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BAILMENT

Meaning & Definition:The contract of bailment is a special type of contract. The Indian companies act which contains the legal provisions to these contract does not deal with all type of bailments. The act only deals with the general principles. However, there are special acts which deals with specific kind of bailment like The Railway Act,1889, The carriage of goods by sea Act1 1925 to name a few. The term bailment is derived from the French word bailler , Which means to deliver. In bailment the possession of the goods is temporarily derived from one person to another person for a specific reason.

SECTION 148 DEFINES BAILMENT AS: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.

ESSENTIALS OF BAILMENT
PARTIES:-In a contract of bailment, minimum two parties are necessary namely the Bailor and the Bailee. Bailor is the person delivering the goods and bailee is the person to whom the goods are delivered. ENTER INTO AN AGREEMENT:- In a contract of bailment, there has to be an agreement. However, the agreement may be expressed (i.e. oral or written) or implied (i.e. inferred from the circumstances).

RETURN OF GOODS:- In bailment there is only temporary transfer of possession. Therefore the goods must be returned or disposed off according to the instructions of the bailor at the end of bailment. PURPOSE:-In case of bailment, the possession of goods must be transferred for some purpose. The purpose may be expressly stated. E.g.: Giving the scooter for servicing, or may be implied E.g.: depositing luggage in the railway cloak room implies, it is for safe custody.

EFFECTING TRANSFER OF POSSESION:- From the definition it is clear that in bailment, only possession is transferred i.e., physical commodity. NO TRANSFER OF OWNERSHIP:- Although the commodity or goods may be in the possession of the bailee, yet the bailor continuous to be the owner.

DELIVERY OF GOODS:- In a contract of bailment, the delivery of goods must be voluntary. The delivery may be actual when the goods are physically handed over or

the delivery may be constructive when one does something which has the effect of putting the goods in the possession of the bailee.

ILLUSIONS: 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.

Restoration of goods lent gratuitously The lender of a thing for use may at any time require its return, if the loan was gratuitous, even though he lent it for a specified time or purpose. But, if, on the faith of such loan made for a specified time or purpose, the borrower has acted in such a manner that the return of the thing lent before the time agreed upon would cause him loss exceeding the benefit actually derived by him from the loan, the lender must, if he compels the return, indemnify the borrower for the amount in which the loss so occasioned exceeds the benefit so derived.

Return of goods bailed on 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 or which they were bailed has been accomplished. Bailee's responsibility when goods are not duly returned. If, by the default 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.

Termination of gratuitous bailment by death A gratuitous bailment is terminated by the death either of the bailor or of the bailee.

Bailor entitled to increase or profit from goods bailed 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. A leaves a cow in the custody of B to be taken care of. The cow has a calf. B is bound to deliver the calf as well as the cow to A.

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. 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.

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. a) 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.

b) A hires a carriage of B. The carriage is unsafe, though B is not aware of it, and A is injured. B is responsible to A for the injury. Right of third person claiming goods bailed If a person, other than the bailor, claims goods bailed, he may apply to the Court to stop the delivery of the goods to the bailor, and to decide the title to the goods.

Right of finder of goods; may sue for specific reward offered The finder of goods has no right to sue the owner for compensation for trouble and expense voluntarily incurred by him to preserve the goods and to find out the owner; but he may retain the goods against the owner until he receives such compensation; and, where the owner has offered a specific reward for the return of goods lost, the finder may sue for such reward, and may retain the goods until he receives it. When finder of thing commonly on sale may sell it When a thing which is commonly the subject of sale is lost, if the owner cannot with reasonable diligence be found, or if he refuses, upon demand, to pay the lawful charges of the finder, the finder may sell it when the thing is in danger of perishing or of losing the greater part of its value, or, when the lawful charges of the finder, in respect of the thing found, amount to two-thirds of its value.

Bailee's

particular line

Where the bailee has, in accordance with the purpose of the bailment, 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. 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 services he has rendered. A gives, cloth to B, a tailor, to make into a coat. B promises A to deliver the coat as soon as it is finished, and to give a three months' credit for the price. B is not entitled to retain the coat until he is paid.

