Bailment Dr Manish dadhich Ph D M Com

Bailment Dr. Manish dadhich Ph. D. M. Com, NET M. B. A. , NET, SET

Tutorial • • Elucidate contract of bailment. Who are bailor and bailee? Describe the essential of contact of bailment. Explain gratuitous bailment. State the duties of finder of goods. Elucidate the duties of bailee and bailor Explain lien. Differentiate between general lien and particular lien.

Introduction of Bailment • Section 148 to 171 of the Indian Contract 1872, contain the provision relating to contract of bailment. • Bailment Originated from a French word Bailer which means to deliver.

Definition Section 148 of the Indian Contract Act outlines, “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. ”

Two Parties Bailor - The person who delivers the goods. Bailee - Person to whom they are delivered is called the bailee. Sub-bailee- when bailee again bails the goods to a third party with consent of bailor. Eg. 1. When A lends his vedio CD to B. 2. When A delivers his clothes to B for dry cleaning. 3. When A hands over key of his car to B for a long drive. 4. When A parks his car in parking centre of B for a payment.

Essentials of Bailment 1. Delivery of possession 2. Delivery of goods should be upon a contract 3. Delivery of goods must be for a specific purpose 4. Return of same goods 5. Contract

Bailment 1. Delivery of possession The first unique feature of bailment is that the bailor must transfer his possession of goods to the bailee. The goods should be put in the leagal possession of the bailee.

2. Delivery of goods should be upon a contract When a persons ‘s goods go into the possession of another without any contract there is no bailment. However a finder of lost goods of another is considered to be a bailee even though there is no real contract. The contract may be express or implied

3. Delivery of Goods must be for a specific purpose U/S 148 provides , the delivery of goods from bailor to bailee must be for some purpose. If goods delivered by mistake to a person , there is really no bailment.

4. Return of Goods should be returned to the bailor or disposed of according to his direction , either in their original or in an altered form , when the purpose of bailment is over.

Classification of Bailments Bailment may also be classified into: 1. Gratuitous bailment – It is a bailment where no consideration passes between the bailor and the bailee, e. g. where A lends a book to his friend B. 2. Non-gratuitous bailment or bailment for reward – It is bailment where consideration passes between the bailor and the bailee e. g. where certain goods are kept in a godown for hire,

Duties of Bailee A. To take care of the Goods U/S 151 provides , the bailee is bound by the contract of bailment to return the goods when the purpose of bailment is fulfilled. He has to take care of the goods while they are in his possession. He is responsible for any loss or damage caused to the goods by virtue of his negligence.

B. Duty not to mix with his own goods U/S 155 to 157 : deal with the provisions governing the rights of the bailor and bailee when there is an inter-mixing of their goods. The bailee has an obligation to keep the goods of the bailor separate from his own. a. Mix with consent b. Mix without consent but goods are separable c. Mix without consent but can’t be separated

C. Duty to Return the Goods /same goods Duty of the bailee to return the goods without demand , on the expiration of the time specified or when the purpose is accomplished. Eg. A hired a Tax but, next it was stolen, here A is liable to pay the owner.

D. Duty not to use bailed goods in an Unauthorized Manner Bailee is under an obligation not to use the goods in an unauthorised manner or for an unauthroised purpose If bailee does so , the bailor can terminate the bailment , and claim damages for any loss or damage caused by the unauthorised use. Eg. A gives his car to B for riding purpose but B is using as a taxi for long route.

F. Duty to return any accretion of the goods The bailee must return to the bailor any increase or profits which have accured from the goods bailed. U/S 163 states that the bailor is entitled to the profits accruing from the goods , unless there is a contract to the contrary. Eg. A pledges some shares with a bank. Bank recd. Dividend and bonus share but the bank was not automatically entitled to the dividend.

G. Duty of Finder of Lost Goods A finder of lost goods is a bailee and such he is bound to take reasonable care of those goods He has to return the goods to the real owner if the real owner pays his lawful charges

H. Duty not to set up adverse title • The bailee must not set up a title adverse to that of the bailor. He must hold goods on behalf of and for the bailor. • Eg. A gets a bicycle from his friend but pledge it to get some loan.

Rights of Bailee 1. Right to compensation (Sec. 164) The bailee can claim compensation form the bailor for any loss resulting to him by the reason that the bailor was not entitled to make the bailment.

2. Right to Expenses or remuneration (Sec. 158) If the bailee is required by the terms of bailment to keep or carry the goods or to do some work upon them for the benefit of the bailor , he (bailee) is entitled to recover his agreed charge The bailee has a right to ask the bailor for payment of necessary expenses incurred by him for the purpose of bailment.

