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CONTRACT OF BAILMENT

Section 148 of the Act defines a contract of bailment as: 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 be disposed off according to the directions of the person delivering them. The word bailment is derived from a French word Bailor which means handover. Deposit of money in a bank is not a bailment, as the bank is not bound to return the same notes and coins. Agent who collects money on behalf of his principal is not a bailee. 1) 2) 3) 4) 5) KINDS OF BAILMENT The different types of bailment are as under:DEPOSITUM: Safe deposit vault is a bare bailment of goods for the use of the bailor. COMMODATUM: Lending for writing or goods lent gratuitously to be used by the bailee and to be eventually returned. LOCTIO ET CONDUCTIO: Goods given on hire, is a contract of bailment. The lender is called the locator and the borrower is called the conductor. VADIUM: This is a bailment where goods are pawned to be security for money borrowed. MONDATUM: Goods delivered to be carried or something to be done to them for a reward.

CHARACTERISTICS The contract of bailment possesses following characteristics:a) CONTRACT There is a contract between a bailor and bailee. There is delivery of goods from bailor to bailee. But a person who is already in possession of the goods may become a bailee by subsequent agreement. Sometimes an obligation of a bailee arises without a contract. Eg: In case of a finder of goods. Bailee is the finder of goods. b) DELIVERY OF GOODS & CHANGE OF POSSESSION Bailment constitutes transfer of possession of goods for a temporary period from bailor to bailee. There is not transfer of ownership. There is delivery of goods from bailor to bailee. This delivery may be actual or symbolic. Actual delivery is by physically or actually handing over the thing. Symbolic or constructive delivery may be by doing something which has the effect of putting the goods in the possession of the intended bailee. For example by delivering a railway receipt or a bill of lading. c) DELIVERY OF GOODS FOR A SPECIFIC PURPOSE Goods are to be delivered for a specific purpose only. When the purpose is accomplished they shall be returned or disposed off according to the directions of the bailor.

..2.. Eg: Giving gold to a goldsmith for the purpose of making jewellery. d) TYPE OF GOODS Bailment can be only of movable goods. Immovable goods do not qualify for bailment. e) RETURN OF SPECIFIC GOODS The bailee must return the specific goods either to the bailor or to somebody according to the directions of bailor as soon as the purpose for which the goods are bailed is accomplished. Eg: A suit stitched by a tailor has to be returned on completion of stitching . LEADING CASE LAWS a) RAM GHULAM Vs. U.P. STATE Plaintiffs ornaments were stolen. These were recovered by the police and kept in safe custody. These goods were stolen from the custody. HELD: State was liable. b) GOVERNOR GEN Vs. JUBILEE MILLS Delivery of cotton was received on the railway station; however no wagon was available to take it to the godown. Therefore, with the consent of the station master the cotton stocked on the station platform. 3 days later it caught fire from a spark of a passing train. HELD: Railway authorities were liable. c) KALIA PERUMAL Vs. VISALKASHI A lady employed a goldsmith for the purpose of melting old jewels for making new jewels from the goods. Every evening she used to receive the half melted jewels from the goldsmith, put them in the box and left them in a room in the goldsmiths house. The key of the room was retained by her. One night her ornaments were stolen. HELD: There was delivery of goods i.e. jewels were given to the lady, and they were not in the possession of the goldsmith when they were stolen. Therefore, goldsmith was not liable. RIGHTS / DUTIES OF THE BAILOR The rights and duties of the bailor are as follows:

a) DISCLOSURE OF FAULTS The bailor is bound to disclose to the bailee the faults in the goods bailed of which the bailor is aware and which materially interfere with the use of them, or expose the bailor to extraordinary risk. If he does not make such a disclosure and the bailee suffers loss or damage arising directly from the faults in the good bailed, the bailor is responsible to the bailee

..3.. for the damage suffered. If the goods are bailed for hire, the bailor is responsible for such damage, whether he was or was not aware of the existence of such fault in the goods. Eg: 1) A lends to B a horse, which he knows is vicious. He does not disclose that the horse is vicious. B is thrown from the horse and is injured. A is responsible to B for damage suffered. 2) B hires a carriage. The carriage is unsafe. A is not aware of it and B is injured while riding it. A is responsible to B for injury. 3) A bicycle hired was having faulty brakes and the hirer suffered an accident due to the non-functioning of the brakes. The lender did not know the brakes were faulty. He was held liable to pay the damages. 4) A gratuitous bailor is responsible only for known defects. A bailor for reward is liable for unknown defects also. b) REPAYMENT OF NECESSARY EXPENSES Unless there is an express term in the contract regarding expenses, a bailee is to pay the ordinary and reasonable expenses of bailment. But for extraordinary expenses the bailor would be responsible. When the goods are given to the bailee to be kept carried or to be worked upon by the bailee for the bailor and bailee is to receive no remuneration, then it is the duty of the bailor to repay to the bailee the necessary expenses incurred by himself for the purpose of bailment. c) RESPONSIBILITY FOR LOSS The bailor is responsible to the bailee for any loss which the bailee may sustain by the reason of the fact that the bailor was not entitled to make the bailment or to receive back the goods or to give directions respecting them. RIGHTS / DUTIES OF BAILEE The rights and duties of a bailee are enlisted as follows:-

