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Duties of Bailor and Bailee under Contract of Bailment

The Indian Contract Act of 1872[1] was passed in British India. It came into force on 1st September, 1872. It lays down the law relating to contracts in India and is based on the principles of English Common Law.

Bailment is one of the types of special contracts under Indian Contracts Act, 1872. It is dealt under Chapter IX which extends from Article 148 to Article 181. Bailment, is a term originally derived from a French word which means ‘to deliver’. According to Merriam Webster, it means:
The transfer of the possession of goods by the owner (the bailor) to another (the bailee) for a specific purpose.

In other words, we can understand bailment is a relationship formed due to temporary transfer of possession of goods for any specific purpose. The contract of bailment is quite wide in its scope as it covers numerous events like delivering gold to goldsmith for making an ornament, delivering garments for dry-cleaning, delivering phone/ watch or any other article for repairing, etc.

There are two actors in the relationship of bailment:

  • Bailor:
    A person with whom the ownership of the goods generally lies. However, it is not the compulsory for him/her to be the owner. He/ She for a specific purpose temporarily delivers the goods
     
  • Bailee:
    A person who has the temporary possession of the goods of others for a specific purpose.
The contract of bailment also includes the returning of the goods by the bailee to the bailor or disposing the goods according to the directions of the bailor.

The following are the essentials of the contract of bailment:

  • Two parties:
    A valid contract of bailment requires the presence of two parties, i.e. bailor and bailee
     
  • Valid Contract:
    The contract between the bailor and the bailee must be a valid contract. It can be either express or implied. In case the goods are delivered by mistake then it would not amount to a bailment.
     
  • Delivery of the goods:
    There must be delivery of the goods from bailor to bailee. There are two kinds of delivery:
    • Actual Delivery:
      When the goods is delivered physically. For example, giving clothes for laundry.
       
    • Constructive Delivery:
      When there is no physical delivery of goods but an act is done in order to put them in bailee’s possession. For example, if one takes the delivery of goods on behalf of his/her neighbour acting under their directions, it would amount to a constructive delivery.
       
  • Delivery must be for a specific purpose:
    There must be a purpose for the delivery of the goods to the bailee.
     
  • Returning/disposal of the goods:
    The final essential of a bailment contract is the disposal of the goods as per the directions of the bailor, either in original form or changed form according to the directions given by the bailor.
In this research paper, we are going to look at a comparative study of the duties of Bailor and the Bailee in a Contract of Bailment.

Research Questions
  1. With the help of relevant sections of the Indian Contracts Act, 1872 and case laws discuss the duty of bailor to disclose faults and duty of care by bailee.
     
  2. Discuss with the help of relevant illustrations and case laws, the conditions where the bailee acts against the will of the bailor:
    • If the goods are mixed by the bailee?
    • If Bailee makes an unauthorised use of goods?
       
  3. Discuss the duties of Bailor and Bailee with respect to the returning of goods.
     

Research Question 1:
The goods that are transferred under the contract of bailment have certain conditions that need to be fulfilled in order for a successful contract of bailment. These conditions impose duties and grants rights to the parties involved in the process. Let us discuss the duties of the Bailor and Bailee in detail.

Duty of bailor to disclose faults. (Bailor’s duty)
As per Section 15o of Indian Contracts Act of 1872, talks about the Bailor’s duty to disclose faults in goods bailed.[2] the Bailor is bound to disclose all the faults in the goods given under bailment to the Bailee. Such faults are necessary to come under the notice of bailee and failure to which might lead to interference in the material usage of the goods or could expose it to extraordinary risks. In case the bailor fails to disclose the facts, he would be directly liable to the bailee for the losses incurred by him.

In order to understand the duty of bailor with respect to disclose the faults in the goods being delivered, we need to first understand that there are two types of bailors according to Section 15o of Indian Contracts Act, 1872.

The two types are:
  • Gratuitous:
    The bailor is expected to disclose the faults in his knowledge. There is benefit of only one party.
     
  • Non- Gratuitous:
    A non-gratuitous bailer has a greater responsibility. He/she would be liable regardless of his knowledge about the fault. There is occurrence of mutual benefit.

