Bailment (Section 148-171 of Indian Contract Act, 1872)

Meaning of Bailment:

Bailment is derived from the French word ‘bailer’ means ‘to deliver a thing under a control’ its a relationship in common law where physical possession but not ownership of personal property, is transferred from one person to another for a specific reason or purpose with a condition to return goods when the purpose is over otherwise disposed of according to the direction of the owner.

The person who delivers the goods is known as the ‘Bailor’ and the person who receives the goods is known as ‘Bailee’ and the transaction is known as ‘bailment’ and the relation between them is defined in Section 148 of the Indian Contract Act. Bailment is a voluntary delivery of goods for a temporary purpose ‘on the understanding that they are to be returned in specie in the same or substitute form.

Sectiontion148: ‘BAILMENT’,’BAILOR’ and BAILEE’ definition:

‘Bailment’, ‘Bailor’ and ‘Bailee’ defined.—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’. —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’.”

Explanation.—If a person is already in possession of the goods of other contracts to hold them as a Bailee, he thereby becomes the Bailee, and the owner becomes the bailor of such goods, although they may not have been delivered by way of Bailment.

A seller of goods becomes a bailee if the goods continue to be in his possession after sale is complete. Here the original possession of goods was with the seller as the owner of the said goods and after the sale, his possession is converted into a contract of bailment.

Requirements of Bailment:

One of the requirements of bailment is the delivery of goods to the bailee. Delivery of possession to the bailee is ‘sine qua non’ of bailment. In order to constitute a bailment change of possession is necessary.

Illustration of Bailment: Mr. B rents his car to A, to pick up his goods and drop it to A’s house. Here B is the bailor or owner of the car, and the car is the movable property and A is the bailee who subsequently has possession of that movable property.

What are the objects or goods that can use in a Bailment?

Bailment is only acted on movable property. Current money or legal tender cannot be bailed. Deposition of money in a bank is not bailment as money is not ‘goods or property’ and it cannot be returned to the client. But the currencies that are no longer legal tender and are the objects of curiosity of antiques, can be bailed.

Essential features of Bailment:

There are three essential elements to constitute a contract of bailment:

1. Delivery of Goods i.e. Delivery of Possession
2. Delivery should be upon Contract
3. Delivery should be upon some purpose and Return of Goods

Delivery of Goods i.e. Delivery of Possession:

Here the delivery of goods means delivery of possession which is essential for bailment. The transfer of possession of the bailed goods from bailor to bailee for whatever is the purpose of bailment must be distinguished from mere custody. One who has custody without possession of goods is not a bailee.

As per Section 149, the delivery can also be made to the bailee by doing anything which has the effect of putting the bailed goods in the possession of the intended bailee or any person authorized by him for this purpose. Thus, the delivery of possession may be of two types:

1. Actual Delivery:

Also known as physical delivery, where the delivery takes place when the goods are physically handed over by the bailor to the bailee.

illustration: X, the bailor gives his car in the service center to Y the bailee. Here, there is actual delivery of possession by X.

2. Constructive delivery:

when some action is taken to mean handing over of the physical possession of goods, though in fact no physical transfer of goods is made at that time.

Example: delivery of railway tickets, or bill of lading amounts to constructive delivery.

Mere custody of goods is not the same as the delivery of possession. A guest who uses the goods of the host during a party may not consider a bailee. Similarly, it was held in Reaves vs. Capper [1838 5 Bing NC 136] that a servant in the custody of certain goods by the nature of his job is not a bailee. Similarly, a servant holding his master’s umbrella is not a bailee but a custodian.

Similarly, hiring and storing goods in a bank locker by itself is not bailment thought there is the delivery of goods to the bank premises. The goods are in no way entrusted to the bank. A bank cannot be presumed to know what goods are stored in any given locker at all times. If a bank is given actual and exclusive possession of the property inside a locker by the person who hired the locker, only then bailment under Section 148 can be assumed.

Delivery should be upon Contract:

In bailment, the delivery of goods is upon a contract and once the purpose is done, such goods shall be returned to the bailor. This means there should be a contract between two parties for transaction of delivery and subsequent return. If there is no possession of goods obtained by someone other than contract, there should be no bailment.

The contract giving rise to bailment can be express or implied; In express where the parties agree to be bound are declared either orally or in writing, in implied where the parties formed a contract on a no-verbal contract.

The exception to the delivery upon contract:

• A finder of goods is treated as a bailee even if there is no contract of Bailment or delivery of goods under a contract. (section 71)
• A finder of the goods is a person who finds the goods belonging to some other person and keeps them under his protection until the actual owner of the goods is found.
• An involuntary contract of bailment arises and the finder automatically becomes bailee even in the absence of bailment by the bailor – the owner of the lost goods. Since the person is in the position of a bailee, he has all the rights and duties of a bailee

Delivery should be upon some purpose and Return of Goods:

In a contract of Bailment where the goods are delivered(in the sense of possession) from one person to the another, on some purpose. Once the purpose of bailment has been completed it is mandatory for a bailee to return the property to the bailor, or be disposed of as per bailor’s instructions depending upon the terms and conditions of the contract. If through no fault of bailee own, the return of the property is delayed or become impossible to return for example if the property is lost during bailment or get destroyed by natural calamities- the bailee will not be held liable for non-delivery on demand. In other situations, the bailee will be held responsible for the Tort of conversion for unjustifiable failure to redeliver the property as well as its unauthorized use.

