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Contract of Bailment

Bailment: Meaning

The word Bailment has got its origin from a French word baillier which means - to deliver. According to section 14, a delivery of goods,with a condition to return,when the purpose is over or otherwise disposed off according to the direction of the person delivering them,by one person to another is called a Bailment.

The person who delivers the goods is called the bailor.The person who receives the goods from the bailor is called the bailee.

Example:
  1. Mr. Shaurya hires a bike for travelling to Delhi.
  2. Mr. Bhavesh delivers his mobile for repairing.
  3. Mr. Aviral gives his suit to a shop for drycleaning.

Elements of a bailment

  1. There must exist an expressed or implied agreement between the bailee and bailor
  2. It is necessary that the goods should be delivered to the bailee in case of bailment. Furthermore, the possession of the goods must be voluntarily transferred and shall be in accordance with the contract. Delivery may be of two types - Actual delivery and constructive delivery.
    Example:
    1. A car delivered for repair to a workshop dealer is an actual delivery.
    2. The key of a car delivered to a workshop dealer for repair of the car is a constructive delivery.
  3. In a bailment the ownership remains with the bailor and is not transferred to the bailee or anyone as because if the ownership is transferred then it is not a bailment contract. It becomes a contract of sale.
  4. Bailment is only for movable goods and not for immovable goods.
  5. There should be a purpose for the delivery of goods like safe custody,use and transportation of the goods, repair etc.
  6. If the bailed goods are changed like a raw material is converted into a product still the contract remains the same as a bailment.
  7. The goods shall be returned to the bailor or disposed off according to his direction
Example: The amount deposited by a person in various bank accounts like saving, current account etc. isn't treated as bailment because the bank is not bound to return the same deposited coins or currency notes.This has been stated in the various decisions given by the judges in different cases from time to time. But it will be treated as bailment if a person keeps of his valuable items in the locker of the bank for safe custody.

Kinds Of Bailment

On the basis of reward

Gratuitous bailment:

The bailment of products without any charges or reward is Gratuitous bailment.In this type,There is no requirement to pay any charges by the bailee for the bailment.

Non gratuitous bailment:

The bailment for some reward or charges is Non gratuitous bailment.It is required to pay some charges to the bailor by the bailee.

On the basis of benefit
  • Bailment Contract made for the exclusive benefits of the bailor
  • Bailment made for the exclusive benefits of the bailee
  • Bailment made for mutual benefits of both bailor and bailee

Duties of Bailor

  1. Duty to disclose all known defects-( sec 150):
    It is the duty of the bailor to disclose any known defects occurred in the goods.In case if there is failure of disclosing the defects and there occurs some loss from the end of bailee,the compensation will be beared by the bailor.
     
  2. Duty to bear necessary and extraordinary expenses (Sec 158):
    In case of gratuitous baiment,the bailee must be repaid with all the expenses which he has incurred already for bailment,by the bailor.
     
  3. Duty to indemnify loss for premature termination of bailment-Sec(159):
    The bailor would be liable to indemnify the bailee for any loss incurred which the bailee has paid to the original owner,if the title to deliever the goods does not falls within the bailor's reach.
     
  4. Duty to indemnify the bailee against the defective title of the bailor (Sec164):
    if any loss is occurred to the bailee by reason that the bailor was not entitled to make the bailment, or to receive back the goods.In that case,bailor will be responsible for the losses.
     
  5. Duty to bear a loss (Sec162):
    If the bailee has taken all the necessary and reasonable care to protect the bailed goods from occurance of any possible damage or loss and still any loss or damage is occurred then it is the duty of bailor to bear the damages or loss of the things bailed.

Rights of Bailor

  1. Right to claim damages in cases of negligence from the bailee [section 152]:
    It is the right of the bailor to be compensated for the damages of the goods which are bailed if the bailee has failed to take all the necessary due care to abstain that damage or losss according to the direction.
     
  2. Right of termination of the contract in case of unauthorized use of goods [sec 153]:
    If there is an unauthorized use of goods by the bailee,the bailment contract can be terminated before its completion.
     
  3. Right of compensation in case of the unauthorized use of goods [ICA sec 154]:
    If the use of goods is not done by the bailee as per the terms and conditions of the bailment contract, the bailor has a right to claim compensation from bailee for any damages arising to the said goods.
     
