(The ownership of goods is in one person and the possession in another)

Contract of Bailment Ankita Raj

En.No. CUSB1913125029
B.A.LLB. 3RD SEMESTER
Section- A

ABSTRACT:

The word “bailment” is derived from a French word meaning “to deliver”. In law, a
bailment occurs where one person voluntarily delivers chattels to another person on trust that
they will be returned in their original or altered form, and without any transfer of ownership
of the chattels occurring. In other words, it is where one person gives property to another
person, expecting to get it back. The test is if the transaction has the elements like the delivery
of the exclusive right of possession by the bailor, voluntarily accepted by the bailee, with an
assumption of the responsibility by the bailee to keep the goods safe and the obligation to
return the thing bailed. In the bailment, the person delivering the the property is known as
“the bailor” and the recipient of the property is known as “the bailee”. Under certain
circumstances there is a possibility of the existence of the sub-bailment, where the bailee the
bails the goods to another person, who becomes a sub- bailor. The bailee has to perform
according to the obligations laid down in the contract of bailment and as per the law of the
land. He is being inconsistent or negligent while performing his obligation or duty would
make him liable under various provisions of law. In each contract of law, he has a certain
uniform or fixed obligations to comply with, and he cannot part with those basic obligations
even if a contract does not provide for any such obligations. These obligations are the essence
of bailment contract. The obligations might differ depending on the facts but there are certain
duties which are implied, and reasonable care is to be taken by the bailee. The bailee’s
responsibility towards the goods bailed can be increased by way of providing provisions in
that regard but it cannot be lowered down, i.e., he cannot repudiate his responsibility.
INTRODUCTION

Bailment is defined in section 148 of the Indian contract act 1872 as “the delivery of goods by
one person to another for some specific purpose, upon a contract that these goods are to be
returned when the specific purpose is complete”i.It is another type of special contract, hence
all basic requirements of contract are applicable. It is an act of delivering goods for a specified
purpose on trust. In this, mutual benefit of the parties is created when there is an exchange of
performances between the parties. It is a form of a contractual relationship, even if no contract
has been signed. A bailment for the repair of an item is a bailment for mutual benefit when the
bailee receives a fee in exchange for his or her work. In order for a bailment to exist, the
bailee must have both the intent to possess the property, and actual possession of the property.

This bailment can be only of ‘goods’, which means every lind of movable property other than
money and actionable claimii. For example, if ‘A’ delivers his car for Service at the service
center is an example of bailment. The person delivering the goods is known as bailor and the
person to whom goods are delivered is known as bailee. However, if the owner continues to
maintain control over the goods, there is no bailment.

Illustration

1. If A gives his car to B his neighbor for 10 days, but at the same time he keeps one key
with himself and during this period of 10 days he used to take the car. Now this will
not be a case of bailment as A is keeping control over the property bailed.
2. Sanju delivers a piece of cloth of Manju, a tailor, to be stitched into a suit. There is a
contract of bailment between Sanju and Manju.
3. Z lends a novel to Y to be returned after a month. There is a contract between Z and Y.
4. Manju sold some goods to komal who left them in the possession of Najuk. The
relationship between Najuk and Komal.
ESSENTIALS OF CONTRACT OF BAILMENT:

1. Delivery of possession of goods : Delivery of goods from one person to another

person for some purpose is an essential elements of bailment. According to Section
149 of the Indian Contract Act, 1872 the delivery to the bailee may be made by doing
anything which has the effect of putting the goods in the possession of the intended
bailee or of any person authorised to hold them on his behalf.iii

In Jagdish chand Trikha v/s Punjab National Bank,ivit was held by the court that the position
of the bank was that of a Bailee and it failed in its duty to take care of the goods and return
them to the Bailor. The Bank was held liable to pay the cost of Rs. 3,72,400/- along-with
simple interest @12% from the date of institution of the suit.