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

RESPONSIBILITIES OF A BAILEE

Duty to take reasonable care


In English law the duties of a gratuitous and non-gratuitous bailee are different. However, in Indian law, Section 151 treats all kinds of bailees the same with respect to the duty. It says that 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, quality, and value as the goods bailed. The bailee must treat the goods as his own in terms of care. However, this does not mean that if the bailor is generally careless about his own goods, he can be careless about the bailed goods as well. He must take care of the goods as any person of ordinary prudence would of his things. In Blount vs War Office 1953, a house belonging to the plaintiff was requisitioned by the War Office. He was allowed to keep his certain articles in a room of the house, which he locked. The troops who occupied the house were not well controlled and broke into the room causing damage and theft of the articles. It was held that War office did not take care of the house as an owner would and held the War Office liable for the loss. Bailee, when not liable for loss etc. for thing bailed As per section 152, in absence of a special contract, the bailee is not responsible for loss, destruction, or deterioration of the thing bailed, if he has taken the amount of care as described in section 151. This means that if the bailee has taken as much care of the goods as any owner of ordinary prudence would take of his goods, then the bailee will not be liable for the loss, destruction, or deterioration of the goods. No fixed rule regarding how much care is sufficient can be laid down and the nature, quality, and bulk of goods will be taken into consideration to find out if proper care was taken or not. In Gopal

Singh vs PNB, AIR 1976, Delhi HC held that on the account of partition of the country, when a bank had to flee along with mass exodus from Pakistan to India, the bank was not liable for the goods bailed to it in Pakistan. If the bailee has taken sufficient care in the security of the goods, then he will not be liable if they are stolen. However, negligence in security, for example leaving a bicycle unlocked on the street, would cause the bailee to be liable. In Join & Son vs Comeron 1922, the plaintiff stayed in a hotel and kept his belonging in his room, which were stolen. The hotel was held liable because they did not take care of its security as an owner would. If loss is caused due to the servant of the bailee, the bailee would be liable if the servant's act is within the scope of his employment. Special Contract The extent of this responsibility can be changed by a contract between the bailor and the bailee. However, it is still debatable whether the responsibility can be reduce or it can be increased by a contract. Section 152 opens with, "In absence of special contract", which is interpreted by Punjab and Haryana HC, as the bailee can escape his responsibility by way of a contract with the bailor.

However, in another case Gujarat HC held that the bank was liable for loss of bales of cotton kept in its custody irrespective of the clause that absolved the bank of all liability. This seems to be fair because no one can get a license to be negligent and a minimum standard of care is expected from everybody. 2. Duty not to make unauthorized use (Section 154) Section 154 says that 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 - A lends horse to B for his own riding only. B allows C, a member of his family, to ride the horse. C rides with care but the horse is injured. B is liable to compensate A for the injury to the horse. A hires a horse in Calcutta from B expressly to march to Benares. A rides with

care but marches to Cuttack instead. The horse accidentally falls and is injured. A is liable to make compensation to B. Thus, we can see that bailee is supposed to use the goods only as per the purpose of the bailment. If the bailee makes any unauthorized use of the goods, he will be held absolutely liable for any damages. 3. Duty not to mix (Section 155-157) The bailee should maintain the separate identity of the bailor's goods. He should not mix his goods with bailor's good without bailor's consent. If he does so, and if the goods are separable, he is responsible for separating them and if they are not separable, he will be liable to compensate the bailor for his loss. For example, A bails 100 bales of cotton with a particular mark to B. B, without A's consent, mixes them with his own. A is entitled to have his 100 bales returned and B is bound to bear all expenses for separation. But if A bails a barrel of Cape flour worth Rs 45 to B and B mixes it with country flour worth Rs 25, B is liable to A for the loss of his flour. 4. Duty to return (Section 160) Section 160 - 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. If the bailee keeps the goods after the expiry of the time for which they were bailed or after the purpose for which they were bailed has been accomplished, it will be at bailee's risk and he will be responsible for any loss or damage to the goods arising howsoever. In Shaw & Co vs Symmons & Sons 1971, the plaintiff gave certain books to the defendant to be bound. The defendant bound them but did not return them within reasonable time. Subsequently, the books were burnt in an accidental file. The defendants were held liable for the loss of books.