CLASSIFICATION OF BAILMENT

Section 150 of the Indian Contract Act 1872, The bailment can be broadly classified into two heads:

1. Classification based on Reward.
2. Classification based on Benefit.

Classification based on Reward:

1. Gratuitous Bailment:

Gratuitous bailment is one where no consideration passes between the bailor and the bailee. No mutual benefits will be acted upon by both parties in the contract.

2. Non – Gratuitous Bailment:

non-gratuitous bailment is one where consideration passes between the bailor and the bailee. In this case both parties get mutual benefits.

Classification based on Benefit:

1. Bailment for the Exclusive benefit of the Bailor:

A bailment in which goods are delivered by the bailor to the bailee only for the exclusive benefit of the bailor himself.

illustration: A give his valuable goods to his relative B for safe custody without any charges. This is a bailment for the exclusive benefit of the bailor ‘A’.

2. Bailment for the Exclusive benefit of the Bailee:

This is a bailment in which goods are delivered by the bailor to the bailee only for the exclusive benefit of the bailee.

illustration: X lent his car to his friend Y, for the temporary use without any charges. This is the bailment for the exclusive benefit of the bailee ‘Y’.

3. Bailment for the Mutual Benefit of the Bailor and the Bailee:

This is a bailment in which goods are delivered by the bailor to the bailee only for the exclusive benefit of the bailee.

illustration: P gave his car keys to Q to drop his as well as Q’s kid to their respective home. This is the bailment for the mutual benefit of both the bailor ‘P’ and the bailee ‘Q’ as both of them are benefitted.

Duties of a Bailor:

Duties of a bailor are as follows:

1. It is the duty of a bailor to disclose all flaws. If the bailor fails to disclose such flaws then he will be responsible for the damage caused to bailed goods or loss suffered by the bailee. (For Example, Mr. X lends a horse, which he knows to be vicious, to Mr. Y, he does not disclose the fact that the horse is vicious. The horse runs away. Mr. Y is thrown and injured. Here Mr.X is responsible for Mr.Y for damage sustained.)
2. Also, the bailor is under the duty to pay the extraordinary expenses acquired by the bailee for such bailment. (Section 158)
   
3. It is the duty of the bailor to accept the goods after the purpose for which such bailed goods were bailed is accomplished.
   
4. It is the duty of the bailor to indemnify the bailee for the cost incurred due to the defective title of goods bailed to the bailee.
   
   For example, Mr. A. lends his horse to Mr. B., a friend, for a few days. While the feeding charges are to be paid by ‘B’. But if the horse meets with an accident ‘A’ will have to repay ‘B’ medical expenses incurred by Mr. B

Rights of Bailor:

 The rights of Bailor are as follows:

1. Right to claim damages if bailee makes wrongful use (Section 154)
2. Right to claim a proportionate share in mixed bailed goods (Section 155)
3. Right to claim the return of bailed goods (Section 160, 161)
4. Right to claim damages due to mixing up of bailed goods (Section 156, 157)

Duties of a Bailee:

The duties of Bailee are as follows:

1. Take proper reasonable care of goods bailed(Section 151)
2. Not to make any unauthorized use of goods (Section 153)
3. Not to mix the goods bailed with his own goods
4. Not to set up an adverse title on bailed goods
5. Return the goods along with any increase or profit accruing to the goods to the bailor
   (For example, if Mr. A lent his pet hamsters to Mr. B and if those hamsters gave birth to a pup then both the hamsters along with their pups have to be returned to Mr. A.)
   
6. To return the goods

Rights of Bailee:

The rights of Bailee are as follows:

1. Delivery of goods to one of several joints bailor of goods;
2. Delivery of goods to bailor without a title;
3. rights to apply to the court to stop delivery;
4. Rights of action against trespassers
5. Bailee’s lien

Explain Bailee’s particular lien?

From Section 170 of the Indian Contract Act, 1872, the bailee has a lien on the goods that he receives under the contract of bailment. When the bailor bails the goods to the bailee for a particular purpose and the bailee expands skill and labor on these goods, he has a right to retain the goods until the bailor pays him his charges in respect of skill and labor.

However, the right of lien arises only when the bailee uses skill and labor on the goods to confer an additional value on the goods.

Section 171 states the provisions for a general lien which deals with the right to detain any property belonging to another person which is in the possession of the person performing the lien, in respect of any payment lawfully due to him.

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