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Concept Of Bailment Under Indian Contract Act

Bailment is defined under the Indian Contract Act of 1872, from sections 148 to 181. The Contract of Bailment is defined under section 148 of the Indian Contract Act as a delivery of goods from one person to another for a specific purpose; after the particular purpose is completed, it will be returned to the same person.

For example, A wants to give his Laptop to the service center for service of his Laptop; in this case, the purpose was to get his Laptop to get serviced. This is an example of a Contract of Bailment.

In the Contract of Bailment, there are two people (1) Bailor (2) Bailee
  1. Bailor:
    Bailor is a person who gives his goods to another person for a specific purpose.
  2. Bailee:
    The goods delivered to the person are known as Bailee. The finder of the goods also is treated as a Bailee even though there is no contract between him and the Owner of the goods.

Essentials for the Contract of Bailment:

  1. Valid Contract between the parties:
    The Contract between the Bailor and Bailee has to be valid; it implies that the goods should be returned when the purpose has been fulfilled. In the above example, the Laptop has been delivered to the Bailee for a specific purpose. When the purpose has been fulfilled, then the Laptop will be returned to Bailor, in the case of Bharat Petroleum Corporation Ltd V.s Rama Chandran & Ors. (2004), the Supreme Court had concluded that a valid contract of Bailment requires the transfer of possession of goods from one person to another person for a specific purpose, with the understanding that the goods will be returned or disposed of. Also, the court stated the importance of consent and mutual understanding between the parties.
  2. Delivery of goods:
    In the Contract of Bailment, there must be the Delivery of goods for a certain period, and there is no permanent possession. The Delivery can be Actual Delivery or Constructive Delivery.
  3. Return of such goods:
    The goods which have been delivered to Bailee, the Bailee has to return the goods to the Bailor after the Bailor has fulfilled the purpose. In the above example, the Laptop has been delivered to the person after the service has been completed.

Duties of Bailor:

  1. Disclose the facts:
    The Bailor must disclose all the facts of the goods delivered to Bailee. It was defined under section 150 of the Indian Contract Act of 1872.
    For example, A house was given to a painter for Painting within a certain period; the house has some defects. The Owner of the house has to disclose the facts about the house.
  2. To bear all the Expenses:
    The Bailor must pay the ordinary expenses to Bailee. If there are any extra expenses, he is bound to pay the extraordinary expenses.

    For Example, A has a Cow and gives it to B to look after the cow for a certain period. A went out of town. Meanwhile, a calf was being born, so B spent some expenses on caring for the calf. After A returns to the town, A is bound to pay the Ordinary Expenses and the Extra Ordinary Expenses.
  3. To Indemnify the Bailee:
    The duty to indemnify the Bailee refers to the responsibility of the Bailor to compensate the Bailee for any loss, damage, or liability incurred during the period of Bailment. It is an essential aspect of a bailment relationship, where the Bailor entrusts their property to the Bailee for a specific purpose.
  4. Compensation for premature termination:
    It is the duty of the Bailor to compensate the Bailee if the Bailor has terminated the Bailment; in case of incurring any loss, then it is the duty of the Bailor to compensate.
  5. To take back the Goods:
    The Bailor must take back the goods from the Bailee when the specific purpose has been fulfilled.

Duties of Bailee:

  1. Duty to take care of goods:
    Bailee must take care of the goods until he returns the goods to the Bailor. It means Bailee has to take reasonable care of the bailed property. This means the Bailee has to protect the bailed property from damage, theft, and any harm that may occur during the period of Bailment.
  2. Duty to use the property for the agreed purpose:
    The Bailee must use the bailed property only for its entrusted purpose. Without the consent of the Bailor, if he deviates, it would lead to the liability of the Bailee.
  3. Duty to not mix the property:
    The Bailee is responsible for not mixing the Bailor's goods with the other goods. If the goods are mixed, he will be held liable if the goods are unable to separate. If the goods can be separated, the Bailee will bear the expenses to separate the mixed goods.
  4. Duty to return the property:
    If the purpose of the Bailment is fulfilled upon the agreed period, the Bailee must return the property to the Bailor.
  5. Duty to render Accounts:
    When the Bailor approaches the Bailee for information regarding the status of the property bailed and the condition of the property, the Bailee must provide accurate reports of all transactions connected to the Bailment. And the Bailee is required to maintain correct records.

Rights of Bailee:

Bailee has some rights which are given under the Indian Contract Act, and their rights are protected.
  1. Right to possession:
    One of Bailee's rights is to have possession of the goods that are subject to the matter of the Bailment. But, the right to possession is limited. The Bailee has to use the goods only for a specific purpose, not for any other purpose, without the consent of the Bailor.
  2. Right to Lien:
    The Bailee has the right to lien, which means the Bailee can take back the possession of the goods bailed by the Bailor until the charges are paid in respect of the goods. This right would be applicable when there is a legal contract between the parties, i.e., a Contract of Bailment.
  3. Right to Recover Compensation:
    If the Bailor does not disclose any facts, then any expenses incurred by the Bailee, the Bailee has the right to compensate for the damages he incurred.

Rights of the Bailor:

Bailor is the Owner of the goods, so the Bailor has some rights given under the Indian Contract Act, and their rights are protected.
  1. Right to terminate the contract:
    The Bailor has the right to terminate the contract before the purpose of the Bailment has been completed. But the Bailor has to compensate the Bailee for any loss incurred due to termination of Bailment.
  2. Right to take the goods back:
    The Bailor has the right to take back the goods after the purpose of the Bailment has been completed in a specified time if mentioned.
  3. Right to Sue:
    The Bailor has a right to sue the Bailee in case of breach of contract. If the Bailee fails to fulfill the contract terms, then the Bailor can sue for the breach of contract.
  1. Bare Act of Indian Contract Act, 1872
  2. Indian Contract Act Text book of R.K Bangia
Written By: Kuncha Anudeep Durga Prasad - Student BBA.LLB(Hons), Gitam, School of Law, Visakhapanam.

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