5. Duty to return increase (Section 163) As per Section 163, in absence of any contract to the contrary, the bailee is bound to deliver to the bailor, or according to his directions, any increase of profit which may have accrued from the goods bailed. Illustration - A leaves a cow in the custody of B to be taken care of. The cow has a calf. B is bound to deliver the calf as well as the cow to B.

6. Duty not to set up jus tertii (Section 166) As per Section 166 if the bailor has no title and the bailee, in good faith returns the goods back to the bailor or as per the directions of the bailor, he is not responsible to the owner in respect of such delivery. Thus, once the bailee takes the goods from the bailor, he agrees that the goods belong to the bailor and he must return them only to the bailor. He cannot deny redelivery to the bailor on the ground that the bailor is not the owner. If there is true owner of the goods, he can apply to the court to stop the delivery of the goods from the bailee to the bailor. This right is given to the true owner in section 167.

RIGHTS OF BAILEE

Right to necessary expenses or remuneration (Section 158) The bailee is entitled to lawful charges for providing his service. As per Section 158 says that where by 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 bailment. Thus, a bailee is entitled to recover the charges as agreed upon, or if there is no such agreement, the bailee is entitled to all lawful expenses according to this section. In Surya Investment Co vs STC AIR 1987, STC hired a storage tank from the plaintiff. On account of a dispute, STC appointed a special officer to take charge of the tank, who delivered the contents as per directions of STC. Thus, the plaintiff lost his possession and with it, his right of lien. SC held that the plaintiff is entitled to the charges even if he loses his right of lien because the bailor has enjoyed bailee's services. Right to compensation (Section 164) As per section 164, 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. This means that if the bailor had no right to bail the goods and if still bails them, he will be responsible for any loss that the bailee may incur because of this. Right of Lien (Section 170-171) Section 170 gives this right to the bailee. It says that where the bailee has, in

accordance with the purpose of the bailment, rendered any service involving the exercise of labor or

skill in respect of the goods bailed, he has, in absense 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. Illustrations - A delivers a rought diamond to B to be cut and polished, which is accordingly done. B is entitled to keep the diamond until charges for his services are paid.

A gives cloth to B, a tailor, to make into a cloth. B promises to deliver the coat as soon as it is done and also to give 3 months credit for the price. B is not entitled to keep the coat until he is paid. Conditions for Particular Lien Exercise of labor or skill - This right is subject to the condition that the bailee has exercised labor or skill in respect of the goods. Further, it has been frequently pointed out that the labor or skill must be such as improves the goods. This, in Hutton vs Car Maintenance Co 1915, it was held that a job master has no lien for feeding and keeping. the horse in his stable but a horse trainer does get a lien upon the horse. Labor or skill exercised must be for the purpose of the bailment - Any services rendered that are beyond the purpose of the bailment do not give a right of lien. For example, A bails his car to B to repair Engine. But B repairs tires instead. B will not get the right of lien.

Labor or skill exercised must be in respect of the goods - As mentioned before, the bailee gets a right of lien only upon the goods upon which the service was performed. General Lien As opposed to Particular Lien, General Lien gives a right to the bailee to keep the possession of any goods for any amount due in respect of any goods. Section 171 says that,

bankers, factors, wharfingers, attorneys of a High Court, and policy brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of 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. Thus, this right is only available to bankers, factors, wharfingers, attorneys of high court, and policy brokers. However, this right can be given to the bailee by making an express contract between the bailor and the bailee. Right to Sue (Section 180-181) Section 180 enables a bailee to sue any person who has wrongfully deprived him of the use or possession of the goods bailed or has done them any injury. The bailee's rights and remedies against the wrong doer are same as those of the owner. An action may be brought either by the bailor or the bailee. Thus, in Umarani Sen vs Sudhir Kumar AIR 1984, a firm which had consigned the goods, of which it was a bailee, with a carrier, was allowed to sue the carrier for loss of the goods.

