The Doctrine of Bailment under the Law of Contract in Pakistan: A Critical

Exposition

Amr Ibn Munir

Abstract

This paper discusses what is a bailment? What are the respective parties of a bailment? What are

the rights and responsibilities of the parties in a bailment? What constitutes a delivery of a

bailment? Is there lien for the bailee? What are the rights of third parties in a bailment? What are

the rights of finder of goods? What happens when there is a mixture of the bailed and non-bailed

goods? Under what circumstances can a bailment be terminated? What is a gratuitous bailment?

Can a gratuitous bailment be terminated? The main findings of this paper are that we can conclude

that a contract of bailment is a contract for the delivery of goods for a specific purpose whereupon

after accomplishing said purpose will be returned or shall be disposed of according to the directions

of the person delivering the goods. The person who delivers the goods is called the bailer, while

the person to whom they are delivered is called the bailee. Anything that has the effect of putting

the goods in the possession of the intended bailee or anyone else who the bailee has authorized to

hold them on this behalf from the bailor will amount to delivery of the bailment. A bailee is a

person to whom goods are deposited under a contract for a certain purpose and he is bound to

return the goods so deposited when the purpose is accomplished. Or he will dispose of such goods

as per the directions of the bailor. The bailor is bound to disclose any fault of the goods. Where the


LLB student at the Department of Law, International Islamic University, Islamabad. Email:
amribnmunir2000@gmail.com.
He is very thankful to Dr. Asim Cheema, Senior Research Officer, Lahore High Court for providing substantial
caselaw.

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bailor’s goods are mixed with bailee’s goods, then it shall be seen whether the bailor gave his

consent for the mixing of his bailed goods alongside the bailee’s own non-bailed goods. A contract

of bailment like any other contract can become void, voidable or void ab initio depending upon

the circumstances of each and every case or when the bailor rescinds the contract due to the fact

that the bailee acts in a way with regards to the bailed goods which is inconsistent with the terms

and conditions stipulated in the bailment. The bailment can also be terminated when the stipulated

time period comes to an end or when the purpose for which the goods were bailed is accomplished.

A gratuitous bailment is a bailment in which the bailor or bailee is simply obliging the other party

without asking anything in exchange. Where a third party has found goods, he has no right to sue

the owner of the goods for compensation for any trouble or expense voluntarily incurred by him

to preserve the goods and to find the owner. However, he has the right to retain the goods until he

receives such compensation. And where the owner of the goods has offered a specific reward for

the return of the lost goods, in such a case, the finder can sue the owner for the reward of finding

the goods and also may retain it until he receives the reward. Where the finder finds a particular

thing which is also commonly a subject a sale and which is lost, the owner cannot be found even

with reasonable diligence being used or the owner refuses to pay the lawful charges to the finder

despite being demanded to, the finder can then sell it, provided that the thing is in danger of

perishing or losing the greater part of its value and when the lawful charges of the finder amount

to two-thirds of the value of thing found. The methodology in this paper is doctrinal.

Keywords:

Bailment, Bailor, Bailee, Gratuitous Bailment, Finder of Goods

Introduction

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This paper discusses what is a bailment; what are the respective parties of a bailment; what are the

rights and responsibilities of the parties in a bailment; what constitutes a delivery of a bailment; is

there lien for the bailee; what are the rights of third parties in a bailment; what are the rights of

finder of goods; what happens when there is a mixture of the bailed and non-bailed goods; under

what circumstances can a bailment be terminated; what is a gratuitous bailment; can a gratuitous

bailment be terminated; The methodology in this paper is doctrinal.

Bailment

Bailment refers to the “temporary placement of control over, or possession of, personal property

by one person, the bailor, into the hands of another, the bailee, for a designated purpose upon

which the parties have agreed”1 Section 148 of the Contract Act 1872 (hereinafter referred to as

the “Act”) provides that

“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”.”

Thus, a contract of bailment is a contract for the delivery of goods for a specific purpose whereupon

after accomplishing said purpose will be returned or shall be disposed of according to the directions

of the person delivering the goods.2 The person who delivers the goods is called the bailer, while

1
West’s Encyclopedia of American Law, (Thomson Gale, 2nd ed., Vol. 1., 2005), p. 444.
2
Mst. Hanifa Bai v. Muhammad Siddiq-Abdul Sattar, PLD 1965 (W. P.) Karachi 259, at para 18. See also, Messrs
Mastersons v. Messrs Ebrahim Enterprises, 1988 CLC 1381 [Karachi], at para 15, Messrs Amie Investment (Pvt.)
Ltd. v. Additional Collector-II, 2006 PTD 1459 [Karachi High Court], 1464, Faisal Bank v. Messrs Zimindara Rice
Mills, 2007 CLD 1164 [Lahore], at para 17, Motor and General Finance (India) v. s Mary Mony, 1991 ACJ 101, at
para 10, Rampal Singh vs Murry, (1900) ILR 22 All 164, at para 3.

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the person to whom they are delivered is called the bailee. 3 Hence, there are three conditions that

have to fulfilled. The first is the delivery of goods, the second is that the delivery of goods should

be for a specific purpose and the third is that upon accomplishing the said purpose, the goods shall

be returned back or will be disposed of according to the directions of the person who delivered the

goods. Thus, in order to constitute an effective contract of bailment, it is obligatory on the part of

the bailer to put the bailee in possession of the goods.4 There must be actual tender and delivery

of the goods and acceptance thereof by him.5 By delivery of goods, we mean to say, the temporary

dispossession of goods from the bailor or to be more specific, the temporary possession of goods

by the bailee. There must also be actual and physical transfer of possession.6 For example, merely

putting into possession of the documents of title does not constitute bailment of goods.7 An

example of a contract of bailment can be where Ahmed delivers or temporarily gives up his

possession of his car and gives it to Ali, for the purpose of driving it to certain destinations for a

period of three months. After three months are over, Ali returns the car back to Ahmed. The bailor

is thus the “one who places control over or possession of personal property in the hands of another,

a bailee, for its care, safekeeping, or use, in accordance to the terms of a mutual agreement”8,

while the bailee is the “one to whom personal property is entrusted for a particular purpose by

another, the bailor, according to the terms of an express or implied agreement.”9 Both parties have

their rights and liabilities which we shall discuss in detail hereinbelow.

