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BAILMENT UNDER INDIAN CONTRACT ACT 1872

Author: Aalok Gaur

Student, III semester, B.A.,LL.B., FIMT School of Law (GGSIPU)


Section 148 also defines the term ‘bailor’ and ‘bailee’:

“The person delivering the goods is called the ‘bailor’ and the person to whom they are delivered is called a ‘bailee’”.

However, if the owner continues to maintain control over the goods, there is no bailment.

It is not always necessary that possession of goods be delivered to the bailee. If he is already in possession of the goods of another, he may contract to become a bailee for those goods. It appears from the definition that a person who is already in possession of the goods may become a bailee only by entering into contract with the bailor to hold the goods as bailee. But this is not always necessary. For example, in State of Gujarat v. Menon Mohammad, some vehicles and goods belonging to respondent were seized by custom officials. Later on, it was found that seizure of said goods was not valid but in the meantime the vehicles were sold as unclaimed property. The Supreme Court held that Government was in position of bailee and therefore liable for it.


Essential elements of a valid bailment:

According to Section 148 of Indian Contract Act, 1872 there are three essential elements of a valid bailment:

❖ Delivery of goods by bailor:

According to Section 148, one of the essential element of bailment is delivery of the goods by one person to another for some purpose.

Case: Ultzen v. Nicols

In this case the plaintiff went to a restaurant to have dinner. As a voluntary courtesy, a waiter took overcoat of the plaintiff and hung it on a hook behind the chair. After having dined, when the plaintiff wanted to leave, he found that his overcoat was missing. He sued the owner of the restaurant for the loss of the coat. The owner was held liable because by taking the overcoat, although by voluntary courtesy, waiter had assumed the responsibility of the bailee.

Illustration: A, a warehouse man, was entrusted with certain goods. A had taken all reasonable precautions for safety of the goods. Nevertheless, the goods were lost due to negligence of the watchman. A pleads that there was no negligence on his part so he was not liable. A will be liable for the loss of goods

So, it may be noted that:

“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 authorised to hold them on his behalf.”

Case: Kaliaperumal v. Visalakshmi Achi

In this case, a lady engaged a goldsmith for melting old jewellery to make some new ornaments. She delivered the old jewellery to him but every evening after the day’s work, she used to take half-made jewelleries with her and after putting those into a box with a lock left it in the room of goldsmith while retaining the keys with her. One morning she found jewellery to be stolen and sued goldsmith for it. It was held that goldsmith was not liable as every evening there was re-delivery of jewelleries to lady and when they were stolen, were not in possession of goldsmith and mere leaving the box in goldsmith’s room while herself retaining the key, did not constitute delivery.


❖ Delivery of possession upon a contract:

The delivery of goods must be upon a contract. Thus, according to section 148, that if the goods are delivered by one person to another, without a contract, there is no bailment.

Illustration: Ram Ghulam v. Government of U.P.

In this case, some stolen ornaments belonging to the plaintiff were recovered by the police. But while ornaments were in custody of the police, they were again stolen and this time couldn’t be recovered. Plaintiff sued Government for loss of ornaments. But this action was dismissed by Allahabad High Court on the grounds that the possession of goods was not under a contract, and hence, the Government never occupied the position of a bailee.

Although, section 148 requires that delivery of goods must be upon a contract, it may be submitted that it is not exhaustive and there may be bailment even without a contract. This was finally affirmed by the Supreme Court in a recent case of State of Gujarat v. Menon Mohammad.


❖ Bailee bound to return goods or to dispose of according to the direction of bailor:

After the purpose is accomplished the bailee is bound to return the goods or otherwise dispose them of according to the direction of the person delivered them. There is no bailment if the bailee is not bound to return the goods delivered to him. It is this special feature which distinguishes bailment from sale or exchange.

Case: Jagdish Chandra Trikha v. Punjab National Bank

In this case, a box containing gold jewellery and ornaments were entrusted to a bank and the custody of the box always remained with bank, the ornaments and jewellery were found missing when produced before the Court, it was held that the Bank failed to discharge its duties as bailee and the heirs of bailor would be entitled to the price of market value of gold ornaments at the time of the institution of the suit.


Rights of Bailee:

❖ Bailee’s right of lien:

Lien means right to retain a property or goods until some charges due upon it or services rendered for its improvement, are paid. It is simply a right to retain the thing and does not give any right of property or ownership to bailee. If the bailee had rendered any service by exercise of labour or skill in respect of the goods, he gets the right to retain the goods until he gets the remuneration for the services rendered.


