What is Bailment?

Section 148 of the Indian Contract Act states that bailment is the act under which goods are transferred or delivered from one party to another party for some purpose and after that purpose is completed, they are returned back to the party or disposed of as per the directions laid down by the party who delivered the goods.

The party that delivers the goods is known as a bailor and the party to whom the goods have been delivered is known as a bailee.

Characteristics of Bailment

Characteristics of bailment are as follows:

• It is a type of contract only. Sometimes it may be done according to the law or it is sometimes implied by the law.
  
  
• It is applicable only on movable goods and not on immovable goods.
  
  
• In this case, the possession of the goods changes by physical delivery of goods.
  
  
• However, the ownership does not transfer in the case of bailment. The bailee is obliged to return the goods back to the bailor or disposed of them as per his directions.
  
  
• The bailee cannot deliver other goods in place of those goods. If it is done it will be a breach of contract.

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Kinds of Bailment

Bailments can be classified into the kinds, which are as follows:

• Deposit: Delivery of Goods by one person to another for the use of the former i.e. the bailor.
  
  
• Commodatum: Goods lent to a friend gratis to be used by him.
  
  
• Hire: Goods lent to the bailee for hire, i.e., in return for the payment of money.
  
  
• Pawn or Pledge: Deposit of goods with another by the way of security for money borrowed.
  
  
• Delivery: of goods for being transported, or something to be done about them, by the bailee for reward.

Bailment for Reward and Gratuitous Bailment

When the bailor in case of a bailment charges something in reward for entering into the contract, then it is known as a bailment for reward. When the bailor does not charge anything for the contract the bailment is known as the gratuitous bailment.

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Duties and Rights of Bailor

The duties of a bailor are:

• To Disclose Faults in the Goods
  
• Liability for the Breach of Warranty as to Title
  
• To Bear Expenses in Case of Gratuitous Bailments

To Disclose Faults in the Goods

Under Section 150, 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.

If he does not make such disclosure, he is responsible for the damage arising to the bailee directly from such faults. If the goods are bailed for hire or reward, the bailor is responsible for such damage whether he was or was not aware of the existence of such faults in the goods bailed.

For example, 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.

Liability for the Breach of Warranty as to Title

Under 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, to receive back the goods, or to give directions respecting them.

For example, A gives B’s car to C without B’s knowledge and permission. B sues C and receives compensation. A the bailor is responsible to make good this loss to C, the bailee.

To Bear Expenses in Case of Gratuitous Bailments

Under Section 158, with respect to bailments under which a bailee is to receive no remuneration, Section 158 provides that in the absence of a contract to the contrary, the bailor must repay to the bailee all necessary expenses incurred by him for the purpose of the bailment. In the case of non-gratuitous bailments, the bailor is held responsible to bear only extraordinary expenses.

For example, a car is lent for a journey. The ordinary expenses like petrol, etc., shall be borne by the bailee but in case the car goes out of order, the money spent on its repair will be regarded as an extraordinary expenditure and borne by the bailorUnder Section 158, with respect to bailments under which a bailee is to receive no remuneration,

Section 158 provides that in the absence of a contract to the contrary, the bailor must repay to the bailee all necessary expenses incurred by him for the purpose of the bailment.

In the case of non-gratuitous bailments, the bailor is held responsible to bear only extraordinary expenses. For example, a car is lent for a journey. The ordinary expenses like petrol, etc., shall be borne by the bailee but in case the car goes out of order, the money spent on its repair will be regarded as an extraordinary expenditure and borne by the bailor.

There are a number of rights of a bailor. These are:

• The bailor can enforce, by suit, all duties or liabilities of the bailee.
  
  
• In the case of gratuitous bailment (i.e., bailment without reward), the bailor can demand their return whenever he pleases, even though he lent it for a specified time or purpose.
  
  But if on the faith of such bailment, the borrower has acted in such a manner that the return of the thing before the specified time would cause him (i.e., the bailee) loss exceeding the benefit derived by him from the bailment, the bailor must indemnify the borrower for the loss if he compels an immediate return.

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Duties and Rights of a Bailee

The duties of a bailee are as follows:

• To Take Care of the Goods Bailed (Section 151)
  
• Not to Make Unauthorised Use of Goods (Section.154)
  
• Not to Mix Bailor’s Goods With His Own (Section 155-157)
  
• To Return the Goods Bailed Without Demand (Section 160)
  
• To Return Any Accretion to the Goods Bailed (Section 163)
  
• Not to Question the Title of Bailor (Section 167)
  
• Another Right of Bailee is the Right of Lien
  
• Right Against Wrongful Deprivation of or Injury to Goods:

To Take Care of the Goods Bailed (Section 151)

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 off his own goods of the same bulk, quality, and value as the goods bailed.

In case, the bailee has taken the amount of care as described above, he shall not be responsible, in the absence of any special contract, for the loss, destruction, or deterioration of the thing bailed.

Not to Make Unauthorised Use of Goods (Section.154)

In case the bailee makes unauthorized use of goods, i.e., uses them in a way not warranted by the terms of bailment, he is liable to make compensation to the bailor for any damages arising to the goods from or during such use of them.

For example, A lends a car to B for his own driving only. B allows C, his wife, to drive the car. C drives with care, but the car is damaged in an accident. A is liable to make compensation to B for the damage done to the car.