3
Messrs Mastersons v. Messrs Ebrahim Enterprises, 1988 CLC 1381 [Karachi], at para 15.
4
Messrs Rice Export Corporation v. Messrs A.H. Corporation, 2002 CLC 607 [Karachi], 612.
5
Ibid.
6
Trading Corporation of Pakistan (Pvt.) Ltd. v. Messrs Punjab Trading Agency, PLD 2017 Sindh 276, at para 28.
7
Ibid.
8
West’s Encyclopedia, at pg. 446.
9
Ibid, at pg. 441.

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Returning of the goods in a contract of bailment cannot be termed as supply but where the goods

are to be disposed of, then in such a case, it would amount to supply.10 However, in such

eventuality, the supplier would be bailor and not the bailee and the purchaser would be the person

to whom the goods are disposed of at the instructions of bailor.11

Delivery of Bailment

Section 149 of the Act provides that “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

authorized to hold them on his behalf.” Hence, anything that has the effect of putting the goods in

the possession of the intended bailee or anyone else who the bailee has authorized to hold them on

this behalf from the bailor will amount to delivery of the bailment.12 The explanation to Section

148 of the Act provides that “if a person already in possession of the goods of another contracts

to hold them as a bailee, he thereby becomes the bailee, and the owner becomes the bailor, of such

goods although they may not have been delivered by way of bailment.” There are two types of

deliveries, namely actual and constructive deliveries.13 The former is when the bailor hands over

physical possession of the goods to the bailee.14 The latter is when there is no change of physical

possession, goods remaining where they are, but something is done which has the effect of putting

them in the possession of the bailee.15 Examples of this include delivery of railway receipts16, trust

10
Messrs Amie Investment (Pvt.) Ltd. v. Additional Collector-II, 2006 PTD 1459 [Karachi High Court], 1464.
11
Ibid.
12
Morvi Mercantile Bank Ltd v Union of India, AIR 1965 SC 1954, (1965) 3 SCR 254, 269.
13
Avtar Singh, “Law of Contract, A Study of the Contract Act 1872 and Specific Relief”, (Eastern Book Company,
12th ed., 2017), 673.
14
Ibid.
15
Ibid.
16
Morvi Mercantile Bank Ltd v Union of India, AIR 1965 SC 1954, (1965) 3 SCR 254.

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receipts from a bank17 etc. In both cases, the delivery of the receipts amounted to a delivery of

goods.

In “Bank of Chittoor v. Narasimbulu”18, where a person had pledged the projector machinery of

his cinema under an agreement which allowed him to retain the machinery for the use of the

cinema, the court observed that

“It must be held that there was a constructive delivery, or delivery by attornment to the

bank. Since then, there was a change in the legal char acter of the possession of goods,

though not in the actual and physical custody. Even though the bailor continued to remain

in possession, it was in the possession of the bailee”19

In “Fazal v Salamat Rai”20, where the defendant held the plaintiff’s mare under the execution of a

decree. The plaintiff satisfied the decree and the court ordered redelivery of the mare to the

plaintiff; the defendant refused to do so until his maintenance charges were also paid. The mare

was taken from his custody. The court held that “that after the delivery order had been passed, the

relation of bailor and bailee was established by virtue of the Explanation to Section 148.”.

Both cases discussed hereinabove serve as good examples of constructive delivery of bailment.

Rights and Liabilities of Bailee

As discussed hereinabove, a bailee is a person to whom goods are deposited under a contract for a

certain purpose and he is bound to return the goods so deposited when the purpose is

accomplished.21 Or he will dispose of such goods as per the directions of the bailor. The duty and

17
The Central Exchange Bank Ltd. v. Mst. Zaitoon Begum, PLD 1968 Supreme Court 83, 90.
18
AIR 1966 AP 163.
19
Ibid, at p. 166, per Venkataswami J.
20
(1928) 120 IC 421.
21
Vital Chemicals Corporation v. Silk Chemical Limited, 2022 CLD 320 [Lahore (Multan Bench)], at para 19.

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liability of the bailee are incorporated within Sections 151, 152 and 161 of the Act. 22 A contract

of bailment also incorporates an element of trust between the bailor and bailee for the goods

specified in the contract. Thus, an obligation in equity amounting to a trust is implicit in every

contract for bailment and a bailee of the goods is subject to the same obligations as a trustee.23 The

bailee thus has a duty to make sure the goods are properly cared for. This finds force in Section

151 of the Act which provides that “in all cases of bailment the 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 the same bulk, quality and value as the goods bailed” Thus, he has to take

care of the goods as reasonably as possible as an ordinary reasonable man would.24 That is to say,

he is bound to act as a man of ordinary prudence, but what is more important is that the standards

of care required of him must be of a prudent man under similar circumstances and with reference

to goods of the same bulk, quality and value.25 Although, no hard and fast rules could be outlined

for fixing of such degree of care.26 It may vary from case to case.27 The degree of care is also

dependent on the nature, description, quality, and quantity of goods and so also nature of bailment

contract.28 However, a bailee is excused from returning the subject matter of the bailment to the

22
Pakistan v. Messrs Ghulam Mahbub Muhammad Umer, PLD 1971 Karachi 259, 263.
23
Messrs Mastersons v. Messrs Ebrahim Enterprises, 1999 CLC 403 [Karachi], at para 20.
24
Messrs Peshawar Lahore Goods Transport Company, Karachi v. Messrs Habib Insurance Company Ltd.,
Karachi, 1983 CLC 2708 [Karachi], at para 5. See also, Vital Chemicals Corporation v. Silk Chemical Limited, 2022
CLD 320 [Lahore (Multan Bench)], at para 21, Motor and General Finance (India) v. s Mary Mony, 1991 ACJ 101,
at para 10.
25
Mst. Hanifa Bai v. Muhammad Siddiq-Abdul Sattar, PLD 1965 (W. P.) Karachi 259, at para 18. See also, The
Lahore Central Cooperative Bank Ltd., Lahore v. Messrs Haji Allah Dad Fida Hussain Merchants and Commission
Agents Grain Market, Pattoki, 1987 CLC 1435 [Lahore], at para 10, Messrs Mastersons v. Messrs Ebrahim
Enterprises, 1988 CLC 1381 [ Karachi], at para 10, Prudential Commercial Bank Ltd. v. Hydari Ghee Industries
Ltd., 1999 MLD 1694 [Karachi], 1670, Faisal Bank v. Messrs Zimindara Rice Mills, 2007 CLD 1164 [Lahore], at
para 18. It should be noted that the court did not apply the correct provision of the Act here. Rather than apply
Section 151, they applied Section 152 instead. See also, Rampal Singh vs Murry, (1900) ILR 22 All 164, at para 3.
26
Trading Corporation of Pakistan (Pvt.) Ltd. Shahrah-e-Faisal, Karachi, v. Murshed Enterprises, PLD 2004
Karachi 407, 415.
27
Ibid.
28
Ibid.

