CONTRACT OF BAILMENT

Contract of bailment means delivery of goods i.e. moveable property by one person who
is generally the owner thereof, to another person for some purpose. The goods are to be returned
to the owner after accomplished the purpose to take further action as per directions of the owner
of the goods. A.T.Trust Ltd., v/s Trippunhura Devaswomi-1954.

DEFINITION:- Section 148 of the Indian Contract Act, A bailment is the delivery of goods by one
person to another for upon a contract that they shall when purpose is accomplished be returned or
otherwise disposed of according to the directions of the person delivering them. In a contract of
bailment, the person who delivers the goods called the “Bailor” and to whom the goods are delivered
is called as “Bailee

Ex. 1. A delivers a piece of cloth to B, a tailor, to be stitched into a suit. There is a contract of
bailment between A and B.
2. A lends a book to B to be returned after the examination. There is a contract of bailment
between A and B.
3. 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.

ESSENTIAL ELEMENTSCONTRACT OF BAILMENT:-

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. Ex. A servant who receives certain goods from his master to take to a
third party has mere custody of the goods; possession remains with the master and the servant
does not become a bailee.
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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 under 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.

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.
7. 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.
8. RIGHT OF REWARD
In a contract of bailment, both the partiesbailor and the bailee can get a reward but it depends on
the nature of the transaction.

KINDS OF BAILMENT

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.

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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.
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 partiesbailor and the bailee can get a reward but it depends on
the nature of the transaction.

KINDS OF BAILMENT

2. 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.
3. 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.
4. BAILMENT FOR REWARD OR NON-GRATUITOUS BAILMENT
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.
5. 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.

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6. 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.
Ex. A found the lost horse B and redelivered it to B. It will be the bailment for lost goods.
7. 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.
Ex. A gets loan from B and hands over his jewels to B as security until the repayment of the
loan. It will be the bailment for pledge.

RIGHTS OF THE BAILOR

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, he is entitled to get reasonable compensation from the
bailee.
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 to get reasonable compensation from bailee tor his goods.

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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

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.
Ex. 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.
Ex. A is a friend of B and repairs B’s 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.

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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.
Ex. 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.
Ex. 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 to be indemnified by A.

RIGHTS OF BAILEE
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 to the bailor. Ex. A leaves his horse with the neighbour for safe custody for a
week. B is entitled to recover the expenses incurred by him in feeding the horse.

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.

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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

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.

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 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.

POSITION OF FINDER OF GOODS

A person who finds goods belonging to another and takes them into his custody is subject to the
same responsibility as a bailee as provided in sec.71. Since the position of the finder of goods is
that of a bailee. He is supposed to take the same amount of care with regard to the goods as is
expected of a bailee under section 151. He is also subject to all duties of a bailee including a
duty to return the goods after the true owner is found.
Section 168 and 169 confer certain rights on the finder of goods which are as under:
1. May sue for specific reward offered: The finder of goods has no right to sue the owner for
compensation or trouble and expenses voluntarily incurred by him to preserve the goods, but he
may retain the goods until he receives such compensation and a specific reward offered by the
owner for return of the goods. Refer sec. 168 of the Act.
2. If true owner is diligence not found or he refuses to pay the lawful charges of the finder of the
goods, the finder may sell it on the following conditions:-
i) When the thing is in danger of perishing or losing part of its value.
ii) When the lawful charges of the finder, in respect of the found goods amount to two-third of its
value.
iii) Right of Lien: He can retain the Lien on the found goods until his expenses on find goods are
paid.
iv) Right to sell the goods found:- Finder of the goods has the right to sell the goods found by
him under certain circumstances provided in section 169 of the act with a reasonable notice
mentioning the intention to sale the goods found.

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TERMINATION OF BAILMENT
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.