BAILMENT
BUSSINESS LAW

CONTRACT OF BAILMENT | ESSENTIAL FEATURES, KINDS AND TERMINATION


What is Bailment? Bailment has been defined under section 148 of the Contract  Act as follows:
” It 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 bailor and the person to whom they are delivered is called bailee”.

DAVID A.G. SARRE
An English Author David, A. G. Sarre defines the bailment as “Bailment is . the delivery of goods by one person called the bailor to another, called the bailee on the conditions that same goods shall be redelivered by the bailee to or on the directions of the bailor”.
Simply stating the contract of bailment is a contract between two persons under which one person called the bailor delivers some goods for some purpose to another, called the bailee on the condition that the same goods shall be returned by the bailee to the bailor or according to his order on the fulfillment of the stated purpose. The examples are a loan, hire of goods, when goods entrusted to warehouseman or carrier.
illustration
A enters into an agreement with B to deliver his bicycle to him on the condition that it shall be redelivered to A after two days. It will be a  contract of bailment. A will be bailor and B will be bailee.

ESSENTIAL FEATURES OF CONTRACT OF BAILMENT

A contract of bailment has the following essential’ features;

1. CONTRACT
The first condition is that there must be a contract between the two parties for the delivery of goods. Such contract may be express or implied, written or oral. ,
2. DELIVERY OF GOODS
This contract is for the delivery of some movable goods from one person (bailor) to another person (bailee) or to his authorized agent. If the goods are immovable the contract will not be a contract of bailment.
3. CHANGE OF POSSESSION
The possession of goods must be affected by such contract. Mere custody without possession is not a contract of bailment.
4. PURPOSE OF DELIVERY
The delivery of the goods is for temporary purposes. It may be for safe-custody, repair, carriage or for gratuitous use by the bailee.
5. NUMBER OF PARTIES
There is two parties tinder such contract e.g., the bailor and bailee. The person delivering the goods is called the bailor and the person to whom the goods are bailed is called the bailee.
6. RIGHT OF OWNERSHIP
In a contract of bailment, the right of ownership remains with an owner (bailor) and is not changed. If the ownership is transferred, the contract will be a contract of sale and is not of bailment.
7. CHANGE OF FORM
If the goods bailed are altered in form by the bailee, such as cloth. is converted into a shirt still, the contract is one of bailment.
8. GOODS IN POSSESSION OF BAILEE
The delivery of the goods is not essential if the goods are already in the possession of the person who enters into the contract as bailee.
9. REDELIVERY OF GOODS
Under such contract, the goods are redelivered to the bailor or according to his directions upon the fulfillment of the purpose by the bailee.

10.RIGHT OF REWARD
In a contract of bailment, both the parties bailor and the bailee can get a reward but it depends on the nature of the transaction.

KINDS OF BAILMENT

A contract of bailment may be of the following kinds:

1. BAILMENT FOR SAFE-CUSTODY
When the bailor delivers his goods to the bailee only for keeping it. in his safe-custody, the bailment is said to be bailment for safe-custody.
Illustration; A delivers his camera to B to keep it in his safe-custody for six months. This will be the bailment for safe-custody.
2. BAILMENT FOR USE
If the bailor delivers, the goods to the bailee to use it. The bailment will be the bailment for use.
Illustration; A delivers his bicycle to B to use it for two days. This will be the example of bailment for use.
3. BAILMENT FOR REWARD
Where the bailment is for use or for sate-custody and the bailee or bailor can charge for his services, then it will be the case of bailment for
Illustration: A delivers his bicycle to B to use it for two days for Rs.50 daily. This will be the bailment for a reward because Bailor (A) will get a reward for the use of a bicycle.
4. GRATUITOUS BAILMENT
Where the bailment is for safe-custody or for use and bailee does not charge anything, the bailment is a bailment for gratuitous.
Illustration: A delivers his bicycle to his friend B to use it for two days without reward. It will be the case of gratuitous bailment.

5. BAILMENT FOR LOST GOODS
When a person finds out the lost goods of another has the same responsibilities as the bailee has against the goods the bailor. such implied bailment Will be the case of bailment of lost goods. Under such conditions, the bailee is entitled to retain the goods until he receives compensation for the trouble and expenses he has to bear in order to find but the owner of the lost goods.
Illustration: A found the lost horse B and redelivered it to B. It will be the bailment for last goods.
6. BAILMENT FOR PLEDGE
When any moveable goods are given as security for the debt, to creditor by the debtor, it will be bailment for pledge until the repayment
Illustration: A gets a loan from B and hands over his B as security until the repayment of the loan. It will be the bailment for pledge.

TERMINATION OF BAILMENT

A contract of bailment can be terminated by any of the following;

1. ACCOMPLISHMENT OF PURPOSE
When the purpose for which goods were bailed” has been accomplished, the contract of bailment is terminated and goods are returned to the bailor.

2.EXPIRY OF TIME
When the goods are bailed for a fixed time, the contract of bailment is terminated at the expiry of the time fixed.
3. DEATH OF THE PARTY
A gratuitous bailment is terminated by the death either of the bailor  Sec. 162.
4. BAILEE’S INCONSISTENT ACT
A contract of bailment ‘is voidable (terminated) at the option of the bailee does any act with regard to the goods bailed’ with the conditions of the bailment.

