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Understanding Bailment: Your Friendly Guide to Property Custody

Bailment is a legal relationship in common law, where the owner transfers the physical possession of personal property for a time, but retains ownership. The owner giving up custody is the "bailor" and person who takes is "bailee". The bailee holds the personal property in trust for a specific purpose and delivers the property back to the bailor when the purpose is accomplished. Since the bailment involves only transfer of possession and not its ownership, it has been distinguished from the contract of sale. A rental or lease of personal property might be a bailment, depending upon the agreement of the parties.

In order for a bailment to exist, the bailee must have both the intent to possess the property, and actual possession the property. The bailor intends that the property will be returned to him at the end of a specified period of time, or after the purpose for which the property was given has been completed.

For example, Kevin pulls up to the entrance of an upscale restaurant with his wife. The couple exits the car, and Kevin gives his keys to the valet, so he can park the car. In such a case, it is clear that the valet intends to take temporary possession of the car, and that Kevin expects to get his car back after dinner. While the car is in the valet's possession, he is responsible for taking reasonable care of Kevin's car.

The main objective of the research is to study the essentials of bailment, also the types of bailment and the duties of the bailor. And also the basic differences between the bailment and the contract of sale.

The research methodology followed in this research is doctrinal and analytical. We are adopting primary and secondary data. The data from law books, laws, case laws, acts, also on internet, commercial information sources, have been used while conducting the research. Here analytical study is been applied while doing the research.

There are many instance of bailment in our daily lives- when we give our clothes for laundry, when we use valet parking for our cars. We deliver our goods to another person or leaves them in power of another person for a purpose and expects to receive our goods back when the purpose has been achieved.

Bailment is the action of the transfer of the possession of a thing from one person (who is called a bailor) to the other (called a bailee). The main aim of bailment is the benefit for one of the sides or for both of them. Bailment cannot be confused with the process of selling, because when the object is sold, the rights on it are sold with it too. During the process of bailment the bailor gives the object into the bailee's possession but the rights on ownership remain with the bailor. In this aspect bailment reminds renting, because the person uses the object but does not own it.

There are three main types of bailment which are divided according to the characteristic of benefit: the first one is the type of bailment, which offers benefit for both the bailor and the bailee; the second type is the benefit exclusively for the bailor and finally, the third one is the benefit for the bailee. For example, a man visits a repair shop for getting his television set fixed. The television set is left at the shop where the repair man examines and fixes the problem. Ones fixed the television set has to be returned to its owner. Therefore, there is a contract of bailment between the man and the repair man.

Bailment is a type of special contract and thus, all basic requirements of contract like, consent of parties, competency, etc. are applicable to any contract of bailment. Usually, by the agreement of the bailor and the bailee the bailment has been created. Only the ‘goods' can be bailed means only the movable goods can be the subject matter of bailment. Current money or legal tender cannot be bailed.

Define Contract Of Bailment

Section 148 of Indian contract Act of 1872, defines ‘Bailment' as the delivery of goods by one person to another person for some purpose, upon a contract that they shall, when the purpose is accomplished be returned or otherwise disposed off according to the person delivering them. Where the person delivering the goods is called the bailor and the person to whom the goods are delivered is called the bailee.

What Are The Essentials Involved In The Contract Of Bailment- Answer For The 1st Research Question

Bailment is defined under the section 148 of the Indian contract Act, 1872, which makes it very clear that there are three essential features of bailment. They are
  • Delivery of possession
  • Delivery should be upon contract
  • Delivery should be upon a purpose and return of goods

Delivery Of Possession

The delivery of possession of goods is essential for bailment. There must be transfer of possession of the bailed goods from bailor to bailee. Thus the goods must be handed over to the bailee for whatever is the purpose of bailment. Therefore, possession means the control over goods and an intention to exclude others from exercising same control over the similar goods. Thus the bailee must have an actual control over the property with an intention to possess it for a valid bailment.

