Bailment is the process of making delivery of an asset or other type of property.

Generally, this type of transaction involves the owner of the assets choosing to temporarily place them in the control of another individual. The person who delivers the asset is usually known as the bailor, while the recipient of the assets is known as the bailee. The process of bailment is not a casual situation where an individual is asked to function as acaretaker for a short period of time. Part of the procedure with bailment it that a legal relationship is established between the owner and recipient. While the owner retains full rights to the assets, the physical possession of the assets is granted to the recipient. Along with the physical possession of the property or assets, the bailee may also be granted certain powers of administration that are related to management of the assets.Along with defining the rights of management during the time that the bailment is in effect, the legal documentation usually also contains specific instructions on how long the state ofbailment will be in effect. Typically, most bailment agreements also include some sort of out clauses that are related to both the bailor and the bailee. For example, the bailor could revoke the bailment if there was evidence that the bailee was mismanaging the asset. At the same time, the bailee would be able to terminate the arrangement and return the property if there was a perception that the bailor is not living up to the terms of the agreement in some manner.A legal state of bailment can be a great option when the owner will be unavailable to manage or oversee an asset for a short period of time. A bailee may be designated that can manage rental property in the absence of the owner, or perhaps oversee a stock portfolio for a given period of time. The idea behind the bailment is to ensure that the asset is in good hands, even if the owner is not in a position to manage the asset at the present time. Delivery of assets into the possession of another person is nothing to be taken lightly. A great deal of trust must exist between the owner and the bailee in order for the business relationship to work. Great care should be taken before entering into a bailment agreement, whether as an owner granting temporary care of assets to another individual, or as the person who is being asked to serve as a bailee. Chapter 49 Bailments Outline The key points in this chapter include:1. The elements of a bailment.2. The rights and duties of a bailee.3. The rights and duties of a bailor.4. Special features of specific bailments.The subject of this chapter is bailments. A bailment is formed by the delivery of personal property, without transfer of title, by a bailor to a bailee, usually under an agreement for a particular purpose, after which the property is returned or otherwise disposed of. I. ELEMENTS OF A BAILMENT A. PERSONAL PROPERTY Only personal property (tangible or intangible) is bailable. B. DELIVERY OF POSSESSION (WITHOUT TITLE) A bailee must (1) be given exclusive possession and control of the property and (2) knowingly accept it. Delivery may be actual or constructive. C. AGREEMENT THAT THE PROPERTY BE RETURNED OR DISPOSED OF The agreement must provide for the return of the property to the bailor or a third person or for its disposal by the bailee. II. ORDINARY BAILMENTS The three types of ordinary bailments are: (1) Bailment for the sole benefit of the bailor, (2) bailment for the sole benefit of the bailee, and (3) bailment for their mutual benefit. III. RIGHTS AND DUTIES OF THE BAILEE A. RIGHTS OF THE BAILEE 1. Right of Possession Temporary control and possession of property that ultimately is to be returned to the owner. During a bailment, a bailee can recover damages from any third persons for damage or loss to the property. 2. Right to Use Bailed Property The extent to which bailees can use the property depends on the contract. If no provision is made, the extent depends on how necessary it is for the goods to be at the bailee’s disposal. 3. Right of Compensation A bailee has a right to be compensated as agreed and to be reimbursed for costs and services in the keeping of the property. To enforce this right, a bailee can place a lien on the property (see Chapter 31). 4. Right to Limit Liability Bailees can limit their liability as long as— a. Limitations Are Called to the Attention of the Bailor Fine print on the back of a ticket stub is not sufficient. b. Limitations Are Not Against Public Policy Exculpatory clauses are carefully scrutinized by the courts and, in bailments, often held to be illegal. If a bailee attempts to exclude liability for his or her own negligence, the clause is unenforceable. B. DUTIES OF THE BAILEE 1. Duty of Care Bailees must exercise care over the property in their possession (or be liable in tort—see Chapter 6). The appropriate standard is— a. Slight Care b. Great Care In bailments for the sole benefit of the bailor, the bailee is liable only for gross negligence. In bailments for the sole benefit of the bailee, the bailee is liable for even slight negligence.