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bailor or his agent where the subject matter was taken away from him by authority of law exercised

through regular and valid proceedings.29

The bailee is to compensate the bailor if damage is caused to the goods due to him making

unauthorized use of them, that is to say, he did not use the goods according to the terms and

conditions stipulated in the contract of bailment between them. In fact, he is even liable to

compensate the bailor if the damage to the goods caused during the unauthorized use of the goods.

This finds force in Section 154 of the Act, which provides that

“if the bailee makes any use of the goods bailed, which is not according to the conditions

of the bailment, he is liable to make compensation to the bailor for any damage arising to

the goods from or during such use of them

Illustrations

(a) A lends a horse to B for his own riding only. B allows C, a member of his family, to ride

the horse. C rides with care, but the horse accidentally falls and is injured. B is liable to

make compensation to A for the injury done to the horse.

(b) A hires a horse in [Karachi] from B expressly to march to [Hyderabad]. A rides with

due care, but marches to [Khairpur] instead. The horse accidentally falls and is injured. A

is liable to make compensation to B for the injury to the horse.”

Hence, there are two conditions that have to be fulfilled for the application of this provision. The

first is that the bailee has used the goods in a way that is not allowed as per the terms and conditions

of the bailment, the second is that damage is caused to the goods due to such unauthorized use of

29
Juggilal Kamlapat Oil Mills v Union of India, AIR 1976 SC 227, (1976) 1 SCC 893, 1976 (8) UJ 94 SC, at para 7.

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the goods or even during the unauthorized use of such goods. The illustrations provided by the

provision shall serve as good examples as they are self-explanatory.

Where a vehicle was delivered to a workshop for repair and the owner of the workshop allowed

an unlicensed employee to drive the vehicle and he caused an accident which resulted in the death

of a person, the court held that the bailee was liable to compensate the deceased and also the owner

of the vehicle because it was an unauthorized use of the vehicle, thus making the liability

absolute.30

The bailee also has the duty of returning the bailed goods or deliver the bailed goods as per the

directions of the bailor without the bailor having to demand it when the stipulated time period for

the bailment ends or when the purpose for which the goods were bailed is accomplished.31 Section

160 of the Act provides that “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.” Hence,

upon the purpose of the bailed goods being accomplished or upon the end of the agreed upon time

period for the bailment, the bailee must return the goods to the bailor or deliver the goods to the

bailor as per his direction, without the bailor having to demand it. Should the bailee be unable to

return the goods at the proper time, then he is liable for any deterioration, loss or destruction caused

to the goods during such time.32 This provision also applies to the liability of the Railway

Administration who are delivering goods.33 Section 161 of the Act provides that “if, by the default

30
Alias v EM. Patil, AIR 2004 Ker 214.
31
Mst. Hanifa Bai v. Muhammad Siddiq-Abdul Sattar, PLD 1965 (W. P.) Karachi 259, at para 18. See also, Faisal
Bank v. Messrs Zimindara Rice Mills, 2007 CLD 1164 [Lahore], at para 19,
32
Federation of Pakistan v. The Co-operative Insurance Society of Pakistan, Ltd, Lahore, PLD 1956 (W. P.) Lahore
878, 882. The court ruled that the Railway Administration’s duty was like that of a bailee under Sections 151, 152
and 161 of the Act. See also, Abdul Karim v. Federation of Pakistan, PLD 1960 Dacca 42, at paras 7-9, Pakistan v.
Messrs H. Pir Muhammad Shamsuddin, PLD 1962 (W. P.) Karachi 810, at para 17.
33
Ibid.

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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 in accordance with the purpose of the bailment rendered his service by exercising any

labour or skill in respect of the bailed goods, he has a right to retain the goods unless and until he

receives his remuneration for such services, he rendered in respect of them, provided of course

that there was no contract made for the contrary.34 This finds force in Section 170 of the Act which

provides that

“where the bailee has, in accordance with the purpose of the bailment, rendered any service

involving the exercise of labour or skill in respect of the goods bailed, he has, in the absence

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) A delivers a rough diamond to B, a jeweller, 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.

(b) A give cloth to B, a tailor, to make into a coat. B promises A to deliver the coat 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.”

The illustrations shall serve as good self-explanatory examples. Where there was a dispute over

the quality and description of the sale of particular goods as per Section 43 of the Sales of Goods

Act 1930, the court held that the liability of bailment under Sections 151 and 170 of the Act do not

34
A.R. Bhuriya (Represented by Heir) v. Llyods Bank Ltd., PLD 1970 Dacca 490.

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apply here as it stands on a different footing, the principle on which a bailee is entitled to dispose

of the goods or has lien on the goods bailed with him are entirely different and are not applicable

to the case of the sale of goods.35

The bailor will thus have to recompensate the bailee as per Section 158 of the Act. He is also

responsible for any loss caused to the bailee as per Section 164 of the Act. We will discuss these

both in detail hereinbelow.