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. Hence, the delivery of possession can be actual or constructive. The delivery may either put the bailee in the actual physical possession of the goods or put the bailee in a position of power over such goods that may be possessed later. The essential of a bailment is the delivery of goods for a temporary purpose.

The mere custody of goods is not the same as delivery of possession. For example, a guest who uses the goods of the host during a party is not a bailee. In the case, Reaves v. Capper [18385 Bing NC 136] that a servant who has certain goods in custody by the nature of his job is not a bailee.

Similarly, in the case, Atul Mehra v. Bank of Maharashtra [AIR 2003 P&H 11], it was held that mere hiring of a bank's locker and storing things in it would not constitute a bailment. But the position changes completely if the locker in the safe deposit vault of the bank can be operated even without the key of the customer. Therefore, to determine whether a delivery is for bailment or not it is clear that the nature of possession is very important.

As required for bailment, delivery of possession can be made into two:
  • Actual delivery
  • Constructive delivery
In actual delivery the bailor hands over the physical possession of the goods to the bailee. For example, A's watch is broken. When he leaves his watch at the showroom for repair, he has given actual delivery of possession of goods to the showroom.

While in constructive delivery, it is an action that the law treats as the equivalent of actual delivery. It can be difficult to deliver intangible goods. In this the physical possession of the goods may not be handed over. The possession of the goods may remain with the consent or authorization of the bailee. Thus the bailor gives the bailee the means of access to taking custody of it, without its actual delivery. For example, A has rare coins in a locked safe deposit box. The delivery of a safe deposit box is not possible. When he hands over the keys to the box to B, it is taken as constructive delivery for purpose of bailment.

According to section 149 of the Indian contract Act, 1872, it certainly deals with constructive delivery of the goods. It states that anything done which has the effect of putting the goods in the possession of the intended bailee or any other person authorized to hold them on his behalf is to be treated as constructive delivery of the goods.

In the case Bank of Chittor v. Narsimbulu [AIR 1966 AP 163] a person pledged cinema projector with the bank but the bank allowed him to keep the projector so as to keep the cinema hall functional. It was held that there was constructive delivery because the action on the part of the bailor had changed the legal character of the possession of the projector. Even though the actual and physical possession was with the person, the legal possession was with the bank, the bailee.

Delivery Should Be Upon Contract
In bailment it is necessary that the good are delivered to the bailee and returned to the bailor when the purpose is accomplished upon a contract. Thus, there should be a contract between the two parties for such delivery transactions and subsequent returns. According to section 148, when a person's goods go into the possession of another without any contract then there is no bailment. The contract giving rise to bailment can be expressed or implied. Property deposited in a court under orders is not property delivered under a contract. In such cases delivery or transfer does not constitute bailment.

For example, the plaintiff's ornaments having been stolen were recovered by the police and, while in police custody, were stolen again. The plaintiff's action against the state for the loss was dismissed. The obligation of a bailee is a contractual obligation and springs only from the contract of bailment. It cannot arise independently of a contract. In this case the assumption has been described as unjustifiable. The ornaments were not made over to the government under any contract whatsoever. The government, therefore, never occupied the position of bailee and is not liable as such to indemnify the plaintiffs.

Similarly, in the case of Ram Gulam v State of UP [AIR 1950 ALL 206] the government was holding the property not as a bailee, but for the fulfilment of the duty imposed by law. The duty of bailee is a contractual duty but there was no such contract between the parties. Hence the government is not liable to indemnify the plaintiff for the loss caused.

The government was only discharging the duty imposed by law; therefore it is not liable for the act, alleging to be tortuous. Thus the suit was dismissed on the ground that the government is not liable for the act of its servant because the act was just the performance of the obligation imposed by the law. Therefore, the government is not liable to compensate for the loss of ornaments.

Delivery Should Be Upon A Purpose And Return Of Goods
The delivery should be a purpose and the return of goods is an essential of bailment. There has to be a purpose for the bailment of goods and it is mandatory that once such purpose is accomplishes, the goods have to be returned to the bailor or be disposed off as per his instructions. Bailment cannot arise if the goods are not to be specially accounted for after completion of such task or purpose. This is a feature of bailment that distinguishes it from other relations like agency, etc.