PLEDGE
The bailment of goods as security for payment of a debt or a debt or performance of a promise is called pledge. The bailor, in this case, as called the pawnor and the bailee as the pawnee (s. 172). Pledge is a special kind of bailment. The characteristic feature of pledge is that the delivery of goods is to provide security for a loan or for the fulfillment of an obligation.

ESSENTIAL FEATURES OF PLEDGE


Bailment of goods is by way of security. Only movable property can be pledge.

There must be actual or constructive delivery of goods pledged. Only the person who is in juridical or de jure possession of goods can make a valid pledge. Mere de facto possession of goods is not enough eg. A servant having physical possession of goods cannot make a pledge so as to bind his master. However, there are some exception to this rule.

PLEDGE BY NON-OWNERS

As stated above, the general rule is that only a person having the pure possession of goods can make a valid pledge. But, in some cases a non-owner may pledge the goods of another so as to bind the latter. These cases are:

PLEDGE BY A MERCANTILE AGENT (S. 178)

A person who takes a pledge from a mercantile agent gets a good title to the goods if a) The agent acts as a mercantile agent. b) The mercantile agent is in possession of the goods or of document of title to the goods. c) This possession is with the consent of the owner. d) The pawnee acts in good faith. e) The pawnee has no notice, at the time of pledge, that the agent had no authority to pledge.

PLEDGE BY A PERSON IN POSSESSION OF GOODS UNDER A VOIDABLE CONTRACT (S.178-A)

When a person acquires possession of goods by coercion, undue influence, fraud or misrepresentation. The other person is entitled to rescind the contract under section 19 and 19A of Contract Act and get back his goods But, if before he can avoid the agreement. The wrong-doer (i.e. the person in possession of goods) pledges them to an innocent person; such innocent person gets a good title if he has acted in good faith, having no notice of defective title of the pledger.

PAWNOR WITH A LIMITED INTEREST IN THE GOODS (S.179)

Where a person pledges goods in which he has only a limited interest the pledge is valid to the extent of that interest.

PLEDGE BY A SELLER WHO IS IN POSSESSION OF GOODS AFTER SALE (S.30 [1])

If, a person after having sold goods continues to be in possession of the goods (or of the document of title to the goods) a pledge made by such person (or by his mercantile agent) is valid if. a) The person receiving the goods has acted in good faith, and b) He has no notice of the previous sale. In the above case, the pledge will have the same effect as if the pownor was expression authorized by the owner of the goods to make the pledge.

PLEDGE BY A BUYER IN POSSESSION OF GOODS BEFORE SATE (S.30 (20)

If a person, who has bought or agreed to buy goods, obtain with the consent of the seller, possession of the goods or of the document of title to the goods, - a pledge made by such person or by his mercantile agent is valid if : a) The person receiving the goods has acted in good faith, and b) He has no notice of any lien or other right of the seller in respect of such goods.

In the above case, pledge will have effect as if such a lien or right did not exist.

ACKNOWLEDEMENT

Any accomplishment requires the effort of many people and this project is no different. Regardless of the source, we wish to express our gratitude to those who may have contributed to this work, even anonymously. We gratefully acknowledge and express deep appreciation to many people who have made this project possible Many thanks to PROF. ARCHNA Without her support, motivation and suggestion this project would not have been possible.

CONTENTS
Meaning & Definition of Bailment Essentials of Bailment Illusions Responsibilities of a Bailee Rights of Bailment Pledge Essential features of pledge Pledge by Non-owner Acknowledgement Bibliography

BIBLIOGRAPHY
WEBSITES
www.google.com www.wikipedia.org www.live.net

TEXTBOOK Business Law Kalaivani Venkataraman (Vipul Prakashan)

GROUP MEMBERS

110:- Rushabh Doshi

114:- Vidhi Joshi

116:- Jigar Marolia

120:- Virali Mehta

154:- Inder Tiwana

158:- Twinkle Malkan

160:- Keshav Gupta

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