Burden of Proof

Where the bailed goods become damaged, the burden of proof is on the bailee to ensure that he

had properly discharged his duty of care on the bailed goods. The loss of the subject-matter of the

bailment is itself prima facie evidence of the negligence of the bailee.36 In order to escape liability

for the loss occurred the onus of proof will be upon the bailee to show that he had taken necessary

standard of care as imposed upon him by the statute.37 Thus, the onus to prove that proper steps

had been taken by the as bailee for discharge of his duty imposed upon him would initially lie on

him.38 Although, this does not apply in cases where ships are carry goods as it could not affect the

liability of a common carrier in the view that the liability of a common carrier for the loss, injury

or delay, in respect of the goods carried, might be varied by a contract.39 In fact sections 151-152

35
Messrs Yusuf and Razak v. Abdullah, PLD 1957 (W. P.) Karachi 747, 758. It should be noted that the judgment is
repeated three times in the judgment itself.
36
Rice Export Corporation v. Int. Exports, PLD 2004 Karachi 705, at para 7.
37
Ibid.
38
Messrs Mastersons v. Messrs Ebrahim Enterprises, 1988 CLC 1381 [ Karachi], at para 10. See also, Trading
Corporation of Pakistan (Pvt.) Ltd. v. Messrs S.R. International, 2008 CLD 412 [Karachi], 423. See also, Trading
Corporation of Pakistan (Pvt.) Ltd. v. Messrs Al-Noor (Pvt.) Ltd., 2008 MLD 755 [Karachi], 767, 2008 YLR 1472
[Karachi], 1484.
39
Trans-Oceanic Steamship Co. Ltd., Karachi v. Abdul Razak-Abdul Kader, PLD 1960 Dacca 147, at paras 10-11.
The court relied on the observation of Basheer J. in the case of “Home Insurance Co., Ltd., New York v. Ramnath &
Co”, AIR 1955 Mad. 602, at 604. Basheer J. himself relied on another case titled, British India Steam Navigation
Co., Ltd., v. Sokkalal Ram Sait. It should be noted that no citation has been given for this case. Basheer J. and
distinguished the British India case from the instant case before him by observing that there was no comprehensive

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of the Act also do not apply to cases where goods are carried by air by means of air travel.40 Instead,

they are to be governed by the rules recognized under the English common law and on those

principles are where the carriers are entitled to diminish or exclude their liability by special

contracts.41 Although, a ship carrier cannot be discharged as bailees of the goods until they were

handed ,over to the consignees or their agents or assignees.42 The responsibility of the Railway

Administration in the matter of the carriage of goods is that of a bailee, thus the duty of care and

caution, in respect of the goods carried, which falls on the Railway is no more than that which a

prudent person would apply for the protection of his own goods.43 If a railway is the bailee of

goods and is delivering the same, then the Railway Administration shall be bound to disclose to

the consignor how the consignment was dealt with throughout the time it was in its possession or

control and, if necessary, to give evidence thereof before the consignor is called upon to prove

misconduct.44 However, while the railway has to prove what that they did for the discharge of

their duty as the bailee but the plaintiff has to prove that the railway’s actions did not amount to

proper due care of the goods.45

When the Bailee is not Liable

clause that exempted the carrier from any liability. The Dhakka High Court thus adopted the same observation. See
also, Muhammad Siddiq v. Messrs Al-Muslim Goods Transport Co., PLD 1968 Karachi 263, at para 21.
40
Pakistan International Airlines Corporation v. Salahuddin Armed, PLD 1962 (W. P.) Karachi 399, 404. See also,
International General Insurance Company of Pakistan Limited v. British India Steam Navigation Co. Ltd., 1987
CLC 152 [Karachi], at para 8.
41
Ibid.
42
East and West Steamship Co. v. Hossain Brothers, PLD 1968 Supreme Court 15, per Rahman J. at p. 25.
43
Pakistan v. Mohammad Ali, 1971 SCMR 426, 428.
44
Pakistan Eastern Bengal Railway v. M.L. Jhawar, PLD 1970 Dacca 780, 785. See also, Honorary Secretary,
Rangpur District Co-operative Consumer's Store Ltd., Rangpur v. The Federation of Pakistan, PLD 1960 Dacca
530.
45
Pakistan v. Messrs Ghulam Mahbub Muhammad Umer, PLD 1971 Karachi 259, 263. See also, Dwarka Nath v.
Rivers Steam Navigation Co. Ltd., AIR 1917 PC 173, Federation of Pakistan v. Ehsan Ellahi, P L D 1955 Lahore
303, Federation of Pakistan v. Sheikh Fazal Karim, PLD 1954 Lahore 245.

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Section 152 of the Act provides that “the bailee in the absence of any special contract, is not

responsible for the loss, destruction or deterioration of the thing bailed, if he has taken the amount

of care of it described in section 151.” Thus, once it is established that the bailee fulfilled his duty

of reasonable care of the goods entrusted to him, he is not liable for any loss, destruction or

deterioration of the bailed goods, provided of course that there was no contract to the contrary.46

Thus, there are two conditions that have to be met for the application of this provision. The first is

that the bailee was able to take reasonable care of the bailed goods as is imposed on him per Section

151 of the Act. The second is that there must not be any contract that provides the contrary.

Hence, we can conclude that to foist the responsibility and impose liability as a bailee, it is to be

shown that, there was a contract of bailment either express or implied between the parties. 47 That

a loss, destruction or deterioration of the goods bailed has occasioned and lastly, the bailee had not

taken as much care of the goods bailed to him as a man of ordinary prudence would have taken

under a given circumstances.48 Thus, the bailee is required to ensure that, (i) all reasonable

precaution has been taken to avoid a risk, which-reasonably could be foreseen, (ii) in case where

a contingency has arisen then, it is to be seen that with what diligence and promptitude the bailee

has acted to avert or minimize the loss, (iii) the promptitude he showed to apprise the bailor of the

contingency encountered by him, to seek his opinion as to further course of action, (iv). To what

46
Messrs Queenland Insurance Co. Ltd., Karachi v. The Trustees of the Port of Karachi, PLD 1976 Karachi 238, at
para 9. See also, Messrs Peshawar Lahore Goods Transport Company, Karachi v. Messrs Habib Insurance
Company Ltd., Karachi, 1983 CLC 2708 [Karachi], at para 5, Trading Corporation of Pakistan (Pvt) Ltd. Shahrah-
e-Faisal, Karachi v. Murshed Enterprises, PLD 2004 Karachi 407, 415. See also, Vital Chemicals Corporation v.
Silk Chemical Limited, 2022 CLD 320 [Lahore (Multan Bench)], at para 22, Rampal Singh vs Murry, (1900) ILR 22
All 164, at para 3.
47
Trading Corporation of Pakistan (Pvt) Ltd. Shahrah-e-Faisal, Karachi v. Murshed Enterprises, PLD 2004
Karachi 407, 415.
48
Ibid.

