The term bailment is derived from the French word “Bailor” which means “to deliver”, and is covered under Sec-148 of the Indian Contract Act,1872.
A ‘bailment’ is the delivery of goods by one person to another for some purpose. Upon a contract, 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 known as bailor and the person to whom goods are delivered is known as bailee. However, if the owner continues to maintain control over the goods, there is no bailment
One of the simplest ways to define bailment is changing the possession of the goods by giving the goods from one person to another upon a contract for some purpose.
For eg- Parking the vehicle by Mr A in a market parking which is managed by Mr B, giving the goods for repair, to do work upon them, to take reasonable care, all this come under the contract of bailment.
Note- Here the delivery of goods means a change in possession and not the ownership of the goods.
Contract of Bailment is made only for the movable goods or items and not for Immovable goods like property, etc.
The delivery should be made for general-purpose not as security of loan because if they are delivered as a security for a loan it will be considered as mortgage and not as bailment.
Table of Contents
Essentials of a valid contract of bailment.
There are 5 essentials that need to be followed to make the contract valid.
- There are two parties are involved as Bailor and Bailee
Bailor is the person who delivers the goods to the bailee, and the bailee is the person who takes the goods from the bailor.
2. Delivery of the possession of goods
The delivery of the possession of goods bailed should be made. The delivery can be both actual and constructive delivery.
Actual means where the goods are Physically transferred from one person to another, whereas constructive delivery means when the goods are not physically transferred but the legal possession of the goods changes.
3. Delivery of the goods should be made upon a contract
The delivery of the goods for bailment should be made upon a contract. the contract can be expressed as well as an implied contract.
4. Delivery of the goods should be made for some purpose
The delivery of the goods for bailment should be made for some purpose. For eg- for repair or to take reasonable care of the goods.
5. Return the goods bailed when the purpose is accomplished or on the expiration of the contract
After the purpose is accomplished for which the contract is made or after the expiration of the contract, the goods bailed to the bailee must be returned to the bailor on time.
Types of Bailment
There are 2 types of a bailment-
- Gratuitous bailment
The bailment in which there is no remuneration made to any of the parties, bailor and bailee. for.eg giving my car to my friend for some work.
2. Non- Gratuitous bailment
The bailment in which remuneration is paid either of the parties, bailor or to the bailee.
For eg:- Giving my car to the bailee for repair work, expenses need to be paid to the bailee. and if the bailor is giving his/her car to someone on a rent basis the expenses or rent of the service of the car must be paid to the bailor.
Rights and Duties of the bailor.
The Rights of the bailor is defined under Sec- 153-157 and 163 of the Indian Contract Act, 1872.
1. To Termination the contract. Sec-153
2. To claim damages arising from the goods bailed because of the wrong use of it. Sec-154
3. To claim benefits arising from the mixtures. Sec-155
4. To Reject the cost of separation and claim damages arising from separable items. Sec-156
5. To claim damages for the goods which are not separable. Sec-157
Sec-153 Termination of bailment by bailee’s act inconsistent with conditions– A contract of bailment is voidable 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– The bailor has the right to terminate the contract if the bailee makes use of the goods other than for which they were bailed.
For eg- If I gave my car to my friend to go to the nearby market but he uses the car for commercial taxi purposes or for any wedding, then the bailor has the right to terminate the contract.
Sec-154 Liability of bailee making unauthorised 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.
Illustration– The bailor has the right to claim damages arising from the goods bailed only when the bailee makes any unauthorised use of the goods.
For eg- If I gave my car to the company for the regular service, and the owner of the company allowed the labourer working there who is not having the licensee to drive the car on the road and if any of the accident takes place to any of the pedestrian or to the car, then the liability would be of the bailee.
Sec-155 Effect of mixture, with bailor’s consent, of his goods with bailee’s– 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.
Illustration– If the bailee with the consent of the bailor mixes the goods with his own then they are entitled to the shares of their contribution.
For eg- If my 10 kg of wheat is with my friend and he also owns 7 kg of wheat of his own, and if he mixes the goods with mine with my consent, then we are entitled to shares of our contribution. like, in this case, 10:7 shares to bailor and bailee respectively.
