Introduction

Bailment is another type of special contract. Since it is a ‘contract’, naturally all basic
requirements of contract are applicable. - - Bailment means act of delivering goods for a
specified purpose on trust. The goods are to be returned after the purpose is over. The
term bailment is derived from the French bailor, "to deliver." It is generally considered to be a
contractual relationship since the bailor and bailee, either expressly or impliedly, bind
themselves to act according to particular terms. The bailee receives only control or possession of
the property while the bailor retains the ownership interests in it. During the specific period a
bailment exists, the bailee's interest in the property is superior to that of all others, including the
bailor, unless the bailee violates some term of the agreement. Once the purpose for which the
property has been delivered has been accomplished, the property will be returned to the bailor or
otherwise disposed of pursuant to the bailor's directions.

A bailment is not the same as a sale, which is an intentional transfer of ownership of personal
property in exchange for something of value. A bailment involves only a transfer of possession
or custody, not of ownership. A rental or lease of personal property might be a bailment,
depending upon the agreement of the parties. A bailment is created when a parking garage
attendant, the bailee, is given the keys to a motor vehicle by its owner, the bailor. The owner, in
addition to renting the space, has transferred possession and control of the vehicle by
relinquishing its keys to the attendant. If the keys were not made available and the vehicle was
locked, the arrangement would be strictly a rental or lease, since there was no transfer of
possession.

In bailment, possession of goods is transferred, but property i.e. ownership is not transferred.  A
“bailment” is the delivery of goods by one person to another 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 the person delivering them. The person delivering the goods is
called the “bailor”. The person to whom they are delivered is called the “bailee”. -
- Explanation : If a person already in possession of the goods of another, contracts to hold them
as a bailee, he thereby becomes the bailee, and owner becomes the bailor, of such goods,
although they may not have been delivered by way of bailment. [section 148].
Bailment can be only of ‘goods’.  As per section 2(7) of Sale of Goods Act, ‘goods’ means every
kind of movable property other than money and actionable claim. - - Thus, keeping money in
bank account is not ‘bailment’. Asking a person to look after your house or farm during your
absence is not ‘bailment’, as house or farm is not a movable property.

Rights of bailee

 Delivery of goods to one of several joint bailors of goods.

 Delivery of goods to bailor without title.
 Right to apply to court to stop delivery.
 Right of action against trespassers.
 Bailee’s lien.

Essentials of contract of bailment

1. The existence of a valid contract:- The existence of a valid contract is a foremost

condition in bailment which implies that goods are to be returned when the purpose is
fulfilled. Finder of lost goods is also known as bailee although there may not be any
existing contract between him and the actual owner.

2. Temporary delivery of goods:- The whole concept of bailment revolves around the fact
that the goods are delivered for a temporary period and bailee cannot have permanent
possession. Delivery of goods can be done through actual delivery or through
constructive delivery which means that doing something which has the effect of putting
the goods in possession of bailee or any other person authorized by him.

3. Return of specific goods:- The bailee is bound to return the goods to bailor after the
purpose for which it was taken is over. If the person is not returning the goods then it will
not be bailment.

Duties and liabilities of bailor

 1. The bailor is bound to disclose to the bailee, the faults in the goods bailed. which he
knows and if he does not make such disclosures, he is directly responsible for damage
arising to the bailee directly from such faults.

   Illustrations:- A delivers a car to B knowing that the brakes of the car very less. Now if any
accident happens A will be liable for the same.

2. Bailor is also responsible to the bailee for any loss which the bailee may sustain by
reason of the fact that bailor was not entitled to make EXPLAIN                          

 To make the bailment

 To receive the goods

 To give directions respecting them Section 164

3. Duty to indemnify the bailee:- The bailor is duty bound to make good the loss

suffered by the bailee where he was compelled to return the goods before the expiry of the period
of bailment

4.Duty to claim back the goods:- The bailor is bound to accept the goods upon
being returned by the bailee in accordance with the terms of the agreement. If he refuses
to accept it at a proper time, without any reasonable ground then he will be liable for any loss
which may happen to the goods.