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extent bailee complied with the directions of the bailor after the bailee notified the contingency

encountered by him.49

Rights and Liabilities of Bailor

It has been ruled that the liabilities of the bailor are not directly provided in the Act, however the

same could be inferred instead from Chapter VI of the Act, which deals with consequence in case

of breach of contract, where a person claims some compensation or damages on account of breach

of contract then it is incumbent on such person to take such appropriate measures and do all what

is within its power to do in order to lessen, avert or mitigate such damages or loss.50

This however is only correct to a certain extent as from the bare reading of the Act itself, we can

find the liability of the bailor incorporated within Sections 150, 158, 164 and 167 of the Act. We

shall discuss all of these provision hereinbelow. However, it is true that the liability of the bailor

provided by the Act are not as detailed as the liability of the bailee and in such a case we can infer

where needed from Chapter VI of the Act.

The bailor has a duty to disclose any sort of fault of the bailed goods, provided he is aware of such

faults and the said fault is one which materially interferes with the use of them or exposes the

bailee to extraordinary risks.51 If he does not make such disclosure, then he shall be liable for any

damage that is caused to the bailee as a result of these faults.52 Should the goods be bailed for hire,

then bailee is liable for any damage caused whether he was aware of such damage or not. This is

incorporated within Section 150 of the Act which provides that

49
Ibid.
50
Trading Corporation of Pakistan (Pvt) Ltd. Shahrah-e-Faisal, Karachi v. Murshed Enterprises, PLD 2004
Karachi 407, 424.
51
Messrs Rice Export Corporation v. Messrs A.H. Corporation, 2002 CLC 607 [Karachi], 613. See also, Trading
Corporation of Pakistan (Pvt.) Ltd. v. Messrs Punjab Trading Agency, PLD 2017 Sindh 276, at para 44.
52
Ibid.

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 “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. 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 damage sustained.

(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.”

These illustrations shall serve as good examples as they are self-explanatory. Hence, we can gather

that there are four conditions that have to fulfilled for the application of this provision. The first is

that the bailor should be aware of the fault. If he is not aware of the fault, then of course, he shall

not be liable. The second condition is that the said fault will materially interfere with their use of

the goods. In the illustration above, we can see that the horse’s viciousness was materially

interfering with its use. By materially interfering, we mean that the fault is preventing the bailee

from making very good use of the goods or preventing them from being used for their intended

purpose. The third condition is that the said fault exposes the bailee to any extraordinary risk.

Taking the example from the illustration once again, the horse’s viciousness exposed B to an

extraordinary risk. The horse runs away and throws down B who is injured as a result. The last

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condition is that the fault also causes damage to the bailee. Once these four conditions are fulfilled,

the bailor becomes liable for any damage caused as a result of said fault. The provision also

provides that should the goods be bailed for hire, then the bailor is liable for any damage caused

despite the fact of whether he was aware of such fault or not.

Section 163 of the Act provides that

“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.

Illustration

A leaves cow in the custody of B to be taken care of. The cow has a calf B is bound to

deliver the calf as well as the cow to A.”

Thus, the bailor is entitled to any increase or profit that has been accrued from the bailed goods.

The bailee is bound to deliver such increase or profit to the bailor or deliver them as per the bailor’s

instructions, provided that there is no contract to the contrary.53 The illustration shall serve as a

good self-explanatory example. Thus, any sort of increase or profit or accretions in respect of the

bailed goods cannot be a property of the bailee and thus must be returned when the bailed goods

themselves are returned.54

Section 158 of the Act provides that

53
Standard Chartered Bank vs Custodian, Appeal (civil) 762 of 1999, at pg. 14 of the judgment. Available at
https://indiankanoon.org/doc/221891/ (Last visited at 6th September 2023). See also, Motilal Hirabai vs Bai Mani,
(1925) 27 BOMLR 455, 87 Ind Cas 269, at para 18. The court held that “these shares are clearly accessions to the
shares expressly pledged or hypothecated, and the pledger or his representative, the present plaintiff', is entitled to
recover the same.”
54
Ibid, at p. 15.

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 “where, by the 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 the bailment.”

Thus, as briefly mentioned hereinabove, the bailor is to recompensate the bailee for any labour or

skill the bailee exercised at his own expense in respect of the bailed goods, provided of course that

there was no contract to the contrary as per Section 170 of the Act. Should the bailment be for the

bailee’s benefit, then when it comes to the expenses incurred by the bailee, there are two

propositions that will apply. If in using the thing, the borrower is put to any expense, this must be

borne by himself. Thus, for example, if a horse is lent to a friend for a journey, he must bear

expenses of his food during that journey, and to getting him shod, if he should chance to require

it, for it is a burden which is naturally attendant upon the use of the horse.55 Thus, the borrower is

compellable to bear the ordinary expenses; for the loan being for his benefit he must be presumed

to engage to bear the burden as an incident to the use.56

Section 164 of the Act provides that “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.”. Thus, as briefly mentioned hereinabove,

the bailor is also liable to compensate the bailee for any loss sustained by the bailee due to the fact

that the bailor was not entitled to make the bailment or to receive the goods back or to give

directions on the same. Thus, if 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

55
Singh, Contract, p. 697.
56
Ibid.

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goods or to give directions, respecting them.57 In such a case, the bailee does not become

responsible to the actual owner of the goods if he in good faith delivers the goods to the bailor or

returns back as per the directions of the bailor.58 This finds force in Section 166 of the Act which

provides that “if the bailor has no title to the goods, and the bailee, in good faith, delivers them

back to, or according to the directions of, the bailor, the bailee is not responsible to the owner in

respect of such delivery”

In such a case, if a third party claims that he is the actual owner of the goods, then he may bring

an application to court to stop the delivery of the goods and to also to decide who is the actual

owner of the goods as per Section 167 of the Act which provides that “if a person, other than the

bailor, claims goods bailed, he may apply to the Court to stop the delivery of the goods to the

bailor, and to decide the title to the goods.” Also, if the bailee has already delivered the goods to

the person having a better title and yet the bailor sues him, he may prove that such person had a

better right to receive the goods as against the bailor.59 In a case where oil was consigned with the

Railways from Kanpur to Calcutta and reached Calcutta intact. The sender then instructed the

Railways to bring it back to Kanpur. However, before the formalities for the same could be

complied with, the oil was seized by a food inspector, who found it adulterated and had it destroyed

under the order of the High Court. The court held that the railway was not liable as a bailee is

excused from returning the subject matter of the bailment to the bailor or his agent where the

subject matter was taken away from him by authority of law exercised through regular and valid

proceedings.60

57
Singh, Contract, p. 696.
58
Mehran Industries Private Limited, Quetta v. Imran Ahmed Hijazi, 1998 CLC 1091 [Quetta].
59
Singh, Contract, p. 694.
60
Juggilal Kamlapat Oil Mills v Union of India, AIR 1976 SC 227, (1976) 1 SCC 893, 1976 (8) UJ 94 SC, at para 7.