Not to Mix Bailor’s Goods With His Own (Section 155-157)

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 bailee shall be bound to bear the expense of separation or division and any damages arising from the mixture.

For example, A bails 100 bales of cotton marked with a particular mark to B.B. without A’s consent and mixes the 100 bales with other bales of his own bearing a different mark. A is entitled to have his 100 bales returned and B is bound to bear all expenses incurred in the separation of the bales and any other incidental damage.

But in case goods are mixed 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.

For example, A bails a barrel of flour worth ₹450 to B. B without A’s consent mixes the flour with flour of his own, worth only ₹250 a barrel. B must compensate A for the loss of his flour.

To Return the Goods Bailed Without Demand (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 bailey fails to return the goods at the proper time, he is responsible to the bailor for any loss, destruction, or deterioration of the goods from that time.

To Return Any Accretion to the Goods Bailed (Section 163)

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.

For example, A leaves a cow in the custody of B to be taken care of. The cow gives birth to a calf. B is bound to deliver the cow as well as the calf to A.

Not to Question the Title of Bailor (Section 167)

In cases of conflicting claims as to title to the goods are to be decided by the court and unless the court grants an injunction against the delivery of goods to the bailor, the bailee is under a duty to return it to the bailor at the proper time or within the reasonable time.

The rights of a bailee are as follows:

• The duties of the bailor are, in fact, if looked at from the point of view of the bailee, the bailee’s rights.
  Thus, a bailee can sue the bailor for:
  
  
  • Claiming compensation for damages resulting from non-disclosure of faults in the goods
    
    
  • The breach of warranty as to the title and the damage resulting therefrom
    
    
  • Extraordinary expense
    

Thus, in the case of wrongful deprivation, the bailee has a right to use the same remedies which the owner might have used in the like case.

Another Right of Bailee is the Right of Lien

Lien is the right of one person to retain what is in his possession, belonging to another, until some debt or claim is paid. Lien thus presupposes two things:

• The person vested with the right of lien is in possession of the goods or securities in the ordinary course of business.
  
  
• The owner (bailor in this case) has a lawful debt due or obligation to discharge to the person in possession of the said goods or securities (bailee in this case).

Since a lien is available only until the debt or claim is satisfied, once the debt is satisfied or the obligation discharged, the right of lien is extinguished. The property so retained has, then, to be returned to or kept at the disposal of the owner (i.e., bailor).

Lien may be of two types:

• General Lien: It means the right to retain goods not only for demands arising out of the goods retained but for a general balance of the account in favor of certain persons.
  
  
• Particular Lien: It means the right to retain the particular goods in respect of which the claim is due. Bailee’s right of lien is particular in certain cases whereas general in other cases. A particular lien is conferred upon a bailee by virtue of the provisions of Section.
  
  170. It reads: “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 the absence of a contract to the contrary, a right to retain such goods until he receives due remuneration for the service he has rendered in respect of them”.

Right Against Wrongful Deprivation of or Injury to Goods:

If a third person wrongfully deprives the bailee of the use or possession of the goods bailed, or causes 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 the third person for such deprivation or injury.

Now, whatever is obtained by the way of relief or compensation in such a suit shall, as between the bailor and the bailee, be dealt with according to their respective interest.

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Termination of Bailment

A contract of bailment terminates or comes to an end under the following circumstances:

• On the Expiry of the Stipulated Period
  
• By Bailee’s Act Inconsistent With Conditions of Bailment
  
• A Gratuitous Bailment May Be Terminated at Any Time

On the Expiry of the Stipulated Period

Where a bailment is for a specific period, it comes to an end on the expiry of the specified period. For example, a room cooler is hired by X from Y for a period of 6 months. On the expiry of 6 months, X must return the cooler.

On the Accomplishment of the Specified Purpose

In case, a bailment is for a specific purpose, it terminates as soon as the purpose is accomplished. For example, a suit length is given to a tailor to be stitched into a suit. The tailor is bound to return it as soon as the cloth is stitched into the suit.

By Bailee’s Act Inconsistent With Conditions of Bailment

By bailee’s act inconsistent with conditions of bailment the bailee does any act with regard to the goods bailed, inconsistent with the conditions of the bailment, the bailor may terminate the bailment. For example, A lets B hire, a horse for his own riding. B drives the horse in his carriage. A shall have the option to terminate the bailment.

A Gratuitous Bailment May Be Terminated at Any Time

However, if premature termination causes any loss to the bailee exceeding the benefit derived from the bailment, the bailor must indemnify. Further, a gratuitous bailment terminates by the death of either the bailor or the bailee.

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Finder of Lost Goods

The finding is not owning. A finder of lost goods is treated as the bailee of the goods found as such and is charged with the responsibilities of a bailee, besides the responsibility of exercising reasonable efforts in finding the real owner.

However, he enjoys certain rights also. His rights are summed up here under.

• Right to Retain the Goods
  
• Right to Sell

Right to Retain the Goods

A finder of lost goods may retain the goods until he receives the compensation for money spent in preserving the goods and/or amount spent in finding the true owner. A finder, however, cannot sue for such compensation.

But where a specific reward has been offered by the owner for the return of the goods lost, the finder may sue for such reward and may retain the goods until he receives it.

Right to Sell

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;
  

• when the lawful charges of the finder in respect of the thing found, amount to two-thirds of its value