DEFINITION (SECTION 148)

It is defined as ‘ 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 persons delivering them’. Bailor is the person who delivers goods
and Bailee is a person to whom goods are delivered. This section indicates out that delivery of
ownership is not obligatory, where one person who already have the ownership of the goods and
contracts them to be as bailee.

It could be explained by certain illustrations such as: ‘X’ delivers laptop to ‘Y’; person giving his
laptop for repair, ‘X’ delivers diamond to ‘Y’; person giving diamond for making diamond
jewelry.

Concept of bailment revolve around three concepts-

1. Commoditum- There must be a commodity.

2. Depositum- This commodity must have been deposited/ delivered.

3. Mandatum- This must be returned after fulfillment of specific purpose for which it is given.

CHARACTERISTICS

1. Delivery of possession of goods: The real meaning of bailment is liberation of goods by

one person to another for some short-term purpose. The delivery of goods could be actual
or constructive. Delivery which could be made by handling over goods to the bailee is
said to be actual delivery. Constructive deliveries could be made by doing something
which has the effect of depositing the goods in the ownership of the bailee or giving
authority to any person to hold the goods on his behalf. Bailment is concerned with goods
only.
Such as: ‘A’ is holding goods on behalf of ‘B’, agrees to hold goods on behalf of ‘C’.
This shows a constructive transfer of ownership from ‘C’ to ‘A’.
‘A’ was the owner of a car and now he sells it to ‘B’ so, ‘B’ becomes the owner of
the car. ‘B’ leaves his car in the possession of ‘A’, here ‘A’ now becomes a bailee, earlier
he was the owner.

1
 A famous case is Ultzon v Nicolas in which waiter has took coat of customer without
permission and it was stolen from place where waiter has kept it. Hotel owner held liable
as a bailee for that coat.

2. Bailment is based on a contract: In bailment the delivery of goods are made under a
contract which means when the purpose of the work is completed, then it should be
returned to the bailor. Like: when a person gives his TV to get repaired in a shop, then a
receipt is given to him and it is agreed that when it is repaired it would be returned back
to him. In case of Ram Gulam v Govt of UP, plaintiff ornament, having been stolen
recovered by police, stolen again from police custody. It was held that state is not liable
as there is no contract. But then in case of Lasalgaon Merchants coop. Bank Ltd. v
Prabhudas Hathibai, it was held that state is liable for the goods it has taken in possession
and same is accepted in State of Gujrat v Memon Mahomed Haji Hasan.

Bailment is usually made on contracts, however there are certain exceptions. This could
be illustrated with an example: When a person finds any lost goods, then the finder is
treated as the bailee of the lost article. Though, there was no such contract between the
finder and the real owner. (Section 168)

3. Return of good in specie: The goods are delivered for some purpose and it is agreed that
the particular good would be returned. Return of the precise good (in specie) is a vital
part of the bailment. This means returning the goods in the same condition. Thus, where
an equivalent and not the same are not agreed then there is no bailment.

4. Ownership of goods: In bailment, it is only the possession of goods which is transferred

not the ownership. Hence, the person who is delivering the possession of goods, need not
to be the owner. The purpose is to transfer the possession of goods not the ownership.

2
KINDS OF BAILMENT

Bailment is classified into six categories:

1. Deposit: The delivery of goods from one person to another for the use of the previous i.e.
bailor.
2. Commodatum: Goods lend by a person to his friend, who can use it without paying
anything to that person.
3. Hire: Goods lent to the Bailee for hire, i.e. in return for payment of money.
4. Pawn or Pledge: The goods are deposited to another person, in return of some money
borrowed.
5. The delivery of goods either for transporting them or something is to be done about them,
by the Bailee for some reward.
6. The delivery of goods either for transporting them or something is to be done about them,
by the Bailee without reward.