c. Ordinary Care In bailments for the mutual benefit of both parties, the bailee is liable for a failure to use reasonable care. 2. Duty to Return Bailed Property When a bailment ends, the bailee must relinquish the property. Failure to do so is a breach of contract (unless the property is destroyed, lost, or stolen through no fault of the bailee, or given to a third party with a superior claim) and could result in liability for conversion. 3. Delivery of Goods to the Wrong Person A bailee may be liable if the property is given to the wrong person. 4. Presumption of Negligence When the bailee has the property and damage occurs that normally results only from someone’s negligence, the bailee’s negligence is presumed. The bailee must prove that he or she was not at fault. IV. RIGHTS AND DUTIES OF THE BAILOR A. RIGHTS OF THE BAILOR Complementary to the bailee’s duties— 1. The property will be protected with reasonable care while in the bailee’s possession. 2. The bailee will use the property as agreed (or not at all). 3. The property will be relinquished according to the bailor’s directions. 4. The bailee will not alter the goods except as agreed. 5. The bailor will not be bound by any limitations on the bailee’s liability unless these limitations are known and are enforceable by law. 6. Repairs or service will be done without defective workmanship. B. DUTIES OF THE BAILOR A bailor has a duty to provide the bailee with goods that are free from hidden defects that could injure the bailee. a. In a mutual-benefit bailment, bailor must notify bailee of all known defects and any hidden defects that the bailor knew of or could have discovered with reasonable diligence and proper inspection. b. In a bailment for the sole benefit of the bailee, the bailor must notify the bailee of any known defects. 2. To Whom Does Liability Extend? To anyone who might be expected to come in contact with the goods. A bailor may also be liable under UCC Article 2A’s implied warranties V. TERMINATION OF BAILMENTS Bailments for a specific term end when the term ends. If no term is specified, a bailment can be terminated by mutual agreement of the parties, a demand by either party, completion of the purpose of the bailment, an act by the bailee that is inconsistent with the terms of the bailment, or the operation of law. VI. SPECIAL FEATURES OF SPECIFIC BAILMENTS A. DOCUMENTS OF TITLE AND ARTICLE 7 Documents of title are subject to UCC Article 7 (unless federal law applies). 1. What a Document of Title Is A receipt for goods in the charge of a bailee-carrier or a bailee-warehouser and a contract for the shipment or storage of identified goods. Includes bills of lading, warehouse receipts, and delivery orders. 2. Negotiability of a Document of Title A document of title is negotiable if it specifies that goods are to be delivered to bearer or to the order of a named person. If so— a. The possessor of the document is entitled to receive, hold, and dispose of the document and the goods it covers. b. A good faith purchaser of the document may acquire greater rights to the document and the goods it covers than the transferor had or had the authority to convey (he or she may take free of the claims and defenses of prior parties). 3. Due Negotiation Due negotiation means that the buyer of a document of title takes it (1) in good faith, for value, and without notice of a defense against or a claim to it, and (2) in the regular course of business or financing (not in settlement or payment of a money obligation). 4. Goods Delivered According to a Thief’s Instructions A bailee who receives goods from a thief and acts according to that individual’s instructions is not liable to the goods’ true owner (if he or she acted in good faith and observed reasonable commercial standards). B. COMMON CARRIERS Common carriers are publicly licensed to provide transportation services to the general public. 1. Strict Liability Common carriers are absolutely liable, regardless of negligence, for all loss or damage to goods in their possession, except if it is caused by an act of God, an act of a public enemy, an order of a public authority, an act of the shipper, or the nature of the goods. 2. Limits to Liability Common carriers can limit their liability to an amount stated on the shipment contract. The shipper bears any loss occurring through its own fault or improper crating or packaging procedures. 3. Connecting Carriers When connecting carriers are involved under a through bill of lading, the shipper can recover from the original carrier or any connecting carrier. Normally, the last carrier is presumed to have received the goods in good condition. C. WAREHOUSE COMPANIES Warehouse companies are liable for loss or damage to property resulting from negligence [UCC 7–204(1)]. A warehouse company can limit the dollar amount of liability, but the bailor must be given the option of paying an increased storage rate for an increase in the liability limit [UCC 7–204(2)].

D. INNKEEPERS Those who provide lodging to the public for compensation as a regular business are strictly liable for injuries to guests (not permanent residents). 1. Hotel Safes In many states, innkeepers can avoid strict liability for loss of guests’ valuables by providing a safe. Statutes often limit the liability of innkeepers for articles that are not kept in the safe. 2. Parking Facilities If an innkeeper provides parking facilities, and the guest’s car is entrusted to the innkeeper, the innkeeper will be liable under the rules that pertain to parking lot bailees (ordinary bailments).