For example, B asks A to take his car for a day to pickup his friend. This is exclusive benefit for B. Here, A would be a gratuitous bailor. However, A did not inform B that the breaks had been faulty for past few days. In this case, A would be liable for the damage incurred as faulty break would expose the bailee to extraordinary circumstances. (Illustration 1)

In the same illustration, if there was a fault in the lock of the backseat, then A would not be liable as the fault in lock would not expose the bailee to extraordinary circumstances. (Illustration 2)

If the goods have been hired, then the knowledge of the fault would not matter as it is the duty of the bailor in this case to check the goods before giving it under bailment. For example, in the illustration 1, the car was not borrowed by but was taken under the rental basis from X (defendant). The faulty brakes of the car led to an accident. Here, X would be a non-gratuitous bailor. In this case, the defendant can be held liable regardless of his knowledge about the fault in the break. (Illustration 3)

Case law on the liability of Gratuitous bailor:
In Reed v. Dean[3], a motor launch was hired by the plaintiff for the holidays on the river Thames. Unfortunately, the launch caught fire and as the fire-fighting equipment was out of order, the fire could not be put down. Consequently, the plaintiffs were injured and suffered loss. It was held that there was an implied undertaking that the launch was as safe for the purpose it was hired, if used with the reasonable care and skill. The defendant was accordingly held liable.

Case law on the liability of Non-Gratuitous bailor:
In the case of Hyman and wife v. Nye and Sons[4], the plaintiff had hired a carriage (including a pair of horses and a driver) from the defendant for a specific journey. However, during the journey, a bolt in the underpart of the carriage broke which resulted in the plaintiff being injured. The court held that the defendant would be liable as it was his duty to supply a carriage as fit for the purpose for which it is hired as care and skill can render it.[5]

Where the bailment is gratuitous, the bailor must compensate the bailee for any expenditure done in keeping the goods.

Duty of Reasonable Care to be followed by bailee. (Bailee’s Duty)
As per Section 151 of Indian Contracts Act,1872, the bailee is entitled to take care of the goods like a reasonable man in the same way he would have taken care if the ownership of the goods was with him. If the bailee takes the amount of care as mentioned in Section 151 and there is absence of any special contract for care, then the bailor would not be liable for the losses incurred thereby.

In Maritn v London Country Council[6], the plaintiff was taken to hospital, where the officials took charge of her jewellery and a case of cigarette made of gold, which was kept in a room. Unfortunately, it was later stolen by a thief who broke in the same room. The court held that the defendant was liable and was liable to pay damages as they did not take proper care of the goods as a reasonable man would have.

In a similar case of Blount vs war office[7] , a house was demanded by the War office which belonged to the plaintiff. He was, however, allowed to keep certain articles in a room of the house which he had locked. The court held that the War office did not take of the goods as an owner would have and hence the War office was held liable to pay for the loss incurred.[8]

Research Question 2:
Unauthorised use of goods. (Bailee’s Duty)
Section 153 of Indian Contract Act states that if the bailee uses the goods against the conditions of the bailment, the contract of bailment would become voidable at the option of the bailor.

Further, the bailee would be liable to pay for the losses incurred as per Section 154. In such cases, bailee would be denied of the defenses including ‘vis major[9]’ and inevitable accidents.

A landmark case under the unauthorised use of goods would be Alias v. E.M. Patil[1o]. In this case, the plaintiff delivered his car to the owner of the shop (defendant) for some repair work. However, the owner allowed an unauthorised worker to ride the car and as a result an accident occurred causing the death of a person. The bailee or the defendant was held liable for the unauthorised use of the car. Additionally, he was liable to pay for the loss incurred due to his negligence.

Duty not to mix bailor’s goods. (Bailee’s Duty)
The sections 155, 156 and 157 deals with the mixing of goods. It is the duty of the bailee to keep the goods separate and not mix it with your own or other. The mixing of the goods can be done either the consent of the Bailor or without their consent.
Mixing
|
|------------------------------------------------------------------------------|
With consent (Section 155) Without Consent
|------------------------------------------------------| .
Separable (Section 156) Non separable (Section 157)

Section 155[11] talks about the situation where the Bailee mixes the goods with the consent of Bailor. They will have an interest that would be proportional to their shares in the mixed goods.

