When some goods are misplaced by the original owner and subsequently found
and taken possession of by another person, various legal conundrums arise. The
finder of these lost goods shouldn't have a legally enforceable and absolute
responsibility to return the goods at the expense of their own time and
financial resources even though returning the goods to the rightful owner would
be the morally upright decision.
However, the very purposes of any legislation that underlies its attempt to
resolve disputes is an attempt to maintain harmony, civility and morality in
society. In furtherance of this ideal, certain restrictions need to be imposed
on what the finder of lost goods is entitled to do with said goods.
To settle such an argument, law makers in India have conferred upon a Finder of
Goods, the same duties as that of a bailee in a contract of bailment, thus
installing an obligation on the finder to match the behaviour laid down under
Bailment as per the Indian Contracts Act, 1872. The nuances of this claim will
be unravelled as the paper progresses, but first the concept of Bailment itself
must be understood.
Chapter 9 (Section 148-181) of the Indian Contract Act, 1872, provides for
provisions governing contracts of "bailment". Section 148 of the Indian Contract
Act, 1872 defines this type of contract 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"."
Thus, a contract of Bailment arises in cases where possession of a movable good
is transferred from one party (Bailor) to another (Bailee) without relinquishing
or transferring ownership, meaning that the Bailee may enjoy possession of
transacted good for a purpose and time period, however ownership is retained by
the Bailor. Since a contract Bailment has certain salient features beyond those
listed under Standard Form of Contracts, it is considered a Specific Contract.
To understand the nuance of Bailment, essentials of such a contract to be valid
are listed below:
- Essentials of Bailment:
- Delivery of Possession
The primary essential for a contract of bailment is a transfer in possession
which comprises of a delivery of the movable product for bailment to the bailee
by the bailor. According to Section 149 of the ICA, such delivery may be actual-
delivering the goods to the physical possession of the bailee or constructive delivering the goods to someone who has the authority to possess the goods on
behalf of the intended bailee or even create a scenario where the bailee may
take possession of the goods at a later time. The effective definition of
possession, here is the ability to exercise exclusive control over said movable
- Delivery must be for some Purpose
The goods should be bailed for a specified purpose, and should be accounted for
upon completion of task or time period of bailment. If this is not maintained, a
claim of bailment would not arise.
- Return of Goods
Upon accomplishment of purpose behind the bailment, the goods must be returned
to the bailor's possession or disposed of according to the bailor's wishes. In a
case where the agreement is to return goods of equivalent value or the good is
returned in a manner at variance with what has been specified by the bailor,
contract of bailment does not arise.
- Delivery upon Contract
Lastly, the behaviour of both parties must satisfy all essential of a valid
contract, for bailment to arise between the bailor and bailee. Thus, a contract
must be established between concerned parties in accordance with the rules for
eligibility of any contract- meaning the contract can be either explicit or
implicit, as long as there is clear meeting of minds, among other nuances.
This essential condition is of particular interest since it makes the 'Finder of
goods' clause an exceptional case to law of bailment.
Finder of Goods:
In the ICA, 1872, Section 71 defines the legal obligation arising in a situation
where a person finds goods owned by some other person and takes them into his
own possession, as follows:
"A person who finds goods belonging to another, and takes them into his custody,
is subject to the same responsibility as a bailee.
This statement raises certain questions borne out of the establishment of the
'Finder of Goods' scenario as an exception to the 'Delivery upon Contract'
essential under Bailment. The exception arises because there is no contact
between the bailor and bailee, let alone a meeting of minds or explicit or
implicit contract formation.
This means that by law, a contract has been
retroactively imposed on both the owner of the goods and the finder, and consent
of either party has not been treated as a necessary element for contract
formation. Since this violates the very basic essentials of a valid contract in
itself, one would not be amiss to assume that such a contract cannot stand.
However, these contracts still hold legal weight and are known as
Quasi ContractsA Quasi or Partial Contract is one which is imposed by a court in lieu of a real
contract. Its purpose is to enforce obligations that arise naturally out of the
principle of avoidance of unlawful or wrongful enrichment. Based on an
assumption of good faith and justice, courts can impose duties and rights on the
parties via a court order directing a non-consensual quasi-contract borne out of
fictional relationship between the parties.
Essentially, even though no actual
contract has been agreed upon or even discussed by the parties in question, if
the court finds that one party is unjustly benefiting at the expense of the
other, they may retroactively impose a quasi-contract to rectify or preempt the
In light of such a quasi-contractual relationship between the owner of lost
goods and the finder, as mentioned in Section 71, the position of the finder is
effectively that of a bailee, with pari passu responsibilities or duties. These
responsibilities are an obligation imposed regardless of the consent of the
finder themselves, and are equivalent to the reasonable limits that a bailee is
subjected to in a contractual bailment.
Duties of Finder of GoodsSince the Finder is treated at par with a hypothetical bailee
of the same goods, they will be subject to the following duties as listed
from Section 151-163 of the Indian Contract Act, 1872:
- Duty to take reasonable care
Section 151 of the Indian Contracts Act dictates that a bailee must treat bailed
goods with the same amount of care that a prudential person would, or as a more
tangible standard, with the same kind of care that a prudential bailee would
treat the same goods if they were the bailee's own.
As an extension of this responsibility, Section 152 prescribes that in lieu of a
special contract specifying their responsibility, the bailee is protected
against legal action to recuperate any loss suffered by the bailor of the goods
provided that the bailee can prove that reasonable care was taken by them and
the damage suffered was unavoidable within the expected standard of care and
mitigation of risk.