The delivery of the goods must be for some specific task or performance. Delivery of goods in bailment is not permanent. There has to be a purpose for the bailment of goods and it is mandatory that once such purpose is accomplishes, the goods have to be returned to the bailor or be disposed off as per his instructions. For example, a tailor is given a cloth for stitching a shirt.

Also the goods must be returned to the bailor or be taken care of it as per the instructions of the bailor. If a person is not bound to return the goods to another, then the relationship them is not of bailment. If there is an agreement to return the equivalent and not the same goods, it is not bailment. For example, an agent who collects money on behalf of his principal is not a bailee because he is not liable to return the same money and coins. Also a tailor who receives a cloth for stitching is the bailee in this case. The tailor is supposed to return the finishing garment to the customer, the bailor, once the garment has been stitched.

The same goods that were bailed must be returned to the bailor in the same condition after the accomplishment of purpose as they were handed over to the bailee in the beginning. Any accruals to the goods must also be handed over. If an animal gives birth during the period of bailment, then the bailee must return the animal with the offspring at the end of the bailment. Also the bailor can give other directions as to the disposal or return of the bailed goods. In case of such agreements or instructions, the bailee must immediately dispose the goods after completion of purpose as per the directions.

If the goods are not returned as per the directions of the bailor there is no bailment. For example, depositing money into bank by a customer does not give rise to a contract of bailment because the bank is not bound to return the same notes and coins to the customer. Similarly, in the case Ichcha Dhanji v. Natha [1888 13 Bom 338] the same points were made as above mentioned.

What Are The Three Types Of Bailment And Also Describe The Duties Of The Bailor Answer For The 2nd Research Question
There are three types of bailment. It is based on the purpose of relationship.

They are as follows:
  • For the benefit of the bailor and bailee;
  • For the sole benefit of the bailor;
  • For the sole benefit of the bailee.

In the case of benefit for both bailor and bailee, the bailment is created when there is an exchange of performances between the parties, which means a bailment for the mutual benefit of the parties is created when there is an exchange of performances between the parties. A bailment for the repair of an item is a bailment for mutual benefit when the bailee receives a fee in exchange for his or her work. For example, parking a car in a paid parking lot.

In the case of the sole benefits of the bailor, it is created when the owner of a valuable item, such as a TV, a car, or a piece of jewellery, leaves the item with someone for safekeeping, with no expectation of compensation being made to the friend or other party. Thus, a bailor receives the sole benefit from a bailment when a bailee acts gratuitously. Free valet service would be an example of this because the valet service (bailee) would not be receiving compensation for parking your car.

In the case of the sole benefits of the bailee, a bailment is created when both the parties agree that the property temporarily in the bailee's custody is to be used to his or her own advantage without giving any thing to the bailor in returns. For example, when the owner of an item loans the property to another person, with no expectation of receiving payment or compensation, but expecting that the item will be returned to the owner. The other examples are the loan of a book to a patron [the bailee] from a library [the bailor].
Now when it comes to the bailor's duty, according to section 150 of Indian contract Act of 1872, a bailor has two kinds of duties. They are:
  • Gratuitous bailor
  • Bailor for reward

Gratuitous bailor
A person, who lends his articles or goods without any charge, is called a gratuitous bailor. His duty is naturally much less than that of a bailor for hire or consideration. The duty of a gratuitous bailor is to disclose the known faults. It is the first and foremost duty of the bailor to disclose the known faults about the goods bailed to the bailee. If he does not make such disclosure, then he is responsible for any damage caused to the bailee directly from such faults.

For example, A lends a horse, which he knows to be vicious to B. he does not disclose that the horse is vicious. The horse runs away and B is thrown and injured. A is responsible to B for damages sustained. Therefore, in gratuitous bailment the bailor is responsible only for those faults which are known to him and which are not disclosed.