Then in Ultzen v/s Nicholes,v the honorable court held that the defendant was the bailee of the
coat as his servant had assumed the possession of the same and he was therefore liable for its
loss which was occurred due to his negligence.

IF THE OWNER MAINTAINS CONTROL OVER THE GOODS THERE IS NO

BAILMENT:

When the person keeps his goods in the premises of others but himself continues to have the
control over them, this is not sufficient delivery for being considered to be bailment, as in
case of Kaliaporumal Pillai v/s Visalakshmi,vi it was held that there was no bailment as she
had not handed over the possession of the jewels to the goldsmith, and therefore the goldsmith
could not be made liable for the loss.

Then in National Bank of Lahore v/s Sohan Lalvii, the court held that the locker could be
perated even without the key with the consumer. The consumer’s control over the valuable
things in the locker had gone and the same with the bank, therefore the bank was liable being
bailee and thus Bank is liable for the loss of the belonging of the consumer in the locker.

THERE CAN BE BAILMENT WITHOUT CONTRACT:

In some cases there can be a bailment when the person obtains the possession without a
contract of the bailment as it was done in the case of Ram Gulam v/s Govt. Of Uttar Pradeshviii
the court expressed that the property of plaintiff was stolen and the same was recovered by the
Police, Police kept the same in the Malkhana. Property was again stolen from the Maalkhana
and could not be traced out. Here the point of bailment raised since no contract of bailment
was made for which conviction is announced but the law itself recognises the finder of the
goods as bailee under section 71 of contract Act, hence it was held that bailment can be even
there when there is no contract of bailment.
Then, in L.M. Co-operative Bank v/s Prabhudass HathiBhai,ix it was eld that the
government stood in the position of a Bailee to take due care of the goods. Govt., duty to
prove that they had taken proper care as was possible for them and the damage was due to
reasons beyond their control.

RETURN OF GOODS AFTER THE PURPOSE IS ACHIEVED: OR THEIR DISPOSAL

ACCORDING TO THE BAILOR DIRECTIONS:

The delivery of the goods in a bailment is only for some purpose i.e. for safe custody, for
carriage, for repair etc., when the purpose is accomplished the goods are to be returned or
otherwise disposed of according to the directions of the person delivering them.
According to Section 148 of ICA, 1872 the goods shall be when purpose is achieved returned
to the bailor or disposed of as per his directions i.e. when the cloth is given for being stitched
in to suit or gold for being converted into ornaments or wheat for being converted into flour
there is a bailment in each case.x
When the money is deposited into a Bank, when the agent receives some payment on behalf
of Principal, he is not the bailee thereof because he is only bound to pay an equivalent of it to
the principal rather than the same currency as done in the case of Secretary of State for India
Council v/s Sheo Singh: Some notes were given to Treasury for being cancelled, there is no
bailment as the same notes are not to be returned. Constructive bailment does not confer any
right to a stranger. Bailment regarding hiring of a locker will not create relationship of Land
lord and the tannent, as the Bank can always open the locker with a Master Key. The hirer of
the locker is not in a position to open the locker without the assistance of the Bank. The Hirer
has to operate the locker only within the Bank’s time but the bank has no such limitation

2. Contract(Express/Written) : There can be no bailment without a contract. all conditions

for valid contract are to be satisfied, such as Competent parties, free consent lawful object etc.

It is necessary that the goods are delivered to the bailee and returned to the bailor
when the purpose is accomplished upon a contract. This means there should a contract
between the two parties for such transaction of delivery and subsequent return. If there is no
contract, there is no bailment. The contract giving rise to bailment can be express or implied.
Property deposited in a court under orders is not property delivered under a contract. Such
delivery or transfer does not constitute bailment.

Exception to the delivery upon contract: A finder of goods is treated as a bailee even if there
is no contract of Bailment or delivery of goods under a contract. A finder of the goods is a
person who finds the goods belonging to some other person and keeps them under his
mprotection till the actual owner of the goods is found. An involuntary contract of bailment
arises and the finder automatically becomes bailee even in absence of bailment by the bailor –
the owner of the lost goods. Since the person is in the position of the bailee, he has all the
rights and duties of a bailee.