Courts have maintained this standard of care as not being
too disproportionate or unreasonable, as can be seen in the case of Shanti Lal
v. Tara Chand Madan Gopal where a sack of grains was the subject of bailment. In
a natural course of events, deemed to be an act of god (force majeure), the sack
of grains were lost in a flood and the Court held the defendant (bailee) to not
be liable for the loss since such an event could not have been foreseen and
Since the Finder of Goods is to be treated with the same responsibility as a
bailee, they are expected to take aforementioned reasonable care of the goods
now in their possession.
- Duty to not make unauthorised use:
Section 153 and 154 of the Indian Contracts act restricts the use of bailed
goods to the conditions of the bailment. Anything beyond the scope of the use
permitted by the bailor would be considered unauthorised use and allow
termination of bailment at the option of the bailor and even compensation of any
damage suffered by the good during such use.
Since this duty is imposed on a contractual bailee, it also unconditionally
stands as a duty of the Finder of Goods. However, the manner of its application
to a Finder of Goods may be subject to the facts of the case since there is no
specific or real "authorisation" of purpose between the owner of goods and the
- Duty to not mix
Section 155 of the Indian Contract Act deals with the situation where the bailee
mixes the goods of the bailor with his own and with the bailor's consent. The
parties' interest in the resulting mixture is then divided between them
proportionate to their share in the input. This implies that for a Finder of
Goods, the act of mixing with the consent of the owner would result in the
finder to share interest in the resulting mixture with the rightful owner of the
used lost good.
If the mixing were to take place without the bailor's consent, Section 156
determines that if the goods can be separated, original proportion of ownership
will perpetuate and the bailee must bear the expense of separation and liability
for damage caused in the process. Further, according to Section 157, if the
goods cannot be separated then the bailee is liable to compensate the bailor for
the total loss of goods. A Finder of Goods will face equivalent liability in
- Duty to return the goods
According to Section 160, the bailee has a strict responsibility to return the
bailed goods to the bailor upon completion of purpose or tenure for which the
goods were bailed. This return must also be made according to the bailor's
direction. Section 161 then commands that if by the fault of the bailee, the
bailed goods are not returned at the proper time and in the proper manner, the
bailee is liable to compensate the bailor for any damage suffered by the good
due to that lapse.
A Finder of Goods thus has the duty to return the goods to the original owner,
if possible to do so after a reasonable search for the owner upon taking
possession of the goods. The time period and manner of return specified by the
original owner, if found, will be binding on the Finder of Goods. Some
consideration to the finder's situation comes in the form of a right of lien
which may be exercised if a legally owed amount is not paid by the original
- Duty to return the profits
Section 163 then posits that a bailee must return to the bailor any profits that
may have arisen during the course of the bailment, unless decided otherwise. In
the case of a finder of goods, this implies that any profits accrued between the
finding of the lost goods and the return of said goods to the true owner, will
also have to be delivered alongside the goods themselves.
For example, consider a farmer who finds that a pregnant cow has strayed onto
his field and decides to take it into his care. While trying to find the
rightful owner, the cow gives birth to a calf. Upon finding the owner, deepening
on the time period and manner of delivery decided, the farmer will have to
return both the cow and the calf to the original owner of the cow.
This summarises the duties or responsibilities imposed on the Finder of Goods,
however for a complete discussion of the position of a Finder of Goods, it is
also necessary to understand the Rights enjoyed by such a person, otherwise the
position would not be lucrative beyond a goal of good-samaritanism and would
instead be one of immense, unnecessary liability.
Rights of Finder of Goods
Right to sue for specific reward offered and impose lien
Section 168 restricts the finder from suing the owner of goods to claim
compensation for the time and finances that may have been spent to identify,
locate and contact the owner, on the basis that such an act is done voluntarily
out of goodwill. However, it does allow the finder to retain possession of the
goods, impose a lien, till such a compensation is paid by the owner.
Further, if the owner announces a reward for the return of the lost goods, the
finder is empowered to sue for such reward and impose a lien on the goods till
the reward is received.
Right to sell the found goods in certain cases
To answer the question of whether the finder has a right to sell the goods
found, we must look at Section 169 of the Indian Contract Act. According to this
provision, some specific scenarios are laid out where the finder does indeed
have the right to sell the goods.
It dictates that if the good is of the nature that is commonly sold and after
sufficient and reasonable searching, the owner cannot be found, the finder may
sell it. The same stands for if the owner is found but does not agree to pay the
demanded legally recognised charges incurred by the finder.
The sale, however, can only proceed if it fulfils the following criteria:
Only when at least one of these criteria is fulfilled, can the Finder of
Goods sell the goods for their own benefit or compensation.
- The goods are of perishable nature or at risk of losing the greater part
of their value, or
- The legally recognised cost of finding the owner surpasses two-thirds of
the value of the found goods themselves.
Such a narrow window to allow sale of found goods is necessary to maintain the
intention behind the quasi-contract governing finder of goods i.e., prevention
of unjust enrichment. The unhindered freedom to make such a sale would
perpetuate a playground mentality similar to the "finders-keepers" sentiment and
also open the legislature to abuse of such a provision since titles would be
The Indian Contract Act clearly confers upon a finder, the same responsibilities
and obligations applicable to a bailee even in lieu of any real contract between
the concerned parties. This creates an atmosphere of using the position of the
finder interchangeably with that of the bailee, which isn't completely accurate.
Thus, an important point to note is that even though the Indian Contract Act
confers on the Finder of Goods, same duties as that of a bailee, the
quasi-contract imposed in each case does not create actual contractual
obligation. The finder of goods isn't actually a bailee and not subject to the
position of a bailee as governed by a real bailment contract, even though the
finder does face the same duties and responsibilities.
As for the question of selling found goods, the Indian Contract Act in no
uncertain terms lays down specific criteria which need to be fulfilled for the
finder to proceed with the sale of such goods.