Rights of Bailee
  Bailee not responsible on redelivery to bailor without title.
If the bailor has no title to the goods, and the bailee, in good faith, delivers them back to,
or according to the direction of, the bailor, the bailee is not responsible to the owner in
repect of such delivery.
Once the bailee in good faith, delivers the bailed goods to the bailor, or according to his
direction, and its transpires that a bailor had no title to the goods, the bailee is not
responsible to the owner in respect of delivery.
A bailee who in good faith returns the goods bailed to the bailor or his order is not liable
to the true owners of the goods.
N entrusted certain bales of cotton to L, a muccadam(warehouseman). L pledge the
cotton with B (with whom he had dealing for several years) to secure advance made by
B to L. Subsequently, L redeemed the pledge, and the cotton was returned by B or to the
order of L, N sued B and L calming delivery of goods or their value. The Privy council
held that irrespective of whether the pledge by L to B was valid under section 178, the
return of the goods by B in good faith to L was complete defense to the suit.1
In Good Faith
When a bailee delivered goods bailed to him to the original bailor when he had notice of
the sale by the original bailor to another person, and also the knowledge that he was
going to sell it to a third party, the bailee is not liable for conversion.2
The railway was not absolved when it delivered goods to a person in the absence of the
railway receipt.3

 Right of a Bailee Against the Wrong-Doer

The bailee’s rights against strangers are naturally not specified in Contract Act, as they
do not differ from the rights of any other lawful possessor, and arise not from the contract
of bailment, but from the fact of possession. His rights are the general right of a lawful
1
Bank of Bombay v. Nandlal Thackerseydass 1912
2
K.J. Patel v. T.K.V.R.V. chetyyar, AIR 1940 Rang 249
3
Chinnari Gopalam v. Union of India, AIR 1959 AP 331
 possessor against a wrong-doer, and his rights to recover full damage from a stranger
who caused loss or damage to the goods does not depend upon the liability of bailee to
the bailor for such loss or damage.
If a third person wrongfully deprives the use or possession of the goods, or injures them,
the bailee is entitled to such remedies as the owner might have used in the like if no
bailment had been made.
The Bailee is entitled to maintain an action against a third party who does not claim
against the bailor. As a bailee, he is not agent of the bailor, and can sue and claim the full
damages for loss due to the alleged negligence of third party defendant, without prejudice
to the rights of the bailor to adjust with the bailee the amount of damages when
recovered4.
The Bailee may sue a stranger who tortuously interferes with his rights to the goods, and
may seek an order for specific delivery of the goods.
The Bailee may also claim specific delivery of the goods. Thus, where A leaves an
elephant in charge of B, C wrongfully takes away the elephant from B, B may sue C for
possession of the elephant.5
The railway as Bailee od good s is entitled to recover them from a person, who takes
them from its possession forcibly or fraudulently, and is also entitled to recover the goods
from the pledgee if such person has made a pledge of the goods6.
If a Bailee, who is in possession of goods and is responsible for delivery of the goods at
his own risk, entrusts the carriage of the goods to a carrier, it may be inferred that the
bailee has employed the carrier on his own account, the Bailee can sue the carrier on the
contract of employment, or for conversion.7

 Right to necessary expenses (Section 158)

 Right to necessary expenses

The bailee is entitled to lawful charges for providing his service. As per Section 158 says

4
Pauline D’Souza v. Cassamalli jairajbhoy, AIR 1933 BOM 465
5
Ramnath Gagoi v. Pitamber Deb Goswami, (1918) 43 Cal 733
6
Purshottam Das Banarsi Das v. Union of India (1967)1 All 398, AIR 1967All 549
7
Sukul Bros v. H.K. Kavarana.(1958) Cal 376, AIR 1958 Cal 730
 that where by conditions of the bailment, the goods are to be kept or to be carried or to
have work done upon them by the bailee for the bailor and the bailee is to receive no
remuneration, the bailor shall repay to the bailee the necessary expenses incurred by him
for the purpose of bailment. Thus, a bailee is entitled to recover the charges as agreed
upon, or if there is no such agreement, the bailee is entitled to all lawful expenses
according to this section.

In Surya Investment Co vs STC8, STC hired a storage tank from the plaintiff. On
account of a dispute, STC appointed a special officer to take charge of the tank, who
delivered the contents as per directions of STC. Thus, the plaintiff lost his possession and
with it, his right of lien. SC held that the plaintiff is entitled to the charges even if he
loses his right of lien because the bailor has enjoyed bailee's services.
 Bailor’s responsibility to Bailee.
The bailor is responsible to the bailee for any loss which the bailee may situation by
reason that the bailor was not entitled to make the bailment, or to receive back the goods,
or to give direction, respecting them.
If the bailee suffers a loss because the bailor was not entitled to make the bailment or to
receive the goods, or give direction relating to the goods, the bailor is liable to make it
good to the bailee.