3. Return or dispose of goods according to the direction : In bailment the goods are
delivered for specific purpose. after the purpose is accomplished the goods may be returned to
the bailor in the same or altered direction, condition or maybe disposed of as directed by
bailor. If the person to whom the goods are delivered is not bound to restore them to the
person delivering them or to deal with them according to the mandate their relationship will
not be that of bailor and bailee.

There has to be a purpose for the bailment of goods and it is mandatory that once such
purpose is accomplishes, the goods have to be returned to the bailor or be disposed off per his
instructions. Bailment cannot arise if the goods are not to be specially accounted for after
completion of such task or purpose. This is a feature of bailment that distinguishes it from
other relations like agency, etc.

The third essential of bailment is twofold –

a) The delivery of goods must be for some specific task or performance. Delivery of goods in
bailment is not permanent. There has to be a purpose for the bailment of goods and it is
mandatory that once such purpose is accomplishes, the goods have to be returned to the bailor
or be disposed off per his instructions. A tailor is given a cloth for stitching a shirt, a watch
repair shop is given a watch to mend it.

b) That the goods must be returned to the bailor or be taken care of as per the instructions of
the bailor. If a person is not bound to return the goods to another, then the relationship
between them is not of bailment. If there is an agreement to return the equivalent and not the
same goods, it is not bailment. An agent who collects money on behalf of his principal is not a
bailee because he is not liable to return the same money and coins.
Example: A tailor who receives a cloth for stitching is the bailee in this case. The tailor is
supposed to return the finished garment to the customer, the bailor, once the garment has been
stitched.

c) Return of goods in specie is also essential. The same goods that were bailed must be returned
to the bailor in the same condition after the accomplishment of purpose as they were handed over
to the bailee in the beginning. Any accruals to the goods must also be handed over. If an animal
gives birth during the period of bailment, the bailee must return the animal with the offspring at
the conclusion of the bailment.

The bailor can give other directions as to the disposal or return of the bailed goods. In case of
such agreement or instructions, the bailee must immediately dispose the goods after
completion of purpose as per the directions.
If the goods are not returned or dealt as per the directions of the bailor there is no bailment.
For example, depositing money into bank by a customer does not give rise to a contract of
bailment because the bank is not bound to return the same notes and coins to the customer.
This same point was also made in the case of Ichha Dhanji vs.Nathaxi

In Secretary of State vs. Sheo Singh Raixii, a man delivered nine government promissory
notes to the Treasury Officer at Meerut for cancellation and consolidation into a single note of
Rupees 48,000 only. The notes were misappropriated by the servants of the Treasury Officer.
The man sued the State to hold it responsible as a bailee. But the action failed as there can be
no bailment without delivery of goods and a promise to the return the same. The government
was in no way bound to return the same notes or dispose the surrendered notes in accordance
with the instructions of the man.

Section 150 of Indian Contract Act 1872 : "Bailors duty to disclose faults in goods bailed"

The bailor is bound to disclose to the bailee faults in the goods bailed, of which the bailor is
aware, and which materially interfere with the use of them, or expose the bailee to
extraordinary risks; and if he does not make such disclosure, he is responsible for damage
arising to the bailee directly from such faults.xiii

If the goods are bailed for hire, the bailor is responsible for such damage, whether he was or
was not aware of the existence of such faults in the goods bailed.