Sec-156 Effect of mixture, without bailor’s 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 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– If the goods of the bailor are mixed with that of the bailee’s goods without his consent then the bailee is liable to bear the cost of separation and also for damages if any comes because of the separation.
For eg- I have given my clothes of Levis to my friend and he also has his clothes to Rebook, and he mixes the clothes without the bailor consent then he will be liable to bear the cost of separation of the clothes and if any wear and tear takes place during the separation of the goods then the bailee is also liable for the same.
Sec-157 Effect of mixture, without bailor’s 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– If the bailee mixes the goods of the bailor with that to his own goods, and the goods are not separable then the bailee is liable for the cost of damage which the bailor has to suffer.
For eg- If I have bailed my basmati rice is to my friend who also owns Sella rice, and he mixes my rice with that of this own rice (knowing that they are not separable items), without my consent or without my prior permission then he/she the bailee is liable to pay damages to the bailor for his rice.
Duties of Bailor
The duties of the bailor are defined under sec-150, 158 and 164 of the Indian Contract Act, 1872
- To disclose fault in the goods bailed. sec-150
- To pay the necessary expenses to the bailee. sec-158
- To pay for the loss suffered by the bailee because of the bailor. sec-164
Sec-150 Bailor’s 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 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.
Illustration– Bailor is required to disclose all the faults which he/she knows, or which cause damage with the use of the goods and things which takes the bailee to unknown or extraordinary risk.
For eg- If I gave my car to my friend for a long journey and I know that the breaks of the cars are not fit for a long journey, but even though I gave him the car knowing the fault in the car.
Then, I am liable for any damage which my friend (bailee) will suffer from the car for all the risk and damages.
Secondly, If I am running a taxi company and I don’t know the fact that the breaks are not working, and gave the car to the customer then also I will be liable, and will not be in a situation to take the defence of unknowing the fault, because I am giving the car on lease.
Sec-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. “
Illustration– If in the contract it is not written that the bailor has to pay any remuneration to the bailee for the bailment, then also bailor is liable to pay the necessary cost which the bailee has to pay for keeping the goods safe.
For eg- I have bailed my crops with my friend where I don’t have to pay any of the remunerations for the goods bailed, but the bailee for the purpose of keeping the crops safe has to make the expenses like the spray and the storage area.
Then the bailor is liable to pay the necessary expenses for the crops.
Sec-164 Bailor’s 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.
Illustration– The bailor is liable to pay all the losses which the bailee suffers, due to the fact that the bailor was not entitled to make the contract of bailment.
Rights and duties of Bailee
The Rights of bailee is covered under sec-166, 180 and 181 of the Indian Contract Act,1872.
- No Liability towards the bailor who has the title of the goods, if the redelivery of goods is made in good faith. Sec-166
- Right to sue the person who deprives the bailee to take possession of the goods. Sec-180
- Right to take compensation by such suit according to the ratio of interest. Sec-181
Sec- 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, the bailor, the bailee is not responsible to the owner in respect of such delivery.
Illustration– Bailee is not responsible to the bailor who has the title of the goods if he does the act without knowing that the person who is giving the possession is not the real owner(good faith).
For eg- If Mr A, the agent of Mr B, delivers the stock of tobacco to Mr C and ask him to give the same stock to Company X, then Mr C the bailee will not be responsible for Mr B, because he (bailee) perform the act in good faith according to the direction given by Mr A, the agent of Mr B.
Sec- 180 Suit by bailor or bailee against wrong-doer– 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.
Illustration– If in a contract of bailment, the bailee is not able to take possession of the goods or receives the injured goods, due to the act of the 3rd person, then the bailee has the right to sue the person as the owner of the goods.
For eg- If Mr A delivers his crops to Mr B via truck transport by Mr C, and Mr C is not making the delivery of the crops and restriction the bailee to take possession, the bailee has the right to sue Mr C and take reasonable compensation.
Case 2:- If the same situation takes place as mentioned above, but instead of possession of the crops, the driver Mr C injured or harms the crops during the transportation, then he is liable to make compensation to the bailee.
Sec-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.
Illustration– If in the contract of bailment, if the bailee does not receive the possession or receive the damaged goods because of the 3rd person, then the bailee has the right to sue the 3rd person, and whatever is obtained as a way of compensation from that suit, that would be distributed between the bailor and the bailee as to their respective share of interest.