 Bailee lien
Lien is from the French, originally meaning “line,” “string,” or “tie.” In law a lien is the
hold that someone has over the property of another. It is akin, in effect, to a security
interest. A common type is the mechanic’s lien (“mechanic” here means one who works
with his hands). For example, a carpenter builds a room on your house and you fail to pay
him; he can secure a lien on your house, meaning that he has a property interest in the
house and can start foreclosure proceedings if you still fail to pay. Similarly, a bailee is
said to have a lien on the bailed property in his possession and need not redeliver it to the
bailor until he has been paid. Try to take your car out of a parking lot without paying and
see what happens. The attendant’s refusal to give you the car is entirely lawful under a

8
AIR 1987 Cal 46.
 common-law rule now more than a century and a half old. As the rule is usually stated,
the common law confers the lien on the bailee if he has added value to the property
through his labor, skill, or materials. But that statement of the rule is somewhat deceptive,
since the person who has simply housed the goods is entitled to a lien, as is a person who
has altered or repaired the goods without measurably adding value to them. Perhaps a
better way of stating the rule is this: a lien is created when the bailee performs some
special benefit to the goods (e.g., preserving them or repairing them).

Many states have enacted statutes governing various types of liens. In many instances,
these have broadened the bailee’s common-law rights. This book discusses two types of
liens in great detail: the liens of warehousemen and those of common carriers. Recall that
a lease creates a type of bailment: the lessor is the bailor and the lessee is the bailee. This
book references the UCC’s take on leasing in its discussion of the sale of goods. Uniform
Commercial Code, Section 2A.
The extent of bailee’s lien is in respect of services involving the exercise of labour or
skill rendered by him in respect of the goods bailed. The service rendered for the purpose
of lien must be limited to the labour or skill expended by the bailor over the goods bailed,
the lien has nothing to do with any other kind of service.
Such labour and skill must have been spent,
1. In accordance with the purpose of the bailment.
2. To improve the goods baled.
3. The lien applies only to such goods over which the bailee has bestowed his
labour and expenses, and not to other goods9.

In general, Lien means the right to keep the possession of the property of a person until that
person clear the debts. In case of bailment, the bailee has the right to keep the possession of the
property of the bailor until the bailor pays lawful charges to the bailee. Thus, right of Lien is
probably the most important of rights of a bailee because it gives the bailee the power to get paid
for his services. Lien is of two kinds -  Particular and General. 

9
Kalloomal Tapeshwari Prasad &co. v. Rashtriya Chemicals & fertilizers ltd., AIR 1990 All 214.
Particular Lien

This means that the lien holder has a right to keep possession of only that particular property for
which the charges are owed. For example, A gives a horse and a bicycle to B. A agrees to pay B
charges for training the horse and no charges for keeping the bicycle. Now, if A fails to pay
charges for the horse, B is entitled to keep possession only of the horse and not of the bicycle. He
must return the bicycle. 

Section 170 gives this right to the bailee. It says that where the bailee has, in accordance with the
purpose of the bailment, rendered any service involving the exercise of labor or skill in respect of
the goods bailed, he has, in absense of a contract to the contrary, a right to retain such goods until
he receives due remuneration for the services he has rendered in respect of them.

Illustrations - A delivers a rough diamond to B to be cut and polished, which is accordingly

done. B is entitled to keep the diamond until charges for his services are paid.
A gives cloth to B, a tailor, to make into a cloth. B promises to deliver the coat as soon as it is
done and also to give 3 months credit for the price. B is not entitled to keep the coat until he is
paid.
 
Conditions for Particular Lien – 

(i) The bailee must have rendered some service in relation to the thing bailed and
must be entitled to some remuneration for it, which must not have been paid.

(ii) The service rendered by the bailee must be one involving the exercise of labor
or skill in respect of the goods bailed, so as to confer an additional value on the
article. ILLUSTRATION A, delivers a rough diamond to B, a jeweler, to be cut
and polished which is accordingly done. B is entitled to retain the stone till he
is paid for the services he has rendered. (Jeweler's labor and skill must have
enhanced the value of the stone).

(iii) The services must have been performed in full in accordance with the
directions of the bailor, within the agreed time or a reasonable time.
ILLUSTRATION. A gives his watch to B for repair. B promises A to deliver
 the watch on the third day. But B takes one week to repair it. B is not entitled to
retain the watch until he is paid.

(iv) There must not be an agreement to perform the service on credit.

