CONTRACT OF BAILMENT UNDER THE INDIAN CONTRACT ACT 1872

INTRODUCTION

Bailment is a type of special contract under the Indian Contract Act 1872 (hereinafter referred to as ‘the act’). Under bailment, a contractual relationship is formed between two parties, where one party delivers the ‘possession of the goods to the other party for a specified purpose or a specified period. Section 148 of the act deals with the contract of bailment[1]. On analyzing the aforementioned section, the following characteristics of bailment can be derived:

  1. Bailment consists of the delivery of goods by one party to the other, upon a contract.
  2. There is a purpose for such delivery of goods.
  3. On the accomplishment of the purpose, the goods are returned, or dealt with according the directions of the delivering party.

The two contracting parties are:

  1. Bailor- The person who delivers the good.
  2. Bailee- The person to whom the goods are delivered.

BAILMENT DEALS WITH GOODS

Bailment deals with movable goods, which are defined under Section 2(7) of the Sale of the Goods Act, 1930[2]. It means only movable goods can be bailed. Moreover, the contract of bailment is distinct from the sale of goods, as it does not involve a transfer of ownership of goods.

ESSENTIAL REQUISITES OF BAILMENT

There are certain essential requisites of bailment, which should be fulfilled to make it a valid contract. They are:

  1. There must be a delivery of possession of goods

One of the key requisites of bailment is the delivery of possession of the goods to the bailee by the bailor. Generally, possession means exercising control over something and excluding others to do the same. For bailment, delivery of possession is distinguished from mere ‘custody.’ In the case of Reeves v. Capper, the court observed that owing to the nature of the job, a servant has mere custody of the goods[3]. However, it cannot be construed as possession of goods. The ‘delivery of possession’ is governed by Section 149 of the act[4]. It is of two types, viz.:

  1. Actual delivery– This type of delivery involves physically handing over the bailed goods to the bailee.
  2. Constructive delivery– This type of delivery involves an action by the bailor which creates a similar effect of delivering the possession of the goods to the ‘intended bailor’ or any other authorized person.
  3. The delivery of goods should be made in the presence of a contract

Without a contract, the delivery of goods cannot be initiated. As discussed earlier, the goods are delivered to the bailee in the presence of a contract. Otherwise, such possession will only amount to mere ‘custody’ of goods and will fall foul of Section 148 of the act. However, Section 168, which is related to the finder of lost goods, is an exception to it[5].

  1. There is a need for a purpose

As per Section 148 of the act, there is always a purpose for bailment. After the attainment of the said purpose, the bailee must return the goods or deal with them as per the directions of the bailor. Supposing that the bailee is not bound to do the same, and then it will not be accounted as bailment.

DUTIES OF THE BAILOR

  1. The bailor must disclose all the faults

The bailee must disclose any and every fault of the goods to the bailee with regards to Section 150 of the act.[6] It should be done irrespective of the fact whether it is gratuitous bailment or non-gratuitous bailment. Otherwise, the bailor will be held liable to pay for any loss arising from such misconduct.

  1. The bailor must bear the expenses

It is subjected to the form of bailment, which is opted by the parties. In the event the bailment is a gratuitous one, the bailor has to bear all ordinary and reasonable expenses. However, he cannot be made liable for any extraordinary expenses arising from the contract[7]. In the event the bailment is a non-gratuitous one, the bailor has to bear all the expenses relating to keeping and carrying of goods, work done on the goods, and other necessary expenses.

  1. To indemnify the bailee

If the bailor terminates the contract before the completion of a specified time or purpose and as a result the bailor incurs losses, then the bailor is liable to indemnify the bailee[8]. Owing to the bailor’s incompetence to deliver or collect the goods, he should pay for any damages incurred by the bailee[9].

  1. To collect the bailed goods

The bailor should collect the goods, once the specified period or purpose is attained. Otherwise, he should adequately compensate the bailee for the custody of goods.

DUTIES OF THE BAILEE

  1. The bailor must take reasonable care of the goods

The bailee has to take reasonable care of the goods is governed by Section 151 of the act[10]. He should take care of the bailed goods as an ordinary man would do for his/her goods. It should be done irrespective of the fact whether it is gratuitous bailment or non-gratuitous bailment. In the event the goods are damaged, it is for the bailee to prove that there was no fault on his part. Otherwise, he has to pay for the damage caused.

  1. The bailee should not use the goods for an unauthorized purpose

The bailee’s obligation to use the goods in an authorized manner is governed by Section 154 of the act[11]. The bailee should ensure that he is using the goods for an authorized purpose and not for any unauthorized purpose. If not, he shall be liable to pay for the damages even though it was caused by accident.

  1. The bailee’s duty is not to mix the bailed goods with his own

The bailor should avoid the mixing of the bailed goods and his goods.

  1. If the goods are mixed with the bailor’s consent[12].
  2. In this case, both parties have the right to take the portion of the mixture as per their proportion.
  3. If the goods are mixed without the bailor’s consent, still separation is possible[13].
  4. In this scenario, the bailee shall bear the expense of separation as well as for damages caused by such mixture.
  • If the goods are mixed without the bailor’s consent with no possibility of separation[14].
  1. In this scenario, the bailee has to bear the loss incurred by the bailor.
  2. The bailee should return the goods
  3. The bailee should return the goods after the expiry of the specified period or purpose[15]. Moreover, if there is an accretion to the goods, he is also bound to return them[16]. Otherwise, he has to pay for any loss incurred by the bailor.

CASE LAWS

In the case of Kaliaperumal Pillai v. Visalakshmi Achi[17], every evening the plaintiff used to take the keys to the box with unfinished jewels with her and leave the box in the house of the defendant. The court observed that this act does not amount to delivery of possession, as the plaintiff took away the keys to the box with her. In Atul Mehra v. Bank of Maharashtra[18], the plaintiff hired a locker in the bank to put his jewelry in it. However, it was stolen from the locker. It was held that the sine qua non of bailment is the exclusive possession of the goods and mere hiring of locker would not suffice. Therefore, the bank was not held liable for the robbery.

CONCLUSION

After a though analysis of the contract of bailment, it can be said that, unlike other contracts, it has its relevance. It is the most common or widely used type of contract. For bailment to be valid, certain essential conditions like exclusive possession, delivery of goods, etc have to be fulfilled. Additionally, certain duties have been laid down to protect the rights of both the bailor and bailee, which are strictly adhered to. Moreover, it is distinct from the sale of goods, as it does not involve a transfer of ownership of the goods.

Author(s) Name: Souvik Shaw (Department of Law, University of Calcutta)

References:

[1]Indian Contract Act, 1872, s 148

[2] Sale of the Goods Act, 1930, s 2(7)

[3]Reeves v Capper (1838) 5 Bing NC 136

[4]Indian Contract Act, 1872, s 149

[5]Indian Contract Act, 1872, s 168

[6] Indian Contract Act, 1872, s 150

[7]Indian Contract Act, 1872, s 158

[8] Indian Contract Act, 1872, s 159

[9]Indian Contract Act, 1872, s 164

[10]Indian Contract Act, 1872, s 151

[11]Indian Contract Act, 1872, s 154

[12]Indian Contract Act, 1872, s 155

[13]Indian Contract Act, 1872, s 156

[14]Indian Contract Act, 1872, s 157

[15]Indian Contract Act, 1872, s 160

[16]Indian Contract Act, 1872, s 163

[17]Kaliaperumal Pillai v Vishalakshmi Achi (1937), AIR 1938, Mad 32

[18] Atul Mehra and Anr. v Bank of Maharashtra (2002), AIR 2003, P H 11

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