BAILMENT 

Meaning

Bailment refers to the delivery of goods by one person to another person for a specific purpose, with the condition that the goods will be returned or disposed of according to the directions of the person who delivered them.

Under sec 148 of the Indian Contract Act, “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 who delivers the goods is called the “bailor,” and the person who receives the goods is called the “bailee.”

Essentials of bailment

The essentials of bailment under the Indian Contract Act, 1872 are as follows:

1. Delivery of Goods: The first essential requirement for bailment is the delivery of goods by the bailor to the bailee. Delivery can be actual or constructive.

2. Purpose: The second essential requirement for bailment is that the delivery of goods must be for a specific purpose, as agreed upon by both parties. The purpose can be safekeeping, transportation, repair, or any other purpose agreed upon.

3. Consent: The bailment must be made with the consent of both the bailor and bailee.

4. Lawful purpose: The purpose of the bailment must be lawful, and the goods themselves must be lawful.

5. Return of Goods: The goods must be returned to the bailor after the purpose of the bailment is fulfilled, or as per the bailor’s instructions.

Kinds of bailment

(I) Voluntary and involuntary bailment

• Voluntary Bailment: A voluntary bailment is a type of bailment where the goods are delivered to the bailee with the consent of the bailor. The bailment is created by the act of the parties and the bailee accepts the goods voluntarily. For instance, if you give your car to a friend to use for a specific purpose, it is a voluntary bailment because you gave your car with your consent and your friend accepted it willingly.
• Involuntary Bailment: Involuntary bailment, on the other hand, is created when the goods come into the possession of the bailee without the consent of the bailor. This can happen in situations such as theft, finding lost goods, or through legal processes such as seizure. In this type of bailment, the bailee has a duty to take reasonable care of the goods until the rightful owner is identified or until the goods are returned to their rightful owner. For example, if someone finds a lost wallet on the street and takes possession of it, it is an involuntary bailment because the goods came into their possession without their consent or knowledge.

(II) Gratuitous and non-gratuitous bailment

• Gratuitous Bailment: Gratuitous bailment is a type of bailment where the bailee does not receive any payment or consideration for the bailment. The bailor entrusts the goods to the bailee for safekeeping or other purposes without any payment or reward. For instance, if you lend your laptop to a friend for a day, it is a gratuitous bailment because you did not receive any payment or compensation for lending your laptop.
• Non-gratuitous Bailment: Non-gratuitous bailment, also known as bailment for reward, is a type of bailment where the bailee receives payment or consideration for the bailment. The bailee is hired by the bailor to provide a service, such as transportation or storage of goods, and receives payment for their services. For instance, if you hire a moving company to transport your furniture to a new location, it is a non-gratuitous bailment because you are paying for the service provided by the moving company.

Rights of bailor

As per the Indian Contract Act, 1872, The bailor enjoys certain rights with respect to the goods that are the subject matter of the bailment. Here are the rights of a bailor:

1. Right to receive the goods back: The bailor has the right to receive the goods back from the bailee once the purpose of bailment is over or as per the agreed terms of the bailment contract.

2. Right to claim damages for unauthorized use: The bailor has the right to claim damages from the bailee if he uses the goods in a way that is not authorized under the terms of the bailment contract.

3. Right to terminate the bailment: The bailor has the right to terminate the bailment at any time before the bailee has completed the purpose of the bailment or before the agreed time period.

4. Right to receive compensation for any damage: The bailor has the right to receive compensation for any damage caused to the goods during the bailment period due to the negligence of the bailee.

5. Right to demand specific performance: If the bailee fails to perform his obligations under the bailment contract, the bailor has the right to demand specific performance or to cancel the contract.

Rights of bailee

Under the Indian Contract Act, 1872, a bailee is a person who receives the possession of goods from the bailor for a specific purpose and has certain rights and responsibilities in relation to those goods. Here are some of the rights of a bailee:

1. Right of retention: A bailee has the right to retain the goods as long as he has any legitimate claim against the bailor for the services provided or expenses incurred in relation to the goods.

2. Right to receive remuneration: If the bailment is for reward, the bailee has the right to receive remuneration for his services.

3. Right to sue third parties: A bailee has the right to sue third parties who interfere with his possession or use of the goods.

4. Right to be indemnified: A bailee has the right to be indemnified by the bailor for any loss or damage suffered by him due to defects in the goods or the bailor’s title to the goods.

5. Right to return the goods: A bailee has the right to return the goods to the bailor or dispose of them in accordance with the bailor’s instructions once the purpose of the bailment is fulfilled.

6. Right to limit liability: A bailee has the right to limit his liability for any loss or damage to the goods, provided such limitation is not contrary to the terms of the bailment contract.

Duties of bailor

Here are some of the duties of a bailor:

1. Duty to disclose defects: The bailor has a duty to disclose any defects in the goods that are likely to affect the bailee’s use of the goods. If the bailor fails to disclose such defects, he may be held liable for any loss or damage suffered by the bailee as a result.

2. Duty to indemnify: The bailor has a duty to indemnify the bailee for any loss or damage suffered by him due to defects in the goods or the bailor’s title to the goods. The bailor is also responsible for any expenses incurred by the bailee in relation to the goods.

3. Duty to take care of the goods: The bailor has a duty to take reasonable care of the goods before delivering them to the bailee. This includes ensuring that the goods are in a proper condition and suitable for the purpose of the bailment.