ILLUSTRATION A gives cloth to B, a tailor, to make into a coat. B promises
A to deliver the coat as soon as it is finished, and to give a three months credit
for the price. B is not entitled to retain the coat until he is paid.

(v) The goods must be in possession of the bailee. If possession is lost, the lien is
also lost.

(vi) There must not be a contract to the contrary. If all the above mentioned
conditions are satisfied, the bailee can exercise his right of particular lien until
he is paid for his services.

The following points must also be noted in connection with the bailee s particular lien:

(a) The bailee retaining the article to enforce his lien cannot charge for
keeping it.

(b) The bailee cannot exercise his lien for the non-payment of
extraordinary expenses incurred in relation to the thing bailed. He
should sue for them.

Besides the bailee, other persons who are entitled to exercise the right of particular lien are:
finder of goods (Sec. 168), pawnee (Secs. 173-174), agent (Sec. 221), and unpaid seller (Sec. 47
of the Sale of Goods Act).

General Lien – 

As opposed to Particular Lien, General Lien gives a right to the bailee to keep the possession of
any goods for any amount due in respect of any goods. Section 171 says that, bankers, factors,
wharfingers, attorneys of a High Court, and policy brokers may, in the absence of a contract to
the contrary, retain as a security for a general balance of account, any goods bailed to them; but
no other persons have a right to retain, as a security for such balance, goods bailed to them,
unless there is an express contract to that effect.
Thus, this right is only available to bankers, factors, wharfingers, attorneys of high court, and
policy brokers. However, this right can be given to the bailee by making an express contract
between the bailor and the bailee.

(i) Bankers.

A banker has a general lien on all goods, cash, cheques and securities deposited with him as
banker by a customer, for any money due to him as a banker. ± Thus, where a customer has a
credit balance in one account of the bank and at the same time he owes money to the bank on
another account, the banker s general lien entitles him to refuse the customer to operate the
account in which he has a credit balance till he clears the debt due to the bank (Davendra Kumar
vs Chaudhary Gulab Singh). But where valuables and securities are deposited for a specific
purpose, e.g., for safe custody, the banker has no general lien on them as the acceptance of the
goods for a special purpose impliedly excludes general lien (Cuthbert vs Robarts).

(ii) Factors.- A factors is an agent entrusted with the possession of goods in the ordinary course
of his business for the purpose of sale. He has a general lien on the goods of his principal, if any
money is due to him by his principal whether for advances made or for remuneration.

(iii) Wharfingers- A wharfinger has a general lien on the goods as regards charges due for the
use of wharf against the owner of the goods.

(iv) Attorneys of High Court- An attorney or solicitor of a High Court has a general lien on all
papers and documents belonging to his client which are in his possession in his professional
capacity until the fee for his professional service and other cost incurred by him are paid. But if
the solicitor refuses to act any more for the client, he is not entitled to any lien.

(v) Policy brokers -They can retain the policy of fire or marine insurance for their brokerage.

(vi)Any other person, if there is an express contract to that effect.

Right to sue

Section 180 enables a bailee to sue any person who has wrongfully deprived him of the use or
possession of the goods bailed or has done them any injury. The bailee's rights and remedies
against the wrong doer are same as those of the owner. An action may be brought either by the
bailor or the bailee.

Thus, in Umarani Sen vs Sudhir Kumar, a firm which had consigned the goods, of which it
was a bailee, with a carrier, was allowed to sue the carrier for loss of the goods.

Bailee’s Liabilities

Care to be taken by the bailee –(Section 151 and 152)

The bailee is bound to take as much care of goods bailed to him as a man of ordinary prudence
would have under similar circumstances and therefore he will not be liable for any loss,
destruction or deterioration of the thing bailed if he has taken care. In the case of Calcutta Credit
Corporation Ltd v. Prince Peter of Greece10, it was held by Calcutta high court that the defendant
has not taken reasonable care to prevent plaintiffs car from burning.  

The duty of the bailee to return the bailed goods (Section 160 and 161)

Bailee is under the duty to return or deliver goods according to the bailor’s direction as soon as
the time for which goods were bailed has expired.

Bailee’s duty to deliver increase profit from the bailed goods to the bailor

In the absence of any agreement, bailee is bound to deliver to the bailor any increase in profit or
any benefit which may have accrued from the goods bailed (Section 161). In the case of Standard
Chartered Bank v. Custodian11, it was held by Supreme court that if Shares and debentures are
pledged, bonus shares and dividend are also regarded as Part of it.

10
AIR 1964 Cal 374, 68 CWN 554
11
Appeal (civil) 762 of 1999