DUTIES AND RIGHTS OF BAILOR AND BAILEE

1. To disclose know faults in the goods (section 150): The goods which are delivered by the
bailor and if the bailor knows that some fault is there and materially interfered with the
use of it or exposed the bailee with extraordinary risks then, the bailor is bound to
disclose the faults of goods to bailee. If the goods are bailed for hire or reward, the bailor
is responsible for any damage in the goods, whether he was or was not aware of the
existence of such faults in the good at the time bailed. In Hymen & Wife v Nye & Sons
case, plaintiff hired a carriage but it broke during journey by which plaintiff has suffered
injury. It was held that person is liable for insurance.

It could be illustrated by an example: ‘A’ lends his bike to ‘B’ and ‘A’ knew that the bike
brakes were not working properly but he didn’t informed ‘B’. Now, ‘B’ drives bike and

3
 had a small accident near his locality and got hurt, at this moment ‘A’ would be
responsible to ‘B’ for damages sustained.

2. Liability for breach of warranty as to title: if there is any loss in which bailor was not
entitled to make the bailment or to receive back the goods or to give directions respecting
them then, bailor is held responsible for it. (Section 164)

Example: ‘A’ gives ‘B’s car to ‘C’ without taking permission or informing ‘B’ then, ‘B’
can sue ‘C’ for it and could receive compensation from him. ‘A’ who is the bailor is now
responsible to make good this loss to ‘C’, the bailee.

3. To bear expense in case of gratuitous bailment’s: Concerning bailment under which

bailee is to receive no remuneration, under section 158, it states that in the absence of a
contract to the contrary, the bailor is supposed to repay all the necessary expenses
incurred by him for the purpose of the bailment, to the bailee.

4. In case of non-gratuitous bailments, the bailor is held responsible to bear only extra-
ordinary expenses.

Example: ‘A’ lends his car to ‘B’. The ordinary expenses would be like filling up petrol,
which has to be taken care of ‘B’. Now, if the car acquires some problem then the money
spent in its repair will be considered as an extra-ordinary expenditure and is borne by the
bailor.

DUTIES OF A BAILEE

1. To take care of the goods bailed (section 151): In all the cases of bailment, the bailee has
to take care of the goods which were bailed to him, as a man of ordinary cautiousness
would. Under similar circumstances, the goods owned of the same bulk, quantity and
should value as the goods bailed. In case, bailee is taking certain steps to take care of the
goods as expressed above then, he shall not be responsible, in the absence of any special

4
 contract, for the loss, destruction or wear and tear of the thing bailed (section 152). In the
case of Calcutta Credit Corporation Ltd v. Prince Peter of Greece, it was held by Calcutta
high court that the defendant has not taken reasonable care to prevent plaintiffs car from
burning.  

2. Not to make unauthorised use of goods (section 154): If bailee makes some unauthorised
use of goods which could be done by using them in a way which are not justified by the
terms of bailment then, he is legally responsible to make compensation to the bailor for
any damages occurring to the goods from or during such use of them.

Example: ‘A’ gives his laptop to ‘B’ so, that ‘B’ could use it only for some work purpose.
‘B’ allows ‘C’ to use the laptop given by ‘A’; but ‘C’ corrupts the laptop system. Now,
‘A’ is legally responsible to take compensation from ‘B’ for the damages done to the
laptop system.

3. Not to mix bailer’s goods with his own (sections 155-157): If the bailee without the
approval of the bailor, mixes the goods of the bailor with his own goods and separates
and divides the goods then, the bailee has to take the responsibility and bear the expenses
of separation or division and any damages arising from the mixture of goods.

Examples: ‘A’ bails 100 bales of cotton with a particular mark to ‘B’. ‘B’ without taking
permission from ‘A’ he mixes his own bales of cotton with a different mark in those 100
bales of cotton. Now, ‘A’ is entitled to have his 100 bales of cotton back from ‘B’ and
now ‘B’ has to bear all the expenses incurred in the separation of the bales and any other
incidental damages.

However, if the goods are mixed in such a manner than it is not possible to separate the
goods bailed from the other goods and deliver them back, the bailor is entitled to be
compensated by the bailee for the loss of the goods.

