Bailment and Pledge

BAILMENT

 According to Sec 148 of the Contract Act - “A

bailment is a transaction whereby one person
delivers goods to another person for some
purpose, upon a contract that they shall,
when the purpose is accomplished, be
returned or otherwise disposed off according
to the directions of the person delivering
them.”
Examples of Bailment

 Lending a book to a friend.

 Delivering of cloth to tailor for stitching
 Delivering a bike or scooter for repair
 Depositing goods for safe custody
BAILOR & BAILEE

 The person who delivers the goods is called

the Bailor and the person to whom they are
delivered is called the Bailee. The transaction
is called a Bailment.
Essential Features

 Itis a delivery of movable goods, which can be

actual or constructive.
 Actual: Physical possession of the goods is given
 Constructive: eg. Goods stored in godown can be
delivered by handing over the key, whey the goods
are in transit like sea or railway, handing over the bill
of landing or railway slip, etc.
 The goods are delivered for some purpose
 The goods are to be returned or disposed off
according to the directions of the bailor.
TYPES OF BAILMENT

 GRATUITOUS BAILMENT
Bailment in which neither the bailor nor the bailee
is entitled to any remuneration.
eg- lending a book to friend

 Non-gratuitous Bailment/ Bailment for reward

Bailment in which either the bailor or the bailee is
entitled to remuneration is called Non-Gratitious
Bailment.
eg- Motor Car let out for Hire.
Difference btw Sale & Bailment

 Insale, the ownership is transferred and he is

under no obligation to return the goods.

 InBailment, only possession is transferred

and not the ownership of goods.
 Duties of Bailee

1.Duty to take reasonable care of goods delivered to him.

(Sec 151)

2.Duty not to make unauthorised use of goods entrusted to

him.

3.Duty not to mix goods bailed with his own goods.

4. Duty to return the goods

5.Duty to deliver any accretion to the goods

Duties of bailor

1. Duty to disclose faults in goods bailed.

a) Gratuitous : a gratuitous bailor will not be liable for damages
arising to the bailee from defects of which he was ignorant.
b) Non-Gratuitous: a bailor for reward is responsible for all defects
whether he is aware of the defects or not.

2. Duty to repay necessary expenses in case of gratuitous

bailment.( eg- horse and its feeding expenses)

3. Duty to repay any extraordinary expenses in case of non-

gratuitous bailment.(eg- horse falls ill , then his medical
expenses)
4. Duty to receive the goods back.

5. Duty to indemnify bailee: due to defective title.

 Eg. A gives his neighbor's scooter to B for use without
the neighbor's permission. The neighbor sues B and
receives compensation. A is bound to indemnify B for
his losses.
Rights of Bailor

1. Enforcement of Bailee’s Duties: The duties of

bailee are the rights of the bailor.

2. Right to terminate bailment if the bailee uses

the goods wrongfully

3. Right to demand return of goods at any time

in case of gratuitous bailment
Rights of the Bailee

1. Enforcement of Bailor’s Duties.

2. Rights to deliver goods to one of the several joint

bailors.

3. Right to deliver goods, in good faith, to bailor

without title.

4. Right of lien.
Right of Lien

 Lien means the right to retain property until

all debt or claim is paid. It means that if the
lawful charges of the bailee are not paid, then
he has right to retain the goods till all
expenses are met.
Types of Lien

There are two types of lien:-

1. General Lien
2. Particular Lien
General Lien

 GeneralLien means the right to retain all the

goods of the other party until all claims of the
holder are paid.

 Eg- If there are two loans from bank by a

same person, then the bank has a right to
retain the collateral security of both the loans
even if the amount of first loan has been paid.
Particular Lien

A bailee has a particular lien when he has

rendered any service upon an article and is
entitled to some remuneration for it.

 Rightto retain only those particular goods in

respect of which the charges are due.
 Conditions

(a) Bailee must have rendered some service in relation to the

thing bailed , must be entitled to some remuneration- and
must be unpaid
(b) Service rendered by the bailee must be one involving the
exercise of labour or skill in respect of the goods bailed.
(c) Services must have been performed in full directions of bailor
(d) There must not be an agreement to perform the services on
credit.
(e) The goods must be in possession of the bailee. Bailee loses
the lien, if possession is lost
(f) Must not be any contract to contrary.
FINDER OF LOST GOODS
FINDER OF THE LOST GOODS

A finder of lost goods is under no obligation

to take charge of the goods when he comes
across them. But if he does take charge , he
becomes responsible for the goods like a
bailee in the gratitious bailment.
Rights of Finder

1. Right to retain posession of the goods until the true owner is

found.

2. Right of lien over the goods for the expenses.

3. Right to sue for rewards.

4. Right to Sale:
a) when the thing is in danger of perishing or of losing the
greater part of its value,
b) When the lawful charges of the finder, in respect of the
thing found, amount to two-third of its value.
Duties of Finder

 Duty to find the true owner of the goods

 Duty to take reasonable care of the goods as

a bailee.
PLEDGE
PLEDGE

“ The bailment of goods as security for

payment of a debt or performance of a
promise is called a pledge”.

Eg. A borrows Rs. 100 from B and keeps his

watch as security. The bailment of watch is
called a pledge.
Thus pledge is only a special kind of bailment.
PLEDGER & PLEDGEE

 The bailor in this case is called a pledger/

pawnor and the bailee is called the pledgee/
pawnee.
Diff btw Bailment & Pledgee
BAILMENT
The delivery of goods may be for any
purpose, e.g., for repairs, safe custody,
etc.
In case of default by a bailor, the bailee
may retain the goods or sue the bailor
for non-payment of the dues.
The bailee may use the goods if the
contract of bailment so provides.
PLEDGE
The delivery is for specific purpose i.e. to
provide a security for a loan.
In case of default by the pledger, the
pledgee may retain the goods , he may
also sell the goods after giving a
reasonable notice of sale to the pledger.
The pledgee can’t use the goods which are
pledged to him.
RIGHTS OF PLEDGER

1. Enforcement of pledgee’s duty: for instance

the pledgee makes an unauthorized sale
without giving notice.

2. Defaulting pledger right to redeem i.e right

to redeem the debt at any subsequent time
before the actual sale of goods pledged.
DUTIES OF PLEDGER

1. To compensate pledgee for any extraordinary

expenses incurred by him.

2. To meet his obligations on stipulated date

and comply with the terms of the contract.
 RIGHTS OF PLEDGEE

1. Right of Retainer: right of particular lien

2. Right of retainer for subsequent advances

3. Right of extraordinary expenses: but he cannot retain the

goods, if such expenses are not paid. He has only a right to
sue the pledger for recovery of such extraordinary expenses

4. Right to sue the pledger or sell the goods on default of the

pledger.
DUTY OF PLEDGEE

 Similar to Bailee’s duties