I Year B.A., LL. B (Div.

-D and E) – Semester-II (2022)

History

Topic:
‘Analysis of the Duties of a Bailor and Bailee’

NAME: ANJANA PALAMAND

DIVISION: E

PRN: 21010125507

COURSE: BA LL.B. (H)

BATCH: 2021-2026
 Duties of a bailor

In the Indian Contract Act, a bailor is defined as the person who delivers the goods in a contract
of bailment.1 The word ‘bailor’ is derived from ‘ballier’, a French word which means ‘to
deliver’. For instance, if A gives B his phone charger to use temporarily, B will return the
charger after using it. Over here, A is the bailor. Listed below are his duties:

The bailor will bear all extraordinary expenses of bailment

According to Section 158 of the Indian Contract Act - for the purposes of the bailment, the bailor
will have to pay all expenses, provided the bailee does not receive any remuneration. These
expenses can include, but are not limited to carrying or storing the goods; or work done upon
them, for the bailor, by the bailee. The bailee is entitled to cover all ordinary and reasonable
expenses during the usage of the good, however, all the extraordinary ones are to be covered by
the bailor.

To indemnify the bailee

If the good used by the bailee is defective, and results in negative consequences for them, the
bailor is supposed to indemnify them. According to Section 164 of the Indian Contract Act,

“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.”

To receive back the goods

When the time period of the bailment contract is over, the bailee is supposed to return the goods
back to the bailor. In furtherance of this, the bailor has a duty to receive them back. This section
is significant since the bailee is entitled to any compensation he faces for maintaining the goods
after the bailment offer expires.

To indemnify the bailee in cases of premature bailment of gratuitous bailment

1 Section 148, Indian Contract Act 1872

The bailor holds the right to call off the contract of bailment if and when he wishes to. This
premature bailment is obviously before the contract was to expire - which can result in losses for
the bailee. In such a scenario, the loss should exceed the benefit. The condition for this
compensation is:

Losses compounded by premature termination to the bailee < benefit he has derived out
of bailment

In this situation, the bailor must compensate the bailee.2

Here, the bailor has to compensate damages which were solely known to him and which are not
disclosed.3

To disclose any known faults

According to paragraph 1 of Section 150 of the Indian Contract Act, the bailee is entitled to
know all faults in the goods from the bailor (in the bailor’s knowledge and understanding). If the
bailee faces any damages by the goods because the bailor did not disclose any faults he knew, the
bailee is entitled to compensation for the same.
In a case in 19494, a person hired a motor-launch from another for a trip. However, the motor-
launch caught fire, and since the fire-fighting mechanism was not efficient, A faced damages.
The owner of the motor-launch was held liable since he was guilty of knowing about the
malfunctioning motor-launch.

Duties of bailee
The person to whom the goods are handed over is called the bailee. His duties include:
1. To take reasonable care of the goods in question,
2. Not to make any unauthorised use of the goods,
3. Not to mix his goods with the goods in question,

2 Section 158, Indian Contract Act 1872

3 Read v. Dean, (1949) 1 K.B. 188
4 Coughlin v. Gillison, (1899) 1 Q.B. 145
 4. Not to set up any adverse title,
5. To return any accretion to the goods, and
6. To return the goods.

To take reasonable care of the goods in question

With a standard of an ordinary man’s prudence and understanding, the bailee is required to take
reasonable care of the goods given to him. This ordinary prudence is equated to that of which a
man would handle goods of the same quantity, bulk and value.5 However, this liability is not
absolute, and is simply strict in nature. This means that in the case of damages not caused by the
bailee, he is required to show that he wasn’t negligent in handling the goods, and that the loss
occurred despite him reasonably taking care of it. Therefore, the onus of proof is on the bailee.