For example, Bailor and Bailee are business partners for the business of sugarcanes. Bailor sends the goods under the contract of bailment to bailee and bailee in turn mixes the sugarcane and sells them. Bailee and Bailor would be entitled to get the profit proportional to their share of sugarcanes. (Illustration 4)

Section 156[12] mentions the case where bailee mixes the goods without the consent of the bailor. However, if the goods can be separated or be divided then the bailee would be entitled to pay for the expenses the incurred in the division of the goods as per the nature of the goods.

For example, if X bails 5o sacks of wheat to Y. Y, without the consent of X, mixes the 5o sacks with other sacks of rice of his own. X will be entitled to have his sacks returned, and Y would be bound to bear all the expense incurred in the separation of the sacks, and any other incidental damage. (Illustration 5)

Section 157[13] discusses the case where bailee mixes the goods without the consent of bailor and the goods are non-separable. In this case, the bailee shall be liable to compensated the bailor for the loss incurred.

For example, X bails a barrel of flour worth Rs. 5o per barrel to Y. Y, without the consent of X, mixes the flour with the flour of his own, worth Rs. 3o per barrel. Y shall be held liable to compensate X for the loss of his flour. (Illustration 6)

Research Question 3.
For a successful contract of bailment, the final essential is the returning/disposing of the goods as per the directions of the bailor. Let us look at the duties of Bailor and the Bailee in this respect.

Bailor’s right to demand the goods.
Section 163 states that the bailor, in the case of gratuitous bailment, has the right to demand the goods back from the bailee before the expiration period. However, if the bailee incurs any loss in the process, bailor shall be liable to pay.

Bailee’s Duty to return the goods.
According to Section 16o, it is the duty of the Bailee to return the goods upon the expiry of the term of the Bailment or when the purpose of the Bailment has been accomplished.
In case, the goods have not been duly returned upon at a proper time, the bailee would be responsible for any loss, destruction or deterioration of the good from that time onwards. This is stated under Section 161 of Indian Contracts Act, 1872.

Bailor’s Duty to receive back the goods.
Following section 164 of the Indian Contract Act, 1872, the Bailor must 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 formulated has been achieved.

If such a situation arises wherein the Bailor refuses to take back the goods, the bailee is empowered to collect reimbursement from the Bailor for the required charges of custody

Conclusion
We can understand that Bailment is a legal relationship in which there is transfer of possession of goods from one party (Bailor) to another (Bailee) for a certain period of time with a specific purpose upon a contract (either express or implied). The two parties in the entire process are conferred with certain duties, rights and liabilities as per the Indian Contracts Act, 1872.

The bailor has to reveal the deficiency of the goods and has to reimburse the expense incurred by a bailee for the safekeeping of goods and any losses against the damage incurred to the bailee by the goods of the bailor. Likewise, the bailee must keep the goods of the bailor secure must return them to the bailor after fulfilment of the objective for which the bailment ensued.
From this research project, we can understand that the duties of the bailor are the right of the bailee and the duties of the bailee are the rights of the bailor. The contract of bailment can be successful only if the terms are adhered by both the parties.

End-Notes:
  1. Act No. 9 of 1872
  2. Section 148, Indian Contracts Act, 1872 (India).
  3. Reed v. Dean, (1949) 1 KB 188
  4. Hyman and wife v. Nye and Sons, (1881) LR 6 QBD 685
  5. Remarks by LINDLEY J.
  6. Maritn v London Country Council, 1947 KB 628
  7. Blount vs war office, 1953 1 WLR 736
  8. Similar case referring to this section is Houghland v R.R Low (Luxury Coaches) Ltd 1962 1 QB 694 (CA)
  9. Vis major is a Latin maxim which means Act of God.
  10. Alias v. E.M. Patil, AIR 2oo4 Ker 214
  11. Section 155, Indian Contracts Act, 1872 (India).
  12. Section 156, Indian Contracts Act, 1872 (India).
  13. Section 157, Indian Contracts Act, 1872 (India).

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