Another duty of the gratuitous bailor is to indemnify bailee for loss in case of premature termination of gratuitous bailment. A gratuitous bailment can be terminated by the bailor at any time even though the bailment was for a specified time or purpose. But in such a case, the loss accruing to the bailee from such premature termination should not exceed the benefit he has derived out of the bailment. If the loss exceeds the benefits, then the bailor shall have to indemnify the bailee.

For example, P lends an old discarded bicycle to Q gratuitously for three months, Q incurs Rs. 120/- on its repairs. If P asks for the return of bicycle after one month, he will have to compensate Q for expenses incurred by Q in excess of the benefit derived by him.

Bailor for reward
The duty of a bailor for consideration is much greater. He is making profit from his profession and, therefore, it is his duty to see that the goods which he delivers are reasonably safe for the purpose of the bailment. In section 150, clearly says that if the goods are bailed for hire, the bailor is responsible for such damage, whether he was or was not aware of such faults in the goods bailed. He has to examine the goods and remove such defects as reasonable examination would have disclosed.

The Duty Of Bailor For Reward Is Of Various Kinds:
  • To bear extraordinary expenses of bailment:
    The bailee is bound to bear ordinary and reasonable expenses of bailment. But for any extraordinary expenses the bailor is responsible. For example, A lends his horse to B, a friend, for two days. 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 B.
  • To receive back the goods:
    It is the duty of the bailor to receive back the goods when the bailee returns them after the expiry of the term of the bailment or when the purpose for which bailment was created has been accomplished. If the bailor refuses to receive back the goods, the entitled to receive compensation from the bailor for the necessary expenses of custody.
  • To indemnify the bailee:
    Where the title of the bailor to the goods is defective and the bailee suffers as a consequence, the bailor is responsible to the bailee may sustain by reason that the bailor was not entitled to make bailment or to receive back the goods or to give directions respecting them.

What Are The Basic Difference Between The Contract Of Bailment And Contract Of Sale Answer For The 3rd Research Question

  • Bailment means change of possession voluntarily from one person to another. While sale means transfer of absolute interest in property (it may be movable or immovable) from one person to another in lawful consideration of price paid.
  • The object of Bailment is temporary possession of the goods in the hands of the Bailee. While the object of sale is permanent transfer to the purchaser.
  • In Bailment the ownership does not change. The Bailor is the owner of the goods before, during and after the period of Bailment, where as in the contract of sale, the Purchaser becomes owner. The seller does not possess any connection with the property sold.
  • In Bailment, the Bailor pays some nominal charges to the Bailee for the services rendered by him. Sometimes, he is not required to pay any charges. But in the contract of sale, the transferee shall have to pay the full market value of the property to buy property.
  • In the contract of bailment, the Bailee cannot appropriate the property bailed to him, where as in the contract of sales the purchaser can appropriate the property purchased by him.
  • In bailment, on certain occasions, the Bailee can exercise his right of lien over the goods bailed. While in contract of sale, the seller of the property has no such right of lien. However, an unpaid seller of goods can exercise lien or stoppage in transit.

This research paper has taken the opportunity to explore the concept of bailment. It can be analysed that the bailment is a contract in which the transfer of the possession of a thing from one person (who is called a bailor) to the other (called a bailee). The main aim of bailment is the benefit for one of the sides or for both of them. The bailee and the bailor must perform according to the sections laid down under the Indian contract Act, 1872 and the contract of bailment.

Many civil lawsuits arise over the failure of a bailee to protect the property of the bailor. In order to prove that a bailment existed, and therefore that the bailee had a duty to reasonably protect the property, three elements must be proven. These three elements are the essentials of bailment. The three elements are delivery of possession, delivery upon contract and delivery for a purpose and return of goods. Usually, by the agreement of the bailor and the bailee the bailment has been created.

Bailment is different from that of the contract of sales. In bailment there are five kinds of duties of the bailor which comes under the topics of gratuitous bailor and bailor for reward. The three types of bailments are mutual benefits of the parties, sole benefits of the bailor and the sloe benefits of the bailee.

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