3. Bailee’s Right of Lien (S. 170 -171) Lein is the right to retain the goods by a person in possession of the goods of another until his lawful claims in respect of the goods are satisfied A. Particular Lien (Skill and labour are used) B. General Lien (right to retain the property belonging to the other and in the possession of the person trying to exercise the lien in respect of any payment lawfully due to him )

4. Others • To deliver goods to one of the joint bailors. • To return goods. • To sue against wrong doers.

Duties of Bailor a) Duty to disclose known fault of goods In the case of gratuitous bailment , the bailor must disclose all the known faults to the bailee and if he doesn’t make such disclosure, he is responsible for the damage arising to the bailee directly from such faults. In case of bailment for reward the bailor is responsible irrespective of the knowledge of the faults in the goods bailed.

b)Duty to repay expenses If the bailee is to receive no remuneration, the bailor is bound to pay necessary expenses incurred by the bailee for the purpose of bailment. In the case of bailment for reward , even thought the bailee is to bear the ordinary and reasonable expenses of bailment (eg, feeding of horse lent),

c)Duty to indemnify in case of premature termination The bailor is bound to indemnify the bailee’s loss caused by such premature termination. Eg. A lends his old computer to B for his use for 2 months. B spends Rs. 500 on its repairs. A requires to return the computer after 1 month. B has derived benefits of Rs 200 by its use. A is bound to compensate B the loss of Rs 300 which exceeds the benefits.

d) To indemnify the bailee for breach of warranties • The bailor is responsible to the bailee for any loss sustained due to any other or by breach of warranties. • Eg. A delivers stolen goods to B, a common carrier to be delivered to C. The police seizes the goods and B suffers a loss of Rs 2000. A is responsible for Rs 2000 to B.

Lien • ‘Lien’ means the right of a person to retain possession of some goods belonging to another until some debt or claim of the person in possession is satisfied. • Possession is essential for exercising the right of lien, and in order to create a lien the possession must be rightful, not for a particular purpose and continuous. • Right of lien may arise by Statute, by express or implied contract, or by a general course of dealing between the parties in a particular trade. • A lien can be 1) Particular lien 2) General lien

Law Relating to Lien • Particular Lien : – A particular lien is available only against the particular property in respect of which the bailee has expended labour and skill. A bailee is entitled to a particular lien only e. g. A repairs B's car. B does not pay the repair charges. A can retain the car until payment is made. • General Lien : – A general lien is a right of one person to retain any property or goods which are in his possession belonging to another person until the promise or liability is discharged. General lien is available to bankers, factors, attorneys of High Court and policy brokers.

Difference between Particular lien and General lien Basis Particular lien General lien Availability of right Available only against those goods in respect of which skill and labour has been expended by the bailee Available in respect of any property belonging to other party and in possession of the person exercising the right, in respect of any payment lawfully due to him Reason of lien For recovery of charge For a general balance of account for labour employed or expenses incurred upon the goods Applicability It can be exercised by all General lien can be exercised bailees. only by legal bankers, factors, attorney and policy brokers.

Finder of Goods • Person who comes by an article but not entitled to its possession - if he picks it up, he becomes a bailee. • Rights of finder of goods : 1. Right of lien - has right of lien for expenses incurred on the preservation and for finding out the owner – but has not right to sue the owner for its recovery, as incurred by him voluntarily. 2. Right to sue for reward - Finder can sue for specific reward offered by owner for return of goods - may retain the goods until reward received.

3. Right of sale - finder can sell the goods a) If owner cannot be found with reasonable diligence, or b) If found, refuses to pay the lawful charges of finder, or c) If goods are in danger of perishing or losing the major part of its value, or d) If lawful charges of finder exceeds two-third of value of goods.

• Duty of finder of goods 1. He must take reasonable care of goods – if despite such care, if goods are destroyed, finder not responsible for such loss. 2. He must not use the goods for own purpose. 3. He must not mix the goods with his own. 4. He must try to find out the owner – if fails to do so, he is liable as a trespasser.

Termination of Bailment 1. On expiry of the period - if bailment is for specific period. 2. On achievement of object - if bailment is for specific purpose. 3. Inconsistent use of goods - if used in manner inconsistent with the terms of contract. 4. Destruction of subject matter or incapable of use for the purpose of bailment. 5. Gratuitous bailment - at any time as per wishes of bailor. 6. 6. Death of bailor or bailee - in case of gratuitous bailment.

Thank You