Illustrations
(a) A lends a horse, which he knows to be vicious, to B. He does not disclose the fact that the
horse is vicious. The horse runs away. B is thrown and injured. A is responsible to B for
damagesustained.
(b) A hires a carriage of B. The carriage is unsafe, though B is not aware of it, and A is
injured. B is responsible to A for the injury.
DUTIES OF BAILEE & BAILOR’S RIGHT

A bailee has to observe the following duties:

1. Duty to take reasonable care of the goods bailed. (Section 151-152)

According to section 151- “A bailee is bound to take as much care of the goods bailed to him
as a man of ordinary prudence would, under similar circumstances, take of his own goods of
same bulk, quality and value as the goods bailed”.xivThis section lays down uniform duty of
care for every kind of bailment, whether the same is for reward or gratuitous.
Given below are the cases in which bailee failed to take
reasonable care and was held liable;

Union of India v. Udho ram & sons.xv

Facts- Certain goods were consigned by M/s Radha Ram Sohan Lal from Calcutta to Delhi by
rail. Some of the articles out of this consignment, having been stolen during transit, the same
were not delivered to the plaintiffs. The plaintiffs brought an action to recover compensation
for the same. The trail court found that the wagon in which the goods were loaded was
properly rivetted and sealed when the train left Howrah at 1:30 am, but seals and rivets of one
of the doors of the wagon were found open when it reached Chandanpur station after 2 hours.
The theft took place at an in-between point when the train stopped there for the home signal at
2:05 am for about 15 minutes. It was found that railway protection police were also there in
the guard’s van.

Issues before the court –

Whether the railway authorities were liable for the loss of the goods in transit?
Whether the railway authorities were in the position of the bailee and liable to indemnify for
the loss caused?
Judgement – It was held that the railway did not take due care. Firstly, they did not prove
from record that the railway protection police which escorted the train was sufficient in
strength, and secondly, that unlike a prudent man, the railway protection police did not keep
an eye on wagons, particularly when the train stopped, to prevent the theft of the goods.
Hence, the defendants were held liable.

Ultzen v. Nicholas.

Facts- The plaintiff went to defendant’s restaurant for the purpose of dining there. When the
plaintiff entered the restaurant, a waiter took the plaintiffs coat from him without being
requested to do so, and hung it on a hook behind the plaintiff. When the plaintiff wanted to
leave, he found that the coat has been lost.

Judgement – It was held that the defendant was the bailee of the coat as the servant had
assumed the possession of the same and he was, therefore, liable for its loss which was due to
his negligence.

Calcutta credit corporation ltd v. Prince peter of Greecexvi.

Facts- a car received for repairs by an automobile garage was damaged by fire. The garage
was a pucca structure, walled by wooden planks. In garage were put not only vehicles
containing petrol but also other combustibles like thinners and paints. The garage was
portioned by wooden walls and a part of it was allowed to be used for cooking purpose. There
was inadequate arrangement for extinguishing the fire. The room in which plaintiffs’ car was
kept could not be opened for 15 minutes after the fire was noticed, as the keys of the rooms
were not available.

Judgement – The defendants had not taken due care and they were held liable.
In this case the defendant i.e., Bailee cannot be excused by pleading that he had taken similar
care of his own goods or his own goods have been lost or damaged along with those of the
bailor or that the bailor had the knowledge that his goods were being kept in a negligent
manner. The court held that the bailee has to take care as a man of prudence or reasonable
care.

Section 152 lays , “if the bailee has taken the amount of care described in section 151 than he
cannot be held liable for any loss, destruction or deterioration of the thing bailed, unless there
is any special contract”.xvii
Given below are the cases in which bailee took reasonable care and was not liable;

Gopal Singh Hira Singh v. Punjab National Bank.xviii

Facts- The plaintiff firm pledged certain goods with the Jahania office of the defendant bank
in 1946. After the partition of the country in August, 1947, that area where the branch was
situated became part of Pakistan. The plaintiff firm bought an action for the recovery of more
than 2 Lakh rupees, being the value of goods pledged and interest thereon, because the bank
failed to return the goods pledged to the plaintiff firm, who had migrated to India. To avoid
liability, the defendant bank pleaded that the goods pledged had been plundered and destroyed
by the rioters in the course of riots which happened to be there at that time.