  4. Right to claim compensation in case of the unauthorized mixture of the goods which cannot be separated" [section 157]:
    If the bailee without the consent of the bailor mixes goods of the bailor with his own goods and they cannot be separated, the bailor has right to claim compensation from bailee for loss of the goods.
     
  5. Right to claim separation of the goods in case of unauthorized mixture of goods[section 156]:
    If bailee, without consent of the bailor mixes with his own goods the goods of the bailor and goods can be separated, the bailor has right to claim his own goods after separation.
     
  6. Right to demand return of goods [section160]:
    The bailor has a right to demand return of goods after the completion of purpose or after expiry of the period of bailment.
     
  7. Right to claim compensation in case of unauthorized retention of goods (section 161):
    If the bailee does not either return or deliver the goods according to bailor's directions, even after accomplishment of the purpose or after expiry of period of bailment, the bailor has a right to claim compensation for any loss, destruction and deterioration of goods from that time.
     
  8. Duty to deliver any accretion to goods:
    It is the duty of the bailee to deliver the respective goods to the bailor and any natural increase or profit accruing from goods bailed, unless there exists a contract to the contrary.

Duties of Bailee

  1. Duty to take due care of the respective goods delivered to him:
    [ICA Sec 151] In all cases of bailment,It is necessary for the bailee to take the maximum amount of care to the goods delivered to him.
     
  2. Duty to not make unauthorized use of the respective goods entrusted to him:
    In ICA Sec 154, the bailee must use the respective goods strictly under the terms of the bailment. If he makes unauthorized use of the respective goods, he's at risk of being liable to compensate the make for any damage arising to the respective goods from or during such use of them. This liability is absolute.
     
  3. Duty to not combine mix bailed along with his own the respective :[ICA sec 155 to 157] goods:
    duty of bailee that he shouldn't mix his own goods with those of the it's also the bailor, without bailor's consent. If the respective goods area unit mixed with the consent of the bailor, there's no breach of duty and therefore the bailor and the bailee shall have an interest, in proportion to their respective shares, within the mixture thus produced.
     
  4. Duty to return the goods: [ICA Sec 160] lays down this duty within the following terms:
    It is that the duty of the bailee to come, or deliver, according to the bailor's directions the respective goods bailed, without demand, as soon because the time for which they were bailed has expired, or the aim that they were bailed has been accomplished.
     
  5. Duty to deliver any accretion to goods:
    It is the duty of the bailee to deliver the respective goods to the bailor and any natural increase or profit accruing from goods bailed, unless there exists a contract to the contrary
     

Rights of a bailee

  1. Right to claim the damages [ICA sec 150]
  2. Right to claim reimbursement of expenses if any [ICA sec 158]
  3. Right to get indemnified if termination of gratuitous bailment takes place [ICA sec 159]
  4. Right to give bailed goods to any of the bailors in case of joint bailment [ICA sec 165]
  5. Right to recover damages for the losses in case bailor refuses to take the goods back [ICA sec 164]
  6. Right to deliver the goods to the bailor in case of the title of bailor is defective [ICA sec 166]
  7. Right to recover damages for the loss in case title of bailor is defective[ICA sec 164]

Termination of bailment

  1. After the fulfillment of the purpose
  2. When use of goods become inconsistent
  3. When the subject matter of bailment gets destroyed
  4. Death of any party occurs
  5. When bailor terminates the bailment contract

Some Relevant Cases
  • Kavita Trehan V. Balsara Hygiene Product Ltd. ( AIR 1992 Delhi 103):
    In this case it was decided that one of the very requirement of bailment is the delivery of goods to the bailee, where there is no change of possession there is no bailment.
     
  • Jagdish Chandra Trikha V. Punjab National Bank (AIR 1998 Delhi 266):
    This case is related to parcel which was carrying some gold jewellery. The jewellery was well scaled and packed. When the parcel reached the destination some part of the jewellery was missing. In this the court held that the position of bank is of bailee.
     
  • Annamalai Timber Trust Ltd. V. Thrippunithura Dewas (1954):
    The court held that where there is no obligation to return identical subject matter is an altered manner there is no bailment

  • Haatmal Bhutaria V. Dominion of India (AIR 1961 Kolkata 54):
    In this case it was decided that sec. 148 makes it clear that a seller can become a bailee if he contracts to hold the goods as bailee in the absence of such contract he cannot be awarded as bailee.

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