Introduction

Bailment implies a sort of relationship in which the personal property of one person temporarily goes into possession of another. The ownership of the articles or goods is in one person and the possession in another. Eg. delivering a cycle, watch for repair.

“Bailment”, “bailor” and “bailee” defined (Section 148)

A “bailment” is 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.

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

Explanation: If a person already in possession of the goods of another contract to hold them as a bailee, he thereby becomes the bailee, and the owner becomes the bailor of such goods, although they may not have been delivered by way of bailment.

Essentials of Bailment : To constitute bailment the following conditions are to be satisfied.

1. Delivery of goods for a specific purpose.
2. Delivery upon Contract
3. Return or disposal of goods. (conditional delivery)

1. Delivery of goods ( Delivery of possession ) : To constitute bailment, there must be a delivery of goods from one person to another for some specific purpose (delivery of possession from one person to another)..

How is Delivery to bailee made (Section 149)

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 authorized to hold them on his behalf. (eg : agent)

So, with reference to explanation of section 148 and section 149 we can conclude that, delivery of possession is of two kinds namely,

1) Actual delivery : When the bailor hands over to the bailee physical possession of the goods, that is called as “actual delivery”.

2) Constructive delivery : It takes place when there is no change of physical possession, goods remaining where they are but something is done which has the effect of putting them in the possession of the bailee.

2. Delivery upon Contract : There can be no bailment without a contract. Bailment is a contract and hence, the essentials of contract under section 10 of ICA like competence, free consent, etc are to be satisfied.

Ram Gulam v. Government of UP : The plaintiff’s ornaments, having been stolen, were recovered by the police and, while in police custody, were stolen again. The plaintiff’s action against the State for the loss was dismissed. Because the ornaments were not made over to the Government under any contract. The Government never occupied the position of bailee to indemnify the plaintiff. But, The Bombay HC in Lasalgaon Merchants Cooperative Bank Ltd v. Prabhudas Hatibhai, has taken a lead in imposing the obligation of a bailee without a contract. In this case, the goods (tobacco) seized by the government officials were damaged because of heavy rains. The court said “Heavy rains do not amount to an act of God. It was the duty of government officials to take such care as every prudent manager would take of his own goods. The Government stood in the position of bailees. This view was accepted by the SC in State of Gujarat v Memon Mohammad.

3. Return or disposal of goods. (conditional delivery) : In bailment, the goods are delivered for a specific purpose like repair, carriage etc. After the purpose is accomplished, the goods may be returned to the Bailor in the same or altered condition, or may be disposed of as directed by the Bailor. If the person to whom the goods are delivered is not bound to restore them to the person delivering them or to deal with them according to his discretions, their relationship will not be that of bailor and bailee.

Shanker Lal v. Bhura Lal : An agent who has collected money on his principal’s behalf is not a bailee of the money. (Because, he is not bound to return the same notes and coins).

According to section 150 which deals with the duty of bailor, bailors are of two types :

1. Gratuitous bailor (costing nothing/ निःशुल्क)
2. Bailor for reward (Non-gratuitous bailor)

Bailor’s duty to disclose faults in goods bailed (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 risk; and if he does not make such disclosure, he is responsible for damage arising to the bailee directly from such faults.

If such 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.

Illustrations :

(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.

In Hyman and Wife v. Nye & Sons, the plaintiffs hired from the defendant for a specific journey a carriage, a pair of horses and a driver. During the journey a bolt in the underpart of the carriage broke, the carriage was upset and the plaintiff injured….. The defendant was held liable.

Care to be taken by bailee (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 of his own goods of the same bulk, quantity and value as the goods bailed.

This section lays down a uniform standard of care for “all cases of bailment”, that is, a degree of care which a man of ordinary prudence would take of his own goods of the same type. If the care devoted by the bailee falls below this standard, he will be liable for loss of or damage to the goods, but not otherwise.

Section 150 = Duty of bailor

Section 151 = Duty of bailee.

Duty of bailor = Right of bailee & Duty of baily = Right of bailor.

Bailee when not liable for loss, etc, of thing bailed (Section 152)

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.

Gopal Singh v. PNB : “No cast-iron standard can be laid down for the measure of care due from a bailee and the nature and amount of care must vary with posture of each case.” Nature, quality and bulk of the goods bailed, the purpose of bailment, facilities reasonably available for safe custody and the like, will be taken into account for determining whether proper care has been taken.

The burden of proof is on the bailee to show that he was exercising reasonable care and if he can prove this, he will not be liable.