RIGHTS OF THE BAILOR

The rights of the bailor under the contract of bailment are as follows:

1. RIGHT TO GET BACK THE GOODS
The bailor has a right to get back the goods bailed by him as soon as the purpose of bailment is accomplished. If the bailee fails to do so, is entitled to get reasonable compensation from the bailee due to
2. RIGHT TO TERMINATE THE CONTRACT
The bailor has a right to terminate the contract of bailment if the bailee does any act with the goods bailed to him. which is inconsistent with the terms of the contract. For example-bailor gives his tonga to bailee for his personal use, but he uses it for carrying passengers.
3. EXPENSES OF SEPARATION
If the bailee has mixed the goods of bailor with someone other goods not belonging to bailor without the consent of the bailor, the bailor has a right to get from bailee the expenses which he has to bear for the separation of his goods from others.
4. COMPENSATION FOR GOODS:
If the bailee has mixed the goods of the bailor with someone other goods not belonging to bailor without the consent of the bailor and bailors goods cannot be separated from the other goods, the bailor has a right 10 get reasonable compensation from bailee tor his goods.
5. COMPENSATION FOR UNAUTHORISED USE
If the bailee make’s any use of the goods bailed, which is not in accordance to the conditions of the bailment, the bailor has a right to get Compensation from the bailee for any damage arising to the goods from or during such unauthorized use of the goods.
6. COMPENSATION FOR DELAY IN TIME
According to The Contract Act, the bailee is responsible to return, deliver or to tender the goods to the bailor at a proper time. If he fails to do the bailor has a right to get compensation from bailee for any loss, destruction or deterioration of the goods due to such delay in time.

7. RIGHT TO SHARE PROFIT
The bailor has a right to share with bailee any profit earned from the goods bailed if it is so provided by the contract.
 

DUTIES OF THE BAILOR

The duties and liabilities of the bailor with regard to the contract of bailment are as under:

1. TO DISCLOSE FAULTS
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 Sec. 150.
Illustration; 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.
2. TO REPAY NECESSARY EXPENSES
Where under the contract of bailment, the goods have been carried by the bailee or he has done some work upon them for the bailor and the bailee has received no remuneration, the bailor must repay to the bailee necessary expenses incurred by him for the purpose of bailment.
Illustration; A is a friend of B and repairs B is television set free of cost. On this repair, he bears Rs. 500 actual Expenses due to a replacement of parts. B is bound by law to pay Rs. 500, the actual cost of repair to A.
3. TO REPAY EXTRA-ORDINARY EXPENSES
When the contract of bailment is for reward but bailee does some work for the benefits of the bailor and bears extraordinary expenses, the bailor is bound to repay these extraordinary expenses in excess of the original reward.
Illustration; A keeps his bicycle for safe custody with B for reward the bicycle gets punctured without the negligence of B and B repairs it. Now A is bound to pay these repair expenses to B in excess of the original amount.
4. TO INDEMNIFY 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 direction respecting.
Illustration; A gives B’s car for use to C without the permission of B. Later on, B gets compensation from C. Now C’ has legal right 10 be indemnified by A.

RIGHTS AND DUTIES OF BAILEE

RIGHTS OF BAILEE

The rights of the bailee in respect of bailment are as follows:

1. TO RECOVER DAMAGES
The bailee is entitled to recover all the damages and losses suffered by the bailee due to the defects in the goods bailed to him with the knowledge of the bailor.
2. RECOVERY OF EXPENSES
The bailee is also entitled to recover all the expenses incurred for the purpose of bailment and for providing services 10 the bailor.-
3. RECOVERY OF COMPENSATION
The bailee can also recover compensation from the bailor for any loss caused to him due to any defect in the bailor’s title.
4. RIGHT OF ACTION AGAINST THE THIRD PARTY
The bailee has a right to take legal action as an owner of the goods, against the third party who wrongfully deprives the bailee of the use of goods bailed or does them any injury. The compensation received from such claims must be dealt between the bailor and bailee in accordance with their respective interests.

5. RIGHT OF LIEN
When the bailee has 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. Sec 170.

DUTIES AND LIABILITIES OF THE BAILEE

The duties and liabilities of the bailee under the contract of bailment are stated below:

1. TO TAKE CARE OF GOODS
According to section 151, the bailee is bound to take as much care of the goods bailed to him as a common person takes off his own goods.
2. EXPENSES OF SEPARATION
If the bailee without the consent of the bailor mixes the goods of the bailor with his own goods, and goods can be separated or divided, the bailee is bound to bear the expenses of separation or division, and any damage arising from the mixture. Sec 156.
3. UNAUTHORISED USE OF GOODS
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. Sec 154.
4. INCONSISTENT ACT
A contract of bailment is voidable at the option of the bailor, if the bailee does any act with regard, to the goods bailee inconsistent with the conditions of the bailment. Sec 153.
5. COMPENSATION
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. Sec 157.

6. RETURN OF GOODS
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; Sec. 160.
7. RETURN OF GOODS AT PROPER TIME
The bailee is responsible to return, deliver or tender the goods to the bailor at a proper time. If he fails to do so, he is responsible to the bailor for any loss, destruction or deterioration of the goods from that time. Sec 161.
8. RETURN OF PROFIT
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 Sec 163.