5
 Example: ‘A’ bails a 1kg of packet of flour to ‘B’ worth Rs.300. ‘B’ without consent of
‘A’ mixes cheap quality of flour in it which worth only Rs.180. Since ‘A’ is entitled to
have his packet of flour back but it is not possible to separate it so, ‘B’ has to compensate
‘A’ for the loss of flour.

4. To return the goods bailed without demand (section 160): It is a duty of the bailee to
return or deliver the goods bailed according to the bailor’s directions, without demand, as
soon as the time for which they were bailed has expired or the purpose for which they
were bailed has been accomplished. If the bailee fails to deliver the goods at the proper
time, he is responsible to the bailor for any loss, destruction or deterioration of the goods
from that time.

5. To return any accretion to the goods bailed (section 163): In the absence of any contract
to the contrary, the bailee is bound to deliver to the bailor, or according to his directions,
any increase or profit which may have accrued from the goods bailed.

RIGHTS OF A BAILEE

1. A bailee can sue a bailor for certain things which are:

a. Calming reimbursement for the damages resulting from non-disclosure of faults in the
goods.
b. If there is any violating of warranty as to the title and the damages resulting from
there.
c. Any extraordinary expenses.

Therefore, in the case of illegal denial the bailee has a right to use the same solution
which the owner might have used in the case like this.

6
 2. Another right of bailee is the right of lien (sections 170-171): Lien is a right in one person
to retain that which is in his possession, belonging to another, until some debt or claim is
paid, Lien, thus assumes two things:
a. The person who has the right of lien is in possession of the goods or securities in the
ordinary course of business.
b. The owner i.e. bailor have got a lawful debt due or obligation to discharge to the
person in possession of the said goods or securities i.e. baliee.

Lien is available only until the debt or claim is fulfilled, once the debt is fulfilled or
obligations are discharged, the right of lien is put out. There are two types of lien:
a. General lien: It means the right to retain goods not only for due to the rise in demand
out of goods but even for a general balance of account in favour of certain persons.
b. Particular lien: It means the right to retain the particular goods in respect of which the
claim is due.

3. Right against wrongful deprivation of or injury to goods: If a third person wrongfully

deprive the bailee of the use or possession of the goods bailed or causes them injury, the
bailee is entitled to use such remedies as the owner might have used in the like case if no
bailment has been made and either the bailor or the bailee may bring a suit against the
third person for such deprivation or injury. Now, whatever is obtained by the way of
relief or compensation from this is taken care between the bailor and the bailee and is
dealt with according to their respective interest.

RIGHTS OF A BAILOR

1. The bailor could enforce, by suit, all duties or liabilities of the bailee.

2. The bailor could demand his return whenever he pleases, even though he lent it for a
specified time or purpose, in case of gratuitous bailment (i.e. bailment without reward). If
on assurance of such bailment, the borrowers have acted in such a manner that the return

7
 of the thing before the specified time would cause him (i.e. bailee) loss exceeding the
benefit derived by him from the bailment, the bailor must indemnify the borrower for the
loss if he comples an immediate return (section 159).

TERMINATION OF BAILMENT

A contract of bailment terminates or comes to an end under the following circumstances:

1. At the time of the expiry of the stipulated period. Here, the bailment is for a specific
period, it comes to an end once the specified time has expired.

Example: ‘A’ hires a car from ‘B’ for a period of 4 months. Now, when the specified
time of 4 months are over then ‘A’ has to return back the car to ‘B’.

2. On the completion of the specified purpose. In case, bailment is for specific purpose it
terminates as soon as the purpose is accomplished.

3. If the bailee does anything with regard to the goods bailed which is not in agreement with
the conditions of the bailment, the bailor may cease the bailment (section 153).

Example: ‘A’ hires a horse from ‘B’ for his own riding purpose only, but ‘A’ is also
using the horse to pull his carriage then ‘B’ can terminate the contract.

4. A gratuitous bailment could be put to an end at any time (section 159). This is terminated
even when there is death of either the bailor or the bailee. However, if premature
termination causes any loss to the bailee exceeding the benefit derived from the bailment,
then bailor could indemnify.