loss by unauthorised use of the goods (S.154).
For example: A lends a camel to B for his own riding only. B allows a member of his family C to ride the camel. C rides with care but falls and is injured. B is liable to make compensation to A for the injury.
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Duty not to mix the bailed goods with his own goods( Sections 155- 157)
(i) Mixture of the goods with bailor’s consent(S.155)
If the bailor has an interest in the goods he may allow to mix the goods of his respective shares.
(ii) mixture of goods without bailor’s consent( S.156, S.157)
If bailee mixes his goods with the bailor’s goods without consent of the bailor, he is liable to compensate the bailor i.e. the money needed for the separation of the mixture.
Duty to return the goods on the achievement of the purpose. ( Sections 160-161 & Sections 165- 167)
It is the duty of the bailee to give the goods back to the bailor when the purpose of taking the goods has been fulfilled. And if he is unable to return, for instance, if he loses the bailed goods, then the loss is incurred by the bailee only.
Duty to return the additional profit on goods bailed (Section 163)
Bailee is bound to deliver the profits accrued on the bailed goods to the bailor until and unless anything contrary is not mentioned in the contract.
For example, A gives his cow to B for taking care. Meanwhile, a calf is born to the same cow which is bailed. Here, B has a duty to return the cow and the calf to A.
Rights of Bailee
Rights of the bailee are the same as the duties of the bailor.
Right to demand expense incurred on bailment ( Section 158)
According to the contract of bailment, if any expenses or service renders in the bailed goods, bailee has the right to recover this money which he spent on the bailor’s goods. For example, A is going for a vacation so he leaves his dog with his neighbour B for safe custody for one week. Here , B has the right to demand the money which is spent on feeding the bailor’s dog.
Right to demand compensation( Section 164)
If any loss is incurred by bailed goods to the bailee, bailee has the right to recover the compensation from the bailor.
Rights to have lien on the bailed goods. (Section 170- 171)
Right of lien is the most important right in the hand of bailee. It means bailee can retain the goods or refuse to deliver them until and unless he gets the compensation for the service of the goods bailed. For example, A gives his piece of cloth to a tailor B for stitching a shirt and trouser. Later , A denied to pay the money, which B is entitled to. Here, B can apply right of lien where he can retain the shirt and trouser until A gives the money for B’s service.
Right to suit against a wrongdoer. (Section 180)
This right applies, when a third person wrongfully deprives the bailee of their use or possession, or causes an injury to the goods. In this case, bailee has the right to sue the third party for wrong to the goods and even the bailor can sue the third party.
References
[1]. (1894) 1 Q.B. 92.
[2] A.I.R. 1950 All. 106.
[3] A.I.R 1966 Bom. 134.
[4] A.I.R 1963 S.C. 422.
BY SAUMYA SINHA | ICFAI LAW SCHOOL, DEHRADUN