Essentials of a bailment 1. There should be a contract: A bailment is based on a contract, i.e., it is created by a contract. The contract of bailment may be express or implied. In some cases e.g., in case of finder of goods, a contract of bailment can be implied by law. 2. Delivery of goods by one person to another: In bailment, there must be delivery of goods by one person to another. However, the word, 'delivery' is very wide. It may be actual or constructive. It should be noted that in bailment, only possession of the goods passes from one person to another. Possession means control of goods to the exclusion of others. Mere custody of goods as against possession is not sufficient. For example, a master while giving his goods to his servant retains the possession with him and parts only with the custody of the goods. Thus to create bailment, there must be delivery of goods. Examples: (1) A delivers his watch to a watch-maker for repair. (2) A lady handed over her old jewellery to a jeweler for melting and making it into a new one. Every evening, she used to collect the half-made jewellery and put in into a box kept in the shop of the jeweler. She used to keep the key of the box with her. One day the box was stolen. Held, the jeweler was not liable as the jeweler had re-delivered the jewellery to the lady and as such, the jeweler could not any more be regarded as a bailee. The lady must bear the loss herself. [Kaliaperumal Pillai v. Visolakshmi] It should be noted that in bailment, only the possession of the goods is transferred not the ownership. Again, only movable goods can be bailed as immovable goods cannot be delivered. 3. The goods are delivered for certain purpose: The purpose may vary from safe-keeping or safe custody to repairing or changing the form of the goods. Examples: (1) A leaves his suit-case with a Railway Cloak Room for safe custody. (2) A gives his watch for repair to a watch-maker. (3) A gives a piece of cloth to a tailor for stitching it into a shirt. 4. The same goods must be returned: For a transaction of bailment, it is necessary that the same goods must be returned. Where money is deposited in a savings bank account or any other account, it is not a transaction of bailment because the bank is not going to return the same currency notes but will return only an equivalent amount. However, where money or valuables are kept in safe custody, it will amount to a transaction of bailment as these will be returned in specie. It should be noted that return of goods in specie does not mean that their form cannot change. For example, old ornaments can be changed into new one. A piece of cloth can be stitched into a shirt. Consideration is not necessary in case of Contract of Bailment : In case of bailment for mutual benefit of the bailor and bailee, consideration is there for both the parties e.g., A gives his watch for repair to B for Rs. 10. For A, consideration is repair of his watch and for B, consideration is Rs. 10. However, in case of bailment either for the benefit of the bailor or bailee alone, consideration in the form of something in return is not there. In such cases the detriment suffered by the bailor in parting with the possession of goods is considered as a sufficient consideration to support the promise on the part of the bailee to return the goods.

Title : THE INDIAN CONTRACT ACT,1872 CHAPTER IX 148."Bailment" "bailor",and "bailee" defined. A " bailment " is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the "bailor". The person to whom they are delivered is called, the " bailee ". Explanation.-If a person already in possession of the goods of another contracts to hold them as a bailee, he thereby becomes the bailee, and the owner becomes the bailor of such goods, although they may not have been delivered by way of bailment. 149.Delivery to bailee how made. 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. 150.Bailors duty to disclose faults in goods bailed.150.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 materially57.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. 1*151. Care to be taken by bailee.-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.2* 1*152.Bailee when not liable for loss,etc., of thing bailed.1*152.Bailee when not liable for loss,etc., of thing bailed.-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 151.153.Termination of bailment by bailees act inconsistent with conditions.153. Termination of bailment by bailees act inconsistent with conditions.-A contract of bailment is avoidable at the option of the bailor, if the bailee does any ad 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. 154.Liability of bailee making unauthorized use of goods bailed. 154. Liability of bailee making unauthorized use of goods bailed.-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 1 The responsibility of the Trustees of the Port of Madras constituted under the Madras Port Trust Act, 1905 (Mad. 2 of 1905), in regard to goods has been declared to be that of a bailee, under these sections, without the qualifying words " in the absence of any special contract" in s. 152, see s. 40 (1) of that Act. 2 As to railway contracts, see the Indian Railways Act, 1890 (9.of 1890), s. 72. As to the liability of common carriers, see the Carriers Act, 1865 (3 of 1865), s. 8. 58.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 Calcutta from B expressly to march to Benares. A rides with clue care, but marches to Cuttack instead. The horse accidentally falls and is injured. A is liable to make compensation to B for the injury to the horse. 155.Effect of mixture, with bailors consent, of his goods with bailees. 155. Effect of mixture, with bailors consent, of his goods with bailees. 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. 156.Effect of mixture without bailors consent, when the goods can be separated. 156.Effect of mixture without bailors consent, when the goods can be separated.-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 re-mains 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 A bails 100 bales of cotton marked with a particular mark to B. B, without As 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 bales, and any other incidental damage. 157.Effect of mixture, without bailors consent, when the goods cannot be separated. 157. Effect of mixture, without bailors consent, when the goods cannot be separated.-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 As 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. 158.Repayment, by bailor, of necessary expenses. 