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Effect of Mixture of Goods

What will happen if the goods of the bailor get mixed up with the bailee? Will they still be the

bailor’s goods? Or do they entirely become the bailees’ goods? This is dependent on two

conditions. The first condition is that the bailor gave his consent for the mixing of his bailed goods

alongside the bailee’s own non-bailed goods. In such a case, both the bailor and bailee shall have

interest in the mixture which will be in proportion to their respective shares. The second condition

is that if the consent was not obtained from the bailor and the bailee mixes them anyway, then it

shall be seen whether both goods can be separated or divided. If so, then the goods shall remain in

the parties’ respective ownership. However, the bailee shall have to bear the expenses that incur

due to the separation or division that occurs and for any damages to the goods that arise out of

such separation or division. If the goods are unable to be separated or divided, then the bailee will

have to compensate the bailor for the loss of the goods. The first one finds force in Section 155 of

the Act which provides that “if the bailee, with the consent of the bailor, mixes the goods of the

bailor with his own goods, the bailor and the bailee shall have an interest, in proportion to their

respective shares, in the mixture thus produced.” While the latter two are incorporated within

Sections 156 and 157 respectively. Section 156 provides that

“if the bailee, without the consent of the bailor, mixes the goods of the bailor with his own

goods, and the goods can be separated or divided, the property in the goods remains in the

parties respectively; but the bailee is bound to bear the expense of separation or division,

and any damage arising from the mixture.

Illustration

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 A bails 100 bales of cotton marked with a particular mark to B, without A’s consent mixes

the 100 bales with other bales of his own, bearing a different mark. A is entitled to have his

100 bales returned, and B is bound to bear all the expense incurred in the separation of

the bailes, and any other incidental damage.”

Section 156 of the Act provides that

“If the bailee without the consent of the bailor, mixes the goods of the bailor with his own

goods, in such a manner that it is impossible 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.

Illustration

A bails a barrel of Cape flour worth Rs. 45 to B. B, without A’s consent mixes the flour with

country flour of his own, worth only Rs. 25 a barrel. B must compensate A for the loss of

his flour.”

The illustrations under both respective provisions shall serve well as good self-explanatory

examples.

Bailment by Several Joint Owners

Section 165 of the Act provides that “if several joint owners of goods bail them, the bailee may

deliver them back to, or according to the directions of, one joint owner without the consent of all,

in the absence of any agreement to the contrary”. Thus, where there are several joint owners of

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bailed goods or several bailors, the bailee may return or deliver the goods back as per the directions

of one of the joint owners of the bailed goods, provided that there is no contract to the contrary.61

General Lien of Bankers, Factors, Wharfingers, Attorneys and Policy Brokers

Section 171 of the Act provides 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, bankers, wharfingers, High Court attorneys and policy brokers may retain any bailed goods

as a security for a general balance of account provided that there is no contract to the contrary. No

other person has such a right to retain goods as a security of such balance unless there is an express

condition stipulating the same or unless there is an express contract to that effect.

Termination of Bailment

A contract of bailment like any other contract can become void, voidable or void ab initio

depending upon the circumstances of each and every case. That is to say, whether it is hit by any

of the vitiating elements of a contract such as fraud, mistake, force majeure/Act of God coercion,

whether it lacks the essential elements of a contract such as offer, acceptance, consideration,

capacity, free mutual consent or whether it becomes by way of performance or it becomes breached

or it could be frustrated, thus in such cases, the contract becomes terminated. This much should

61
Singh, Contract, p. 694.

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suffice as anything more would be beyond the scope of this paper.62 However, there is also another

circumstance in which a contract of bailment is terminated, which is when the bailor rescinds the

contract due to the fact that the bailee acts in a way with regards to the bailed goods which is

inconsistent with the terms and conditions stipulated in the bailment as per Section 153 of the Act

which provides that

“A contract of bailment is avoidable at the option of the bailor, if the bailee does any act

with regard to the goods bailed, inconsistent with the conditions of the bailment.

Illustration

A lets to B, for hire, a horse for his own riding. B drives the horse in his carriage. This is,

at the option of A, a termination of the bailment.”

Thus, should the bailee act in a way with the bailed goods which is inconsistent with the terms and

conditions stipulated of the bailment, the bailment becomes voidable at the option of the bailor,

who can either rescind it, thus terminating the contract or if he believes it is beneficial to him, he

can choose to enforce it instead.

Of course, the bailment can also be terminated when the stipulated time period comes to an end or

when the purpose for which the goods were bailed is accomplished. This is the performance of the

contract of bailment as briefly discussed hereinabove.

Gratuitous Bailment

62
For more information on this, see the author’s, “Unenforceability of a Contract: A Comparative Analyses of the
Doctrines of Void, Voidable and Void Ab Initio Contracts in Pakistan”. Available at
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4548021 (Last visited at 6th September 2023).

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Gratuitous means something which is “bestowed or granted without consideration or exchange

for something of value”63 It applies to deeds, bailments, and other contractual agreements.64 Hence,

gratuitous simply means giving something without consideration. One party gives another party

something and he does not want anything in exchange for it. This term has been mostly applied to

gifts. But for our purposes, we shall strictly concern ourselves with bailment. Hence, a gratuitous

bailment is a bailment in which the bailor or bailee is simply obliging the other party without

asking anything in exchange. However, in such a case, where the bailor has lent the goods to the

bailee gratuitously, he may at any time require the return of the goods despite the fact that the

bailor lent them for a specific time or purpose.65 But, if the bailee has acted on the faith of the loan

made for a specified time or purpose in such a manner, that if the goods are demanded back before

the agreed time, the bailee’s loss would be greater than the benefits derived, the bailor must, if he

compels the return, indemnify the bailee for the amount in which the loss occasioned exceeds the

benefits derived.66 This is incorporated within Section 159 of the Act which provides that

“The lender of a thing for use may at any time require its return, if the loan was gratuitous,

even though he lent it for a specified time or purpose. But, if, on the faith of such loan made

for a specified time or purpose, the borrower has acted in such a manner that the return of

the thing lent before the time agreed upon would cause him loss exceeding the benefit

actually derived by him from the loan, the lender must, if he compels the return, indemnify

the borrower for the amount in which the loss so occasioned exceeds the benefit so

derived.”