For. eg- The charge of filing the suit against the 3rd person is Rs 3,000 and compensation for injured goods is given Rs 5,000 by the 3rd person, then the total amount of 8,000 will be distributed according to the interest.
like the filling of suits is done by bailee and the damaged amount is asked by the bailor, then it will be share in the respective ratio.
The Duties of Bailee is covered under sec- 151, 152, 160, 161 and 165 of the Indian Contract Act, 1872.
- To take reasonable care of the bailed goods. Sec-151
- Bailee is not responsible if damage arises even after due care. Sec- 152
- To return the goods after the expiration of the time or after the purpose is fulfilled. Sec-160
- Bailee is responsible if the goods are not returned. Sec-161
- Bailee not responsible if the goods bailed are of a partner. Sec-165
Sec- 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, quantity and value as the goods bailed.
Illustration– The bailee has the duty to take proper care of the goods bailed as a reasonable man would take, of his own goods. Care changes with the nature of the goods, Perishable and Non- Perishable goods.
For eg- I have given my car to the company for regular service, it is the implied duty of the company to take reasonable care of my car. like, park the car in a safe place to save from theft or from any natural calamity.
Case 2:- If the goods are of Perishable nature like I have given my crops to my friend for some purpose, he the bailee has the duty to store the crop in the proper place, spray the chemical to keep them fresh, etc.
Note- More care is required in perishable goods.
Sec- 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.
Illustration– Even after taking the due care as a man of ordinary prudence would have taken, the goods get deteriorate, then the bailee is not responsible to the bailor.
Exception– If in the contract it is written to the contrary (Before) that even after taking due care the goods gets damaged, then the bailee will be liable, then he will be held liable.
For eg – If the car company take the proper care of my car as would an ordinary man would take, but even though my car gets stolen or gets damaged due to natural calamity then, the company would not be held liable.
But if I have told before the contract is made and it is written in the contract that even after taking due care, if my goods get damaged then you as in the company as bailee would be held liable, then they will be liable for all the damages.
Sec- 160 Return of goods bailed, on the expiration of time or accomplishment of purpose– 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.
Illustration– It is the duty of the bailee to return the goods bailed after the time for which the goods are kept is expired or the purpose for which the goods are bailed is completed.
For eg- If I gave given my book to my friend for 5 days then after the expiration of the period the bailee (my friend) has to return the book to me.
Case 2:- If have given my book to my friend to complete his topic from the book, and after the completion, the bailee is entitled to return the book, and if he/she does not return then he/she will be liable.
Sec- 161 Bailee’s responsibility when goods are not duly returned– If by the fault 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.
Illustration– If the bailee does not return the goods on the expiration of the period or after the purpose is fulfilled, and the bailor has to suffer any damages from such act of the bailee, then the bailee is liable for the damages which the bailor has to suffer.
For eg- If I have given my book to my friend for 5 days to study and after it, he has to return the books but he fails to do that, due to which I was not able to study for my examination and further fails in the exam, then the bailee is entitled to my losses.
Sec-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.
Illustration– If in the contract of bailment, the goods bailed are of the partners and one of the partners gave direction to the bailee to do activities with the goods bailed, then the bailee will not be held liable on grounds that he had not taken the consent of all the partners.
But, if it is written in the contract that he has to take the consent of the others partner too, and if he does not take it and does the act with the consent of one of the partners, then he will be held liable.
For eg- If a group of 5 partners bailed their goods to the bailee, and one of the partner as bailor give the direction to the bailee to pass on the goods to someone else, then the bailee will not be liable to the bailors if any damage arises from such act.
Case 2:- But if it is written in the contract that the bailee has to take the consent of all the partners before doing any act, and if he does not do that, then he will be held liable for the wrongful act of his own.
Every contract covered in our Indian Contract Act,1872 is different from each other, same goes with the contract of bailment, the contract of pledge is somewhat similar to the contract of bailment, but the only difference between them is a contract of pledge is made on grounds of taking the loan from the party by giving goods as security for the loan, but in the contract of bailment the goods are given for some purpose other the security upon a contract.
So, please don’t intermix the contract of bailment with that of the contract of pledge. Contract of pledge is just a part of bailment.