• Particular lien: a lien of bailee in respect of goods bailed for which he has rendered any service by the exercise of his labour or skill. It does not give him right to retain goods for general balance of account or for other claims. Only those goods can be retained in respect of which, the bailee had rendered service.

It may be noted that a bailee gets particular lien in respect of certain goods only when he has improved it by exercise of his labour and skill.

Illustration: 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 service he has rendered.

Case: Hutton v. Car Maintenance Co.

In this case, the plaintiff company maintained the car of the defendant. Some maintenance expenses having become due, the plaintiff company took the car into its possession and claimed lien for the expenses. The court, however rejected its claims because what it did was simply to maintain the car and not to improve it.


• General lien: a general lien, as distinct from particular lien, means that bailee has a right to retain goods bailed to him as a security for a general balance of accounts.

Section 171 which deals with general lien of bailees provides:

“Bankers, factors, wharfingers, attorneys of a High Court and policy brokers may, in the absence of a contract to the contrary retain, as security for a general balance of a 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. ”

Case: Mercantile Bank of India Lyd. v. Rochaldas Gidumal & Co.

In this case, a bank received some money of his customer with instruction to transmit it telegraphically to his own firm at other place; it was held that the bank could not retain it as it was not given to it for the purpose of bailment.


❖ Right to sue wrongdoer:

Section 180 confers right on the bailee to sue wrongdoers, section 180 provides:

“If a third person wrongfully deprives the bailee of the use of 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.”

Case: State of Bihar v. Bank of Bihar

In this case, a sugar company pledged the entire stock of sugar manufactured for advances made by bank to company. The stock was seized by the government. It was held that there was no wrongful deprivation in the case, firstly because the seizure was lawful and secondly because the Cane commissioner recovered money lawfully.


❖ Bailee’s rights where bailor not entitled to make bailment:

According to section 164, “The bailor is responsible to the bailee for any loss which the bailee may sustain by the reason that the bailor was not entitled to make the bailment, or to receive back the goods or to give directions respecting them.”


Duties of bailor:

Section 150 defines bailors into two categories for the purpose of their duties:

❖ Gratuitous bailor: A gratuitous bailor is one who lends his goods without consideration. Since he receives no consideration, his duty is much less than that of a bailor for reward. He is bound to disclose to the bailee the fault in goods bailed. But he is liable to disclose, the faults of which he is aware and which may materially interfere with use of them, if the bailor does not make such disclosure he will be liable for damages arising to the bailee directly from such faults.


❖ Bailor for reward: Under English Law, the well recognised view is that a bailor for reward is responsible for ensuring that the goods delivered are “fit for purpose for which it is hired as care and skill can render it.” This rule was affirmed in Reed v. Dean, wherein a motor launch hired from a defendant caught fire and the plaintiffs were injured. Since the fire fighting equipment was out of order, plaintiff could not extinguish the fire. The defendant was held liable for injury and loss suffered by the plaintiffs.

Illustration: A hires a motor car from B. the car has defective brakes and is unsafe though B is not aware of it and A is injured. B is liable to compensate for the injury because according to Section 150 a bailor for reward is responsible for such damage and it is immaterial whether he was or was not aware of the existence of such faults in the goods bailed.


Bailment of pledges:

Definition: Section 172 of the Indian Contract Act defines pledge as “the bailment of goods as security for payment of a debt or performance of a promise.” It further provides that bailor in this case is called “pawner” and the bailee is called the “pawnee”.


Case: Morvi Mercantile Bank v. Union of India

In this case, a bank advanced Rs. 20,000 against a railway receipt endorsed to it by the consignors. The goods which were worth Rs. 35,000 were lost in the transit. The bank sued the railways for the loss of goods. It was held by the majority decision that the bank is entitled to full price of the goods although it advanced a lesser sum and the delivery of documents of title may also create a pledge.


Conclusion:

It can be concluded that bailment is a contract in which delivery of possession of specific goods is given to another person for a specific purpose and it is different from the concept of sale. The concept of bailment is used in our day to day lives so it becomes necessary to know about the rights and duties arising out of the concept of bailment. The bailee and the bailor have to perform in accordance with the provisions of the Indian Contract Act, 1872 and the contract of bailment. Awareness helps to minimize the wrongs. Knowledge of the concept of bailment helps to protect our rights and interests.


References:

  • AIR 1967 SC 1885.

  • AIR 1938 Mad 42.

  • AIR 1950 All 206.

  • AIR 1967 SC 1885

  • AIR 1998 Delhi 266, 301-302, 305-306, 308

  • (1915) 1 Ch. 621.

  • AIR 1926 Sind 225.

  • AIR 1963 Pat. 344.

  • AIR 1965 SC 1954.

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