Section 152 of the Act reads that when the bailee can prove that the loss/ destruction/
deterioration was not because of his action/ inaction, he is not required to compensate the bailor
for the same. The following case laws explain the same:

1. Ultzen v. Nicols: when a person went to a restaurant, his coat was taken by the waiter to
hang. However, as he got up to leave, the coat was gone. The proprietor was held liable
for loss since he owed a duty of care towards the coat and him.6
2. Coldman v. Hill: a (A) man gave his cattle to another for feeding. During the course of
the same, he lost his cattle, and did not make any effort to find it (by alerting the police,
etc.). Therefore, he had to compensate A for the losses.7
3. Martin v. London County Council: when a woman was admitted to a hospital, she gave
her jewellery to the authorities for safe custody. However, they lost it. They were held
responsible since there was a contract of bailment (the woman is the bailor and the staff is
the bailee) and the bailee failed to maintain a decent level of duty of care towards the
jewellery.8

5 Section 151, Indian Contract Act 1872

6 (1894) 1 Q.B. 92
7 (1919) 1 K.B. 443
8 (1947) K.B. 628
 4. Clarke v. Earnshaw: a person trusted his goods with another, who did not take care of
them (by locking and storing them properly). Hence, he was liable when they were
stolen.9

Not to make any unauthorised use of the goods

The goods provided by the bailor to the bailee is for a specific purpose only, which must be
specified in the contract. If the bailee uses the goods for any other purpose, and any losses occur
due to the same, the bailee is liable to compensate the bailor for the damages caused.10 These
losses can be either an accident, or devoid of any negligence from the bailee’s end.

For instance, A gives B his laptop only for typing purposes. If B uses it to download softwares
with viruses, the laptop will become useless, and B will have to compensate A for the damaged
laptop.

Not to mix his goods with the bailed goods

In the case where the bailee mixes his goods with the bailed goods, there can be three situations:
1. If the bailor consents, the bailee and bailor shall have a proportionate share of the profits
from the mixture11,
2. If the bailor does not consent to the same, the bailee shall pay for the damages caused by
the separation or mixture12,
3. If the bailor does not consent to the same, and the mixture is beyond separation, the bailor
is entitled to full compensation by the bailee.13

If the mixture or separation is by accident, or by an Act of God, or because of an unauthorised

third party, or by the inadvertance of the bailee, the mixture belongs to both the bailor and bailee
(in an equitable proportion). However, all the losses caused by the same are to be borne by the
bailee.

9 (1818) Gow. 30
10 Section 154, Indian Contract Act 1872
11 Section 155, Indian Contract Act 1872
12 Section 156, Indian Contract Act 1872
13 Section 157, Indian Contract Act 1872
 Not to set up any adverse title
The bailee must hold the goods of the contract of bailment for and behalf of the bailor only. He
does not reserve the right to keep the goods and not bail them back to the bailor. In the case
where he delivers the goods to another person (not the bailor), the bailee must prove that the
other person has the right to possess those goods, and not the bailor.14

To return any accretion to the goods

In an ordinary case, the goods must be delivered back to the bailor, once the contract of bailment
is discharged, by the bailee. This also means that any profits made by the goods must also be
given to the bailor, and cannot be held back by the bailee.15

For instance, if A gives B his cow for a specific period of time, and the cow gives birth to a calf
when she is in the possession of B. After the contract is discharged, B must return both the cow
and calf to A.

To return the goods

After the contract of bailment has expired, it is the duty of the bailee to return the goods to the
bailor, without any demand by the bailor. When the bailor orders him to return the goods after
completion or after the task has been accomplished, the bailee has to do so.16 If the bailee refuses
to do so, and there are any losses, he is supposed to compensate for any and all damages.17

In Shaw & Co. v. Symmons & Sons18, A gave B some books to be bound, however, B did not
return them after a reasonable elapse of the contract. During this time, there was an accidental
fire in the premises and the books were burned. Thus, A was entitled to compensation B.