Judgement – The court found that as the conditions prevailed at that time on the partition of
the country, there was insecurity of the life and property of the non-Muslim population under
the compulsion of adverse circumstances, there was extraordinary breakdown of law and
order machinery, and compulsive migration of mass of these persons from Pakistan to India.
That was also true about institutions manned by Hindu staff, as was the defendant bank. It
was held that under these circumstances, since the property with the bank had to be left
uncared there, the bank could not be considered to be guilty of any negligence. It was
observed that “the obligation of the bank to take care of the pledged goods must be seen in the
context of the extraordinary situation that developed.”

Atul Mehra v. Bank of Maharashtra.xix

Facts- Atul Mehra had hired locker No. 75 on 15th January 1986 at Bank of Maharashtra. He
had deposited jewellery in the said locker the value of which he claimed as Rs 4,26,160. The
strong room in which the locker was located was broken in and the contents thereof were
stolen by miscreants. On 9th January 1989 an FIR for the same was filed. It was stated in the
FIR that all other 43 lockers in the strong room were also broken in and contents thereof
stolen.

Judgement – The court held that exclusive possession of the goods is sine qua non for
bailment. Therefore, mere hiring of a locker would not be sufficient to constitute a contract of
bailment as provided under Section 148 of the Indian Contract Act, 1872. Further, the court
said that the question of reasonable care and quantum of damages would arise only after it has
been shown that actual exclusive possession of the property was given by the bailee to the
bailor, i.e. the bank. Since the bank was not aware of the contents of the locker, hence it was
impossible to know the quantity, quality or the value of the jewellery that was allegedly kept
in the locker at the time when the robbery occurred. In this case, it was held that there was no
exclusive possession to the bank hence no compensation was allowed to the plaintiff.
If the bailee has taken due care and the damage to the goods is because of the circumstances
beyond his control, he will not be liable for the loss.

Sundar Lal v. Ram Swarup.xx

Facts- A wooden shop was hired under a written agreement that the shop will be returned in
the same condition, and the hirer will be liable to any loss or damage to it. The shop was burnt
by the mob during the communal riots in the city.

Judgement- It was held that since the destruction of the shop was due to no negligence on the
part of the hirer, he was not liable for the loss.

2. Duty not to make unauthorized use of the goods bailed. (section 153-154).

When the goods have been bailed for a particular purpose, the bailee is supposed to use them
only for that purpose and none else. If he makes unauthorized use of the goods bailed, there
are two remedies available to the bailor:
(i) The bailor may terminate the bailment;

According to section 153, if the bailee make unauthorize use of goods or uses the goods
which is inconsistent with the conditions of bailment, then the bailor has the option to
terminate the bailment and claim back the good.xxi

Illustration- A lets to B, for hire, a car for his own use. B lends the car to C for commercial
purpose. A can terminate the bailment.
(ii) The bailor may recover compensation for the loss caused due to unauthorized use of
goods;

According to section 154, “If the bailee makes such use of goods which is contrary to the
conditions of bailment, and there happens any damage to the goods due to such unauthorize
use, the bailee is liable to compensate bailor for such loss”.xxii

Illustration- A hires a car from B for travelling to Delhi but instead went to Mumbai. The car
met with an accident. A is liable to compensate B for loss.

3. Duty not to mix bailor’s goods with his own goods. (section 155-157).

Section 155- Mentions that Bailee, with the consent of the bailor, can mix bailor’s goods with
his own goods and in such case, both shall have an interest in proportion to their respective
shares, in the mixture produced.

If the bailee without bailor’s consent mixes bailor’s goods with his own goods, there arises
two possibilities. According to Section 156, “When the mix goods can be separated, both
remain the owners in accordance with there respective shares. The bailee has to bear the
expenses of separation of goods and also for any damage arising from the mixture”.xxiii
Then according to Section 157, “ If the nature of the goods is such that the bailor’s goods
cannot be separated from those of bailee’s, then it is deemed to be the loss of goods and bailor
can recover compensation for the same”.

