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MB0051-Unit-04-Contracts of Bailment and Pledge

MB0051-Unit-04-Contracts of Bailment and Pledge

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Published by: Sensorica Evanescere on Sep 19, 2011
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Unit-04-Contracts of Bailment and Pledge
 Structure:4.1 IntroductionObjectives4.2 Bailment and its KindsDefinition of bailment (Sec.148)Kinds of bailments4.3 Duties and Rights of Bailor and BaileeDuties of a bailorDuties of a baileeRights of a baileeRights of a bailor4.4 Termination of Bailment4.5 Finder of Lost Goods4.6 Pledge or Pawn4.7 Pledge by Non-owners4.8 Rights and Duties of Pledgor and a PledgeeDuties of a pledgeeDuties of a pledgorRights of a pledgor4.9 Summary4.10 Terminal Questions4.11 Answers4.1 IntroductionIn the previous unit, you came to know about the contract of law and guarantee of contract. In this unit you will study about the contract of bailment.
 
At one time or another, you enter into a legal relationships, called bailment and pledge.Bailments are quite common in business also. Traders often store their surplus goods inwarehouses; and utilize the services of cold storages for keeping their goods to be takenback as and when required; and factory owners often send machinery back to vendors forrepairs. Also, goods are pledged for securing loans.ObjectivesAfter studying this unit, you should be able to:· Describe the bailment and its types· Explain the duties and rights of bailor· Define pledge· Explain the pledge by non-owner4.2 Bailment and its Kinds4.2.1 Definition of bailment (Sec.148)Bailment
is defined as the “delivery of goods by one to another person 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 person delivering them”. The person
deliv
ering the goods is called the „bailor‟ and the person to whom the goods are deliveredis called the „bailee‟. The explanation to the above Section points out that delivery of 
possession is not necessary, where one person, already in possession of goods contracts tohold them as bailee.The bailee is under an obligation to re-deliver the goods, in their original or altered form,as soon as the time of use for, or condition on which they were bailed, has elapsed or
been performed”. Let‟s illustrate, (i) A del
ivers some clothes to B, a dry cleaner, for drycleaning. (ii) A delivers a wrist watch to B for repairs. (iii) A lends his book to B forreading. (iv) A delivers a suit-length to a tailor for stitching. (v) A delivers some goldbiscuits to B, a jeweller, for making jewellery. (vi) Delivery of goods to a carrier for thepurpose of carrying them from one place to another. (vii) Delivery of goods as security forthe repayment of loan and interest thereon, i.e., pledge.From the definition of bailment, the following characteristics should be noted:1.
Delivery of goods.
The essence of bailment is delivery of goods by one person toanother for some temporary purpose. Delivery of goods may, however, be actual orconstructive. Actual delivery may be made by handing over goods to the bailee.Constructive delivery may be made by doing something which has the effect of putting thegoods in the possession of the intended bailee or any person authorised to hold them onhis behalf (Sec.149).
Example:
A holding goods on behalf of B, agrees to hold them on behalf of C, there is aconstructive transfer of possession from C to A.2.
Bailment is based on a contract.
 
In bailment, the delivery of goods is upon a contractthat when the purpose is accomplished, they shall be returned to the bailor. For
example
,where a watch is delivered to a watch repairer for repair, it is agreed that it will bereturned, after repair, on the receipt of the agreed or reasonable charges.
 
3.
Return of goods in specie.
 
The goods are delivered for some purpose and it is agreedthat the specific goods shall be returned. Return of specific goods (in specie) is anessential characteristic of bailment. Thus, where an equivalent and not the same is agreedto be returned, there is no bailment.4.
Ownership of goods.
In a bailment, it is only the possession of goods which istransferred and not the ownership thereof, therefore the person delivering the possessionof goods need not be the owner; his business is to transfer possession and not ownership.4.2.2 Kinds of bailmentsBailments may be, classified into six kinds as follows. (i)
Deposit.
Delivery of goods by oneperson to another for the use of the former, i.e., bailor;(ii)
Commodatum.
Goods lent to a friend gratis to be used by him; (iii)
Hire.
Goods lent tothe bailee for hire, i.e., in return for payment of money;(iv)
Pawn or Pledge.
Deposit of goods with another by way of security for moneyborrowed; (v) Delivery of goods for being transported, or something to be done aboutthem, by the bailee for reward. (vi) Delivery of goods as in (v) above, but without reward.Self Assessment Questions1. Delivery of good is essential for effecting bailment. (True/False)2. Placing of ornaments in a bank locker is not a contact of bailment. (True/False)3. All are the kind of bailments. EXCEPT:(a) Commodatum(b) Hire(c) Deposit(d) Loan4.3 Duties and Rights of Bailor and Bailee4.3.1 Duties of a bailor1.
To disclose know faults in the goods (Sec.150).
The bailor is bound to disclose to thebailee faults in the goods bailed, of which the bailor is aware and which materiallyinterfere with the use of them or expose the bailee to extraordinary risks. If he does notmake such disclosure, he is responsible for the damage arising to the bailee directly fromsuch faults.
Example:
A lends a horse, which he knows to be vicious, to B. He does not disclose thefact that the horse is vicious. The horse runs away. B is thrown and injured. A isresponsible to B for damage sustained.2.
Liability for breach of warranty as to title.
 
The bailor is responsible to the bailee forany loss which the bailee may sustain by reason that the bailor was not entitled to makethe bailment, or to receive back the goods or to give directions respecting them (Sec.164).
Example:
A g
ives B‟s car to C without B‟s knowledge and permission. B sues C and
receives compensation. A, the bailor, is responsible to make good this loss to C, thebailee.

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