4. Duty to give proper instructions: The bailor has a duty to give proper instructions to the bailee regarding the use and care of the goods. The instructions should be clear and specific, and the bailee should be informed of any restrictions or limitations on the use of the goods.

5. Duty to pay charges: If the bailment is for reward, the bailor has a duty to pay the agreed charges to the bailee. If no charges are agreed upon, the bailor is still liable to pay reasonable compensation to the bailee for his services.

6. Duty not to interfere with the bailee’s possession: The bailor has a duty not to interfere with the bailee’s possession or use of the goods during the bailment period.

Duties of bailee

1. Duty to take reasonable care: A bailee has a duty to take reasonable care of the goods entrusted to him. He should take all necessary precautions to ensure that the goods are not damaged or destroyed while in his possession.

2. Duty to use the goods for the intended purpose: A bailee has a duty to use the goods for the specific purpose for which they were entrusted to him. He cannot use the goods for any other purpose without the bailor’s consent.

3. Duty to return the goods: A bailee has a duty to return the goods to the bailor once the purpose of the bailment is fulfilled. If no time limit is specified, the bailee must return the goods within a reasonable time.

4. Duty to return any increase or profit: If the goods are of a perishable nature and have increased in quantity or value while in the bailee’s possession, the bailee has a duty to return the increase or any profit derived from the goods to the bailor.

5. Duty to compensate for loss or damage: If the bailee causes any loss or damage to the goods due to his negligence or wilful act, he has a duty to compensate the bailor for such loss or damage.

6. Duty not to mix goods: If the bailee mixes the goods entrusted to him with his own goods or with goods of another person, he has a duty to separate the goods and return them to the bailor in the original condition.

Bailee’s lien

Bailee’s lien is a right that a bailee has to retain the possession of goods entrusted to him until he receives payment for his services or expenses incurred in relation to those goods. The Indian Contract Act, 1872 recognizes the bailee’s right of lien under section 170.

The bailee can exercise his right of lien in the following cases:

• When the bailee has been entrusted with the goods for some work or service and has not received payment for such work or service.
• When the bailee has advanced some money for the repair, preservation or improvement of the goods.
• When the bailee has incurred expenses in relation to the goods, such as storage charges, insurance premiums, etc.

Bailee’s lien is of two types- Particular and general lien

(i) Particular lien

A particular lien is a type of bailee’s lien that arises when the bailee has provided services or expended money in relation to a specific goods or property that have been entrusted to him. The bailee has a right to retain the possession of those goods until he receives payment for his services or expenses.

For example, a mechanic who has repaired a car can exercise a particular lien over the car until he receives payment for the repairs. Similarly, a jeweler who has repaired a piece of jewelry can exercise a particular lien over the jewelry until he receives payment for the repairs.

The right of particular lien is subject to certain conditions:

• The lien can only be exercised over the specific goods that have been entrusted to the bailee.
• The services or expenses must be directly related to the specific goods.
• The lien does not give the bailee the right to sell or dispose of the goods.
• The bailee must give notice to the bailor or any other person claiming an interest in the goods of his intention to exercise the right of lien.
• The bailee must take reasonable care of the goods while in his possession.

If the bailee retains possession of the goods beyond a reasonable period of time or if he misuses his right of lien, he may be held liable for any loss or damage suffered by the bailor or any other person claiming an interest in the goods.

(ii) General lien

A general lien is a type of lien that gives the bailee the right to retain possession of all the goods belonging to the bailor until the bailee receives payment for all the services rendered or expenses incurred by him in relation to any of the goods. The right of general lien is recognized under section 171 of the Indian Contract Act, 1872.

The general lien is exercised by a person who is in possession of the goods of another person as a bailee. The right of general lien is different from the right of particular lien as it allows the bailee to retain possession of all goods, not just the specific goods in relation to which the services or expenses were incurred.

For example, a bank may exercise a general lien over all the assets of a borrower who has defaulted on a loan, in order to secure repayment of the loan. Similarly, a warehouse keeper may exercise a general lien over all the goods stored in his warehouse until he receives payment for storage charges or any other expenses incurred in relation to those goods.

If the bailee retains possession of the goods beyond a reasonable period of time or if he misuses his right of lien, he may be held liable for any loss or damage suffered by the bailor or any other person claiming an interest in the goods.

Termination of bailment

The bailment can be terminated in a number of ways, including:

• Expiration of the term: If the bailment was for a specific period of time, it will terminate automatically upon the expiry of that period.
• Accomplishment of the purpose: If the bailment was for a specific purpose, it will terminate automatically once the purpose has been accomplished.
• Mutual agreement: The bailor and the bailee may agree to terminate the bailment at any time by mutual consent.
• Revocation by the bailor: The bailor has the right to revoke the bailment at any time, provided that he compensates the bailee for any loss or damage suffered as a result of the revocation.
• Renunciation by the bailee: The bailee may renounce the bailment if he is unable to perform his obligations under the bailment or if the bailor breaches his obligations.
• Destruction of the goods: If the goods are destroyed or become unusable during the bailment, the bailment will terminate automatically.

It is important to note that the termination of the bailment does not affect the rights and obligations of the parties that arose during the period of the bailment. The bailee must return the goods to the bailor upon the termination of the bailment, and the bailor must compensate the bailee for any services rendered or expenses incurred in relation to the goods during the bailment period.