Analysis of the Duties of the Bailor and the Bailee

In a contract of bailment, the goods in question can either be gratuitous or non-gratuitous. In the
former, the bailor and bailee receive no benefits. In this kind of bailment, the bailor is supposed

14 Section 117 of the Indian Evidence Act 1872

15 Section 163, Indian Contract Act 1872
16 Section 160, Indian Contract Act 1872
17 Section 161, Indian Contract Act 1872
18 (1917) 1 K.B. 799
to inform the bailee about any known faults, or faults which may hamper the bailee’s
participation in the contract. However, in a non-gratuitous bailment, the bailor is required to tell
the bailee all known faults, failing which, he will have to compensate for all the damages caused
due to the withheld fault in the good. This is one of the clauses which are completely intended
for the bailee’s benefit. In return, the bailee is supposed to make sure that he does not misuse the
good, damage it (when it is in his possession) and return it back on time. In Hyman and wife v.
Nye and Sons19, the case was on the premise that there was a fault in the carriage given to the
prosecution by the defendant, and the carriage broke, causing injuries to the prosecution. The
defendant was held liable even though he was unaware about the broken carriage, since it was
his duty to provide a well-working carriage. Not only this, the bailor is also required to inform
the bailee if the goods are dangerous.20
Along with, the duties of the bailor and bailee are drafted in such a way that they reflect and
compliment each other. On one end, the bailee is required to take care of the goods when in his
possession, and must make sure that he does not neglect or carelessly manage them. However,
despite his care, if there is damage caused, it is to be compensated by the bailor.
In cases where there has been damage to the goods in the bailee’s possession, the bailee has to
prove that they took ample and reasonable care to prevent the damage. If they manage to do so,
they do not have to compensate the bailor for the damages caused. In L.M. Co-operative Bank v.
Prabhudas Hathibhai21, a godown filled with tobacco was handed over to the bank since it was
the defendant’s pledge. The bank, in return, handed the keys over to the police. Due to heavy
rains, the tobacco was damaged. In this case, the defendant was the bailor and the bank was the
bailee. The onus of proof was on the bank, in order to avoid paying compensation for the
damaged tobacco.

Shortcomings in the Contract of Bailment

1. The first and foremost shortcoming to pay attention to is the concept of ‘duty of care’. In
multiple cases, it has been impossible to prove as to whether or not the bailee took ample

19 (1881) LR 6 QBD 685

20 Lyell v. Ganga Das, ILRC (1875) 1 AII 60
21 AIR 1966 Bom 134
 care of the goods, before it got damaged. In the landmark judgement of Shanti Lal v.
Tara Chand22,

“No cast-iron standard could be laid down for the measure of the care due from him and
the nature and amount of care must vary with the posture of each case.”

Why the duty of care has such an important role is because it decides who bears the brunt
of the damages caused to the goods.
2. If the bailee damages the goods when in his possession, he is supposed to compensate the
bailor. He can be exempted from this only if he can prove that the damage was caused
despite his fully committed duty of care. So then, the question arises - who will pay for
the damages when it is caused by a third party or by an act of God? When there is a
mixture of goods, and is caused by the abovementioned factors, the bailee bears the loss;
however, the bailor and bailee have an equitable share in the profits. In the general case
of damages, however, the Act has not specified as to who will pay for the losses when it
is caused by parties other than the bailor and bailee. As vaguely mentioned in Coldman v.
Hill23, the bailee had to prove that he ‘reasonably’ tried to gain the lost goods of the
bailor, failing which, he had to compensate the bailor for the act of a third party.
3. In arrangements and promises which aren’t necessarily contracts, will the concept of
bailment exist? In Chaturgun v Shahzady24, the defendant (bailee) had borrowed the
prosecution’s (bailor’s) ornaments for a function. The ornaments got stolen, however, the
defendant denied any liability since there was no legally binding contract between them.
The court held that there was an implied contract between them, and hence, the bailee
had to compensate the bailor for losing his goods. In today’s cases, there are a lot of
domestic and affectionate arrangements made, which aren’t necessarily contracts. So
then, it becomes an issue as to whether or not a particular case would qualify as a breach
of an implied contract, or simply a loss of goods between two members who reached an
agreement because of their relationship.

22 1933 All 158

23 [1918-19] All ER Rep 434
24 AIR 1930 Oudh 395