63
West’s Encyclopedia of American Law, (Thomson Gale, 2nd ed., Vol. 5., 2005), p. 131.
64
Ibid.
65
Singh, Contract, pp. 692-693. See also, Gangineni Kondiah vs Gottipati Pedda Kondappa Naidu, (1910) 20 MLJ
41, at para 1.
66
Ibid.

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This type of contract is terminated by the death of either the bailor or bailee67 as per Section 162

of the Act which provides that “a gratuitous bailment is terminated by the death either of the bailor

or of the bailee.”.

Suits by Bailee and Bailor against a Third Party who is a Wrongdoer

If a third party were to wrongfully deprive the bailee of use or possession of the bailed goods, or

causes any injury/damage to the goods, then in such a case, the bailee becomes entitled use such

remedies as the owner might have used in a similar case where there was no contract of bailment.68

And the bailor and bailee both can institute a suit against such a third party for causing such

deprivation or damage/injury. Section 180 of the Act provides that

“If a third person wrongfully deprives the bailee of the use or possession of the good bailed,

or does them any injury, the bailee is entitled to use such remedies as the owner might have

used in the like case if no bailment had been made; and either the bailor or the bailee may

bring a suit against a third person for such deprivation or injury.”

Section 181 of the Act provides that “whatever is obtained by way of relief or compensation in any

such suit shall, as between the bailor and the bailee, be dealt with according to their respective

interests.” Thus, in case such a suit is brought against the third party, whatever is obtained by either

relief or compensation in such a suit be dealt with according to the respective interests of both the

bailee and bailor.69

Right of Third Person who finds Goods

67
Gangineni Kondiah vs Gottipati Pedda Kondappa Naidu, (1910) 20 MLJ 41, at para 1.
68
Karnataka Electricity Board v Halappa, (1987) 1 TAG 451.
69
Morvi Mercantile Bank Ltd v Union of India, AIR 1965 SC 1954.

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Where a third party has found goods, he has no right to sue the owner of the goods for

compensation for any trouble or expense voluntarily incurred by him to preserve the goods and to

find the owner. However, he has the right to retain the goods until he receives such compensation.

And where the owner of the goods has offered a specific reward for the return of the lost goods, in

such a case, the finder can sue the owner for the reward of finding the goods and also may retain

it until he receives the reward. Section 168 of the Act provides that

“The finder of goods has no right to sue the owner for compensation for trouble and

expense voluntarily incurred by him to preserve the goods and to find out the owner; but

he may retain the goods against the owner until he receives such compensation; and, where

the owner has offered a specific reward for the return of goods lost, the finder may sue for

such reward, and may retain the goods until he receives it”

A finder of goods is considered a bailee and as such will be bound by the duty of reasonable care.70

Early English cases disallowed not only any compensation, but also the right to lien for expenses.71

Where the finder finds a particular thing which is also commonly a subject a sale and which is lost,

the owner cannot be found even with reasonable diligence being used or the owner refuses to pay

the lawful charges to the finder despite being demanded to, the finder can then sell it, provided

that the thing is in danger of perishing or losing the greater part of its value and when the lawful

charges of the finder amount to two-thirds of the value of thing found. This finds force in Section

169 of the Act which provides that

70
Isaack v Clark, (1615) 2 Bulstr 306.
71
Singh, Contract, p. 695. See also, Binstead v Buck, (1776) 2 Wm B1117, 96 ER 660, Nicholson v Chapman,
(1793) 2 Hy B1 254.

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 “When a thing which is commonly the subject of sale is lost, if the owner cannot with

reasonable diligence be found, or if he refuses, upon demand, to pay the lawful charges of

the finder, the finder may sell it—

(1) when the thing is in danger of perishing or of losing the greater part of its value, or,

(2) when the lawful charges of the finder, in respect of the thing found, amount to two-thirds

of its value.”

Thus, there are five essential conditions that have to be fulfilled for the application of this

provision. The first is that the thing found is commonly the subject of sale. The second is that it is

lost. The third is that the owner is unable to be found despite the finder using reasonable diligence

to try and find him or that the owner is not willing to pay the finder’s lawful charges despite being

demanded to. The fourth is that the thing is in danger of perishing or losing a greater part of its

value and lastly, the when the lawful charges of the finder amount to two-thirds to the value of the

thing found. When all these five conditions are fulfilled, the finder then has the right to sell the

thing that he found.

Conclusion

From the discussion hereinabove, we can conclude that a contract of bailment is a contract for the

delivery of goods for a specific purpose whereupon after accomplishing said purpose will be

returned or shall be disposed of according to the directions of the person delivering the goods. The

person who delivers the goods is called the bailer, while the person to whom they are delivered is

called the bailee. Anything that has the effect of putting the goods in the possession of the intended

bailee or anyone else who the bailee has authorized to hold them on this behalf from the bailor will

amount to delivery of the bailment. There are two types of deliveries, namely actual and

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constructive deliveries. The former is when the bailor hands over physical possession of the goods

to the bailee. The latter is when there is no change of physical possession, goods remaining where

they are, but something is done which has the effect of putting them in the possession of the bailee.

A bailee is a person to whom goods are deposited under a contract for a certain purpose and he is

bound to return the goods so deposited when the purpose is accomplished. Or he will dispose of

such goods as per the directions of the bailor. A contract of bailment also incorporates an element

of trust between the bailor and bailee for the goods specified in the contract. Thus, an obligation

in equity amounting to a trust is implicit in every contract for bailment and a bailee of the goods

is subject to the same obligations as a trustee. Thus, he has to take care of the goods as reasonably

as possible as an ordinary reasonable man would. That is to say, he is bound to act as a man of

ordinary prudence, but what is more important is that the standards of care required of him must

be of a prudent man under similar circumstances and with reference to goods of the same bulk,

quality and value. The bailee is to compensate the bailor if damage is caused to the goods due to

him making unauthorized use of them, that is to say, he did not use the goods according to the

terms and conditions stipulated in the contract of bailment between them. In fact, he is even liable

to compensate the bailor if the damage to the goods caused during the unauthorized use of the

goods. The bailee also has the duty of returning the bailed goods or deliver the bailed goods as per

the directions of the bailor without the bailor having to demand it when the stipulated time period

for the bailment ends or when the purpose for which the goods were bailed is accomplished. Should

the bailee be unable to return the goods at the proper time, then he is liable for any deterioration,

loss or destruction caused to the goods during such time. If the bailee in accordance with the

purpose of the bailment rendered his service by exercising any labour or skill in respect of the

bailed goods, he has a right to retain the goods unless and until he receives his remuneration for