If the bailee places before the court evidence to show that, he had taken all reasonable care to avoid damage which was reasonable foreseeable, or had taken all reasonable precautions to obviate(avoid) risks which were reasonable apprehended, he would be absolved(freed) of his liability.(reference : Chittagong Port Authority v. Mohd Ishaque) Where the loss has been due to the act of the bailee’s servent, he would be liable if the servant’s act is within the scope of his employment. (reference : Sanderson v. Collins)

Where the bailor’s goods are stolen from the custody of the bailee, he will be liable, if there has been negligence on his part. (reference : Join & Son v. Comeron)

Where the bailee’s own goods are lost along with those of bailor, it will not be deciding factor. If the bailee is generally negligent with his own goods is no justification for his negligence towards the bailor’s goods.

In Sheills v. Blackburne, the bailee was held not liable as he had in good faith taken equal care of goods of both.

Termination of bailment by bailee’s act inconsistent with conditions (Section 153)

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

A lets to B, for hire, a horse of his own riding. B drives the horse in his carriage. This is, at the option of A, a termination of the bailment.

Liability of bailee making unauthorized use of goods bailed (Section 154)

It was held that the bailee was liable to compensate the deceased as also the owner of the vehicle because it was an unauthorised use of the vehicle and the liability was absolute.(Allas v. E.M. Patil, Air 2004 Ker 214)

Section 154. Liability of bailee making unauthorized 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.

Illustrations :

(a) A lends a 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 accidentally falls and is injured. B is liable to make compensation to A for the injury done to the horse.

(b) A hires a horse in Calcutta from B expressly to march to Banaras. A rides with due care but marches to Cuttack instead. The horse accidentally falls and is injured. A is liable to make compensation to B for the injury to the horse.

Duty of bailee …not to mix ( section 155 to section 157)

The bailee should maintain the separate identity of the bailor’s goods. He should not mix his own goods with those of the bailor and without his consent.

Section 155 to section 157 deals with the provisions of effect of mixture.

Effect of mixture with bailor’s consent, of his goods with bailee’s (Section 155)

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.

Effect of mixture, without bailor’s consent, when the goods can be separated (Section 156)

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

A bails 100 bales of cotton marked with a particular mark to B. B, without A’s consent, 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 the expenses incurred in the separation of the bales, and any other incidental damages.

Effect of mixture, without bailor’s consent, when the goods cannot be separated (Section 157)

If the bailee, without the consent of the bailor, mixes the foods 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

A bails a barrel of Cape flour worth Rs. 45 to B. B, without A’s consent, mixes the flour with country flour of his own, worth Rs. 25 a barrel. B must compensate A for the loss of his flour.

Repayment, by bailor, of necessary expenses. (Section 158)

(The bailee is entitled to lawful charges for providing his services.)

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 bailors shall repay to the bailee the necessary expenses incurred by him for the purpose of the bailment.

Restoration of goods lent gratuitously (Section 159)

B, on the faith, of car to be returned in two months, lents further to a company for two months upon a contract of two months. If A is asking his car return after one month and because of which B will have a loss of Rs. 5000/- because of breach of contract with company, over and above the benefit which B has received, A must indemnify B for Rs. 5000/-

Sec 159 : The lender of a thing for use may at any time require its return, if the loan was gratuitous, even through he lent it for a specified time or purpose.

But if, on the face 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 losses 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 benefits so derived.

Termination of gratuitous bailment by death (Section 162)

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

Return of goods bailed & bailee’s responsibility ( Sec 160 & 161)

Return of goods bailed, on expiration of time or accomplishment of purpose (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.

Bailee’s responsibility when goods are not duly returned (Section 161)

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.

Shaw & Co v. Symmons & Sons The plaintiff entrusted books to the defendant, a book binder, to be returned them within a reasonable time. The plaintiff having required the defendant to deliver the whole of the books then bound, the defendant failed to deliver them within a reasonable time and they were subsequently burnt in an accidental fire on his premises. The defendant was held liable in damages for the loss of the books.

Bailer entitled to increase or profit from goods bailed (Section 163)

In the absence of any contract to the contrary, the bailee is bound to deliver to the bailer, or according to his directions, any increase or 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 A.

Bailor’s responsibility to bailee (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

Bailment by several joint owners (Section 165)

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.

Provision for not to set up jus tertii ( Sec 166 & 167)

Jus tertii meaning : The right or interest of a third person. When a person is sued in respect of certain property he may sometimes set up as a defence that the title to such property is not in the plaintiff but in some third person.

A bailee is not entitled to set up, as against the bailor’s demand, the defence of jus tertii, that is to say, that the goods belong to a third person. The bailee is estopped from denying the right of the bailor to bail the goods and to receive them back.

In fact A is not the owner of bike, the actual owner is C.