158.Repayment, by bailor, of necessary expenses.-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. 159.Restoration of goods lent gratuitously.-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 59.dat d return of d thing lent before d 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. 160.Return of goods bailed on expiration of time or accomplishment of purpose.-It is the duty of the bailee to return, or deliver according to the bailors 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.1*161.Bailees responsibility when goods are not duly returned.1*161. Bailees responsibility when goods are not duly returned.If, by the default 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.2*162.Termination of gratuitous bailment by death.-A gratuitous bailment is terminated by the death either of the bailor or of the bailee.163.Bailor entitled to increase or profit from goods bailed.-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. Illustrdtion A leaves a 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.164.Bailors responsibility to bailee.-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.165.Bailment by several joint owners. 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. 166.Bailee not responsible on re-delivery to bailor without title.-If the bailor has no title to the goods, and the bailee, in good faith, delivers them back to, or according to the directions of, the1 S. 161 has been declared to apply to the responsibility of the Trustees of the Port of Madras as to goods in their possession, see the Madras Port Trust Act, 1905 (Mad. 2 of 1905). 167.Right of third person claiming goods bailed.-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.168.Right of finder of goods; may sue for specific reward offered.-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. 169.When finder of thing commonly on sale may sell it.-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. 170. Bailees particular line.-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 gives, cloth to B, a tailor, to make into a coat. B promises A to deliver the coat as soon as it is finished, and to give a three months credit for the price. B is not entitled to retain the coat until he is paid. 171.General line of bankers, factors, wharfingers, attorneys and policybrokers.-Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, foot note See the Indian Evidence Act, 1872 (1 of 1872), s. 117 61.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.1* Bailments of Pledges 172."Pledge" "pawnor",and "pawnee" defined.-The bailment of goods as security for payment of a debt or performance of a promise is called "pledge ". The bailor is in this case called the " pawnor ". The bailee is called the " pawnee".173.Pawnees right of retainer.-The pawnee may retain the goods pledged, not only for payment of the debt or the performance of the promise, but for the interest of the debt, and all necessary expenses incurred by him in respect of the possession or for the preservation of the goods pledged. 174.Pawnee not to retain for debt or promise other than that for which goods pledged. Presumption in case of subsequent advances.-The pawnee shall not, in the absence of a contract to that effect, retain the goods pledged for any debt or promise other than the debt or promise for which they are pledged; but such contract, in the absence of anything to the contrary, shall be presumed in regard to subsequent advances made by the pawnee. 175.Pawnees right as to extraordinary expenses incurred. The pawnee is entitled to receive from the pawnor extraordinary expenses incurred by him for the preservation of the goods pledged. 176.Pawnees right where pawnor makes default.-If the pawnor makes default in payment of the debt, or performance, at the stipulated time of the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the pawnor upon the debt or promise, and retain the goods pledge as a collateral security; or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale. If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawnor. 1 As to lien of an agent, see s. 22 1, infra. As to lien of a Railway Administration, see the Indian Railways Act, 1890 (9 of 1890), 62.177.Defaulting pawnors right to redeem. 177.Defaulting pawnors right to redeem.-If a time is stipulated for the payment of the debt, of performance of the promise, for which the pledge is made, and the pawnor makes default in payment of the debt or performance of the promise at the stipulated time, he may redeem the goods pledged at any subsequent time before the actual sale of them ; but he must, in that case, pay, in addition, any expenses which have arisen from his default. 178.Pledge by mercantile agent. 2*[178. Pledge by mercantile agent.-Where a mercantile agent is, with the consent of the owner, in possession of goods or the document of title to goods, any pledge made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to make the same ; provided that the pawnee acts in good faith and has not at the time of the pledge notice that the pawnor has not authority to pledge. Explanation.-In this section, the expressions " mercantile agent and " documents of title " shall have the meanings assigned to them in the Indian Sale of Goods Act, 1930. (3 of 1930). 178A. Pledge by person in possession under voidable contract.- When the pawnor has obtained possession of the goods pledged by him under a contract voidable under section 19 or section 19A, but the contract has not been rescinded at the time of the pledge, the pawnee acquires a good title to the goods, provided he acts in good faith and without notice of the pawnors defect of title.] 179.Pledge where pawnor has only a limited interest.-Where a person pledges goods in which he has only a limited interest, the pledge is valid to the extent of that interest. Suits by bailees or bailors against wrong-doers 180.Suit by bailor or bailee against wrongdoer.-If a third person wrongfully deprives the bailee of the use or possession of the goods 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.------------------------------------------……….--------------1 For limitation. see the Indian Limitation Act, 1908 (9 of 1908), Sch. 1, Article 145.2 Ss. 178 and 178A were subs. by Act 4 of 1930, s. 2, for the original s. 178.---------------------------------------------------------------------63. 181. Apportionment of relief or compensation obtained by such suits.-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,

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