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such services, he rendered in respect of them, provided of course that there was no contract made

for the contrary. Where the bailed goods become damaged, the burden of proof is on the bailee to

ensure that he had properly discharged his duty of care on the bailed goods. The loss of the subject-

matter of the bailment is itself prima facie evidence of the negligence of the bailee. In order to

escape liability for the loss occurred the onus of proof will be upon the bailee to show that he had

taken necessary standard of care as imposed upon him by the statute. Thus, the onus to prove that

proper steps had been taken by the as bailee for discharge of his duty imposed upon him would

initially lie on him. However, once it is established that the bailee fulfilled his duty of reasonable

care of the goods entrusted to him, he is not liable for any loss, destruction or deterioration of the

bailed goods, provided of course that there was no contract to the contrary. The bailor has a duty

to disclose any sort of fault of the bailed goods, provided he is aware of such faults and the said

fault is one which materially interferes with the use of them or exposes the bailee to extraordinary

risks. If he does not make such disclosure, then he shall be liable for any damage that is caused to

the bailee as a result of these faults. Should the goods be bailed for hire, then bailee is liable for

any damage caused whether he was aware of such damage or not. The bailor is also entitled to any

increase or profit that has been accrued from the bailed goods, thus the bailee is bound to deliver

such increase or profit to the bailor or deliver them as per the bailor’s instructions, provided that

there is no contract to the contrary. The bailor is also bound to recompensate the bailee for any

labour or skill the bailee exercised at his own expense in respect of the bailed goods, provided of

course that there was no contract to the contrary. The bailor is also liable to compensate the bailee

for any loss sustained by the bailee due to the fact that the bailor was entitled to make the bailment

or to receive the goods back or to give directions on the same. He is also liable to compensate the

bailee for any loss sustained by the bailee due to the fact that the bailor was not entitled to make

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the bailment or to receive the goods back or to give directions on the same. In such a case, the

bailee does not become responsible to the actual owner of the goods if he in good faith delivers

the goods to the bailor or returns back as per the directions of the bailor. In such a case, if a third-

party claims that he is the actual owner of the goods, then he may bring an application to court to

stop the delivery of the goods and to also to decide who is the actual owner of the goods. In a case

where the bailor’s goods are mixed with bailee’s goods, then it shall be seen whether the bailor

gave his consent for the mixing of his bailed goods alongside the bailee’s own non-bailed goods.

In such a case, both the bailor and bailee shall have interest in the mixture which will be in

proportion to their respective shares. If he did not give his consent, then the bailee mixes the goods

anyway, then it shall be seen whether both goods can be separated or divided. If so, then the goods

shall remain in the parties’ respective ownership. However, the bailee shall have to bear the

expenses that incur due to the separation or division that occurs and for any damages to the goods

that arise out of such separation or division. If the goods are unable to be separated or divided,

then the bailee will have to compensate the bailor for the loss of the goods. Where there are several

joint owners of bailed goods or several bailors, the bailee may return or deliver the goods back as

per the directions of one of the joint owners of the bailed goods, provided that there is no contract

to the contrary. Bankers, wharfingers, High Court attorneys and policy brokers may retain any

bailed goods as a security for a general balance of account provided that there is no contract to the

contrary. No other person has such a right to retain goods as a security of such balance unless there

is an express condition stipulating the same or unless there is an express contract to that effect. A

contract of bailment like any other contract can become void, voidable or void ab initio depending

upon the circumstances of each and every case or when the bailor rescinds the contract due to the

fact that the bailee acts in a way with regards to the bailed goods which is inconsistent with the

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terms and conditions stipulated in the bailment. The bailment can also be terminated when the

stipulated time period comes to an end or when the purpose for which the goods were bailed is

accomplished. A gratuitous bailment is a bailment in which the bailor or bailee is simply obliging

the other party without asking anything in exchange. However, in such a case, where the bailor has

lent the goods to the bailee gratuitously, he may at any time require the return of the goods despite

the fact that the bailor lent them for a specific time or purpose. But, if the bailee has acted on the

faith of the loan made for a specified time or purpose in such a manner, that if the goods are

demanded back before the agreed time, the bailee’s loss would be greater than the benefits derived,

the bailor must, if he compels the return, indemnify the bailee for the amount in which the loss

occasioned exceeds the benefits derived. But, if the bailee has acted on the faith of the loan made

for a specified time or purpose in such a manner, that if the goods are demanded back before the

agreed time, the bailee’s loss would be greater than the benefits derived, the bailor must, if he

compels the return, indemnify the bailee for the amount in which the loss occasioned exceeds the

benefits derived. This type of contract is terminated by the death of either the bailor or bailee. If a

third party were to wrongfully deprive the bailee of use or possession of the bailed goods, or causes

any injury/damage to the goods, then in such a case, the bailee becomes entitled use such remedies

as the owner might have used in a similar case where there was no contract of bailment. And the

bailor and bailee both can institute a suit against such a third party for causing such deprivation or

damage/injury. In case such a suit is brought against the third party, whatever is obtained by either

relief or compensation in such a suit be dealt with according to the respective interests of both the

bailee and bailor. Where a third party has found goods, he has no right to sue the owner of the

goods for compensation for any trouble or expense voluntarily incurred by him to preserve the

goods and to find the owner. However, he has the right to retain the goods until he receives such

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compensation. And where the owner of the goods has offered a specific reward for the return of

the lost goods, in such a case, the finder can sue the owner for the reward of finding the goods and

also may retain it until he receives the reward. Where the finder finds a particular thing which is

also commonly a subject a sale and which is lost, the owner cannot be found even with reasonable

diligence being used or the owner refuses to pay the lawful charges to the finder despite being

demanded to, the finder can then sell it, provided that the thing is in danger of perishing or losing

the greater part of its value and when the lawful charges of the finder amount to two-thirds of the

value of thing found.

Electronic copy available at: https://ssrn.com/abstract=4563976