In above case, i) if C is asking return his bike from B, is bailee(B) is supposed to give it to C ?

ii) If B refuses to give back bike to C, what is the remedy for C ?

Answers lies in section no 166 and 167.

Bailee not responsible on redelivery to bailor without title (Section 166)

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.

Right of third person claiming goods bailed (Section 167)

If a person, other than the bailor, claims goods bailed he may apply to the court to stop delivery of the goods to the bailor, and to decide the title to the goods.

(Even if there is a person who has a better title to the goods than that of a bailor or who claims ownership of the goods, the bailee may safely return the goods to the bailor and he will not be liable to the owner for conversion. In such case that another person, has remedy as mentioned in section 167.)

Further, explanation (2) to section 117 of the Indian Evidence Act, 1872, if the bailee has already delivered the goods to the person having a better title, and yet the bailor sues him, he may prove that such person had a better right to receive the good as against the bailor.

Where goods have been bailed by several joint owners, the bailee may deliver them back to one joint owner without the consent of all, in the absence of any agreement to contrary.

Finder of Goods

Right of finder of goods may sue for specified reward offered (Section 168)

A finder of goods is a bailee thereof and as such bound by the duty of reasonable care. (sec 71. Responsibility 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.). Section 168 & 169 protects the interest of a finder in two ways.

Sec 168 : 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 (Section 169)

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 charges of the finder, the finder my sell it-

(1) when the thing is in danger of perishing or of losing the greater part of its value, or

(2) when the lawful charges of the finder, in respect of the thing found, amount to two-thirds of its value.

Lien in Bailment (S 170-171)

Concise Law Dictionary : A right by which a person in possession of the property holds and retain it against the other in satisfaction of a demand due to the party retaining.

If the bailee’s lawful charges are not paid, he may retain the goods. The right to retain any property until the charges due in respect of the property are paid is called ‘the right of lien’.

The Supreme Court in Syndicate Bank v. Vijay Kumar laid down that a lien is in primary sense a right given by law and not by contract.

Liens are of two kind : (1) Particular Lien (s 170) & (2) General Lien (s 171)

Bailee’s Particular lien (Section 170)

As a general rule, a bailee is entitled only to particular lien, which means the right to retain only that particular property in respect of which the charge is due.

Sec 170. Bailee’s particular lien

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.

Illustrations

(a) 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.

(b) 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.

The right is available subject to certain important conditions ;

Foremost among them is that, the bailee must have rendered some service involving the exercise of labour or skill.

Secondly, labour or skill must have been exercised in accordance with the purpose of the bailment.

Thirdly, only such goods can be retained on which the bailee has bestowed trouble and expense, he cannot retain any other goods.

Chand Mal v. Ganda Singh : Where a bailee claimed lien for storage of sugar, it was held that, such custody, not being a service involving the exercise of labour or skill within the meaning of section 170

Vothoba Laxman Kalar v. Maroti U Kalar : A person to whom cattle are given for grazing does not have the right of lien on them for his charges.

Lien is a personal right which continues only so long as the possessor holds the goods (Legg v. Evans). The right of lien may also be defeated or excluded by an agreement to the contrary.

General lien of bankers, factors, wharfingers, attorneys and policy brokers (Section 171)

Banker : means any association, a company, or association who accepts, for the purpose of lending or investment, deposit of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise. (Bombay Stamp Act)

Factor : An agent, entrusted with possession of goods for the purpose of selling them for his principal. He has a general lien on the goods of his principal for his balance of account against principal.

Wharfingers : Wharf means a place contiguous to water, used for the purpose of loading and unloading of goods. Wharfinger is he that, owns or keeps wharf, or has the supervision or the management of it.

Concise law dictionary define Attorney : he is one that is appointed by another man to do anything in his absence. & Solicitor : is one properly qualified and formally admitted to practice as a law-agent in any court.

Policy-broker : An insurance agent who is employed to effect a policy of marine insurance is called a policy-broker. His lien extends to any balance on any insurance account due to him from the person who employed him to effect the policy.

Section 171 : General lien of bankers, factors, wharfingers, attorneys and policy brokers : Bankers, factor, 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 which balance, goods, bailed to them, unless there is an express contract to that effect.

The right of ‘general lien’ as provided in section 171, means the right to hold the goods bailed as security for a general balance of account. General lien entitles the bailee to detain any goods bailed to him for any amount due to him whether in respect of those goods or any other goods.

Time-barred debts and lien : One of the great advantage of the right of lien is that, it can be exercised for the realization of a debt even when an action for recovery of the debt would be time-barred (Bombay Dyeing & Mfg Co Ltd v. State of Bombay).