4. Duty to return the goods upon the accomplishment of the purpose. (Section 160-161).

Section 160– According to this section “It is the duty of the bailee to return, or deliver
according to the bailor’s directions, the goods bailed, 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”.

Section 161– “If by the fault of the bailee, the goods are not returned, delivered or tendered at
the proper time, he is responsible to the bailor for any loss, destruction or deterioration of the
goods from that time”.

If the bailee is not in the position to return the goods bailed to him, for instance, when they are
lost due to the fault of his servants or anybody, then it is bailee’s responsibility for such loss.

5. Duty to return the bailor the increase or profit on the goods bailed. (Section 163)

According to this section “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.”
For example- A leaves a cat in the custody of B to be taken care of. The cat gives birth to 5
kittens. B is bound to deliver the kittens as well as the cat to A.

DUTIES OF BAILOR & RIGHTS OF BAILEE

The duties of the bailor are the rights of bailee of goods. As such, the bailee can, by suit,
enforce the duties of the bailor enumerated. Certain rights of bailee are stated below:-
 1. Right to recover necessary expenses incurred on bailment. (section 158)
Section 158– Some remuneration has to be paid to the bailee for services he renders in respect
of them, he has a right to recover the same, or to exercise the right of lien in respect of such
goods until he receives the necessary payment.

For instance, A leaves his horse with his neighbor, B, for safe custody foe one week. B is
entitled to recover the expenses incurred by him in feeding the horse.

2. Right to recover compensation from the bailor. (section 164)

“The bailor is responsible to the bailee for any loss which the bailee may sustain by reason
that the bailor was not entitled to make the bailment, or to receive back the goods, or to give
directions respecting them.”

3. Right of lien on the goods bailed. (section 170-171)

Lien is the right of the bailee under which the bailee can retain the goods of the bailor, and
refuse to deliver them back, until the due remuneration or amount due is paid.
The Act recognizes two kinds of lien;
i) Particular lien; and
ii) General lien.
The right of ‘particular lien’ entitles the bailee to retain those very goods for the service
regarding which the remuneration is due. The ‘general lien’ entitles the bailees to retain the
goods of the bailor for a general balance of account.
ENDNOTE:

i
Section 148 of ICA, 1872.
ii
Section 2(7) of Sale of Goods Act,1930.
iii
Section 149 of ICA,1872
iv
AIR 1998 Delhi 266
v
Ultzen v. Nichols[1894] 1 QB 92
vi
AIR 1938 Mad 32
vii
AIR 1962 P H 534
viii
AIR 1950 All 206
ix
AIR 1966 Bom 134
x
Section 148 of ICA, 1872.
xi
Ichha Dhanji v. Natha (1889) ILR 13 Bom 338
xii
(1880) ILR 2 All 756
xiii
Section 150 of ICA, 1872
xiv
Section 151 of ICA, 1872
xv
UOI v. Udho ram &sons 1963 AIR 422, 1963 SCR (2) 702
xvi
AIR 1964 Cal 374.
xvii
Section 152 of ICA, 1872.
xviii
AIR 1976 Delhi 115
xix
Atul Mehra v. Bank of Maharastra AIR 2003 P H 11
xx
Sundar Lal v. Ram Sarup AIR 1952 All 205
xxi
Section 153 of ICA, 1872.
xxii
Section 154 of ICA, 1872.
xxiii
Section 156 of ICA, 1872

REFERENCES

BOOKS REFERRED :-
• Avtar singh, Law of Contract & Specific Relief 12th Edition, 2020
• Part 1 of Law of Contract, R.K. Bangia 2nd edition, 2003
• J. C. Smith, Contract ( 11th edn, Sweet and Maxwell 2000 )

WEBSITES:
• https://indiakanoon.org./
• www.manupatra.com
• www.citehr.com
• www.wikipedia.org
• www.academia.edu
• www.egyankosh.ac.in
• www.researchgate.net