a) TO TAKE CARE OF GOODS A bailee is under the duty to take as much care of goods bailed as mainly expected of an ordinary prudent man under similar circumstances with respect to his own goods of the same bulk quantity and value as the goods bailed. If the bailee takes as much care of the goods bailed as he would have taken of his goods, he is not liable for any loss or damage they may sustain. Eg: LAXMI NARAYAN Vs. THE SECY. OF STATE A boat which carried jute had 30 leaks, each of these leaks was 1 inch in length and jute was kept in the boat for 30 hrs. HELD: Carrier was liable for loss as it was due to his negligence.

..4.. THE NEW INDIA ASSURANCE CO. LTD. Vs. THE DELHI DEVELOPMENT AUTHORITY A truck was found in a parking space and the receipt was issued for its safekeeping but the truck was lost from the parking center. HELD: Bailor was responsible for loss because of lack of reasonable care. SHANTILAL Vs. TARACHAND Foodgrains of the bailor were stored in the bailees godown. They were damaged by unexpected floods. HELD: Bailee was not liable as the loss was due to an act which was beyond his control. b) DUTY NOT TO MAKE UNAUTHORISED USE OF GOODS Goods bailed must be strictly used for the purpose for which they are bailed to the bailee. It is the duty of the bailee not to do any act inconsistent with the condition of bailee and if he does so the contract of bailment is voidable at the option of the bailor. If the bailee makes any use of the goods bailed, which is not according to the condition of bailment, he is liable to compensate the bailor for any damage caused to the goods from or during such use of the goods. Even an act of God or an inevitable accident will be no defence to the bailee. Eg: a) A lets to B for hire; a horse for his own riding purpose. B rides the horse in his carriage. A has the option of terminating the contract of bailee. b) A lends to B a horse for his own riding. B allows C, a member of his family to ride the horse. C rides with care, but the horse falls accidentally and is injured. B is liable to compensate A for injury done to the horse. c) B hires a horse in Kolkata from A expressly to march to Banaras. B rides with care but marches to Cuttack instead. The horse accidentally falls and is injured. B is liable to compensate A for the injury to the horse. c) NOT TO MIX GOODS BAILED The Act provides that the bailee should not mix his own goods with that of the bailor, without the consent of the bailor so as to maintain the separate identity of the goods bailed. If the bailee without the consent of the bailor, mixes the goods with his own goods and these goods can be separated or divided, the property in the goods remain with the respective parties, but the bailee is bound to bear the expenses of separation or division and any damage arising from the mixture. 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. Eg: A bails 100 bales of cotton marked with a particular mark to B. B without the consent of A, mixes the 100 bales with the other bales of his own bearing a different

..5.. 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 expenses. 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 for the loss of goods. Eg: A bails a barrel of corn flour worth Rs.45/- to B. Without As consent, B mixes the flour with his own country flour worth Rs.25/- a barrel. Since B cannot separate As flour from the mixture he must compensate for the loss of flour. d) TO RETURN GOODS BAILED It is the duty of the bailee to return the goods bailed according to the direction of the bailee. When the time for which the goods are bailed, expires or the purpose for which they are bailed is accomplished the bailee must deliver the goods to the bailor even though there is no demand from the bailor. If due to the default of bailee, the goods are not returned, delivered or tendered at the proper time, he is responsible to the bailor for any loss, destruction, deterioration of the goods from that time. Eg: RAMPAL Vs. GAURISHANKAR Even after the giving or tendering of the debt the bailor, the bailee refuses to return the goods to him. The goods are subsequently stolen. HELD: Bailor is responsible to bailee. e) TO RETURN EXCESS PROFIT The bailee is bound to deliver to the bailor any increase or profit which may have accrued from the goods bailed unless there is a contract to the contrary. Eg: A leaves a cow in the custody of B to be taken care of. The cow delivers a calf. B is bound to handover the cow and calf to A. f) DUTY NOT TO SET UP AN ADVERSE TITLE The bailee is not entitled to sell the goods belonging to a third party and hence he shall not return the goods to the bailor. Where the bailor had 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 a delivery. If several joint owners bailed the goods, the bailee may deliver them back according to the directions of any on joint owner without the consent of all unless there is a contract to the contrary. PLEDGE It is a special kind of bailment. Pledge or pawn is the delivery of goods by one person called the pawner to another called the pawnee, as a security for a loan.

..6.. Eg: If A in need of money obtains an amount from money lender B on the security of his gold watch, the transaction is called a pledge. Here, A is the pawner and B is the pawnee. In pledge the possession of the goods pledged remains with the pawnee. However the title still remains with the pawner. 1) 2) 3) 4) FEATURES OF PLEDGE The following are the features of a pledge: The purpose of delivery of goods is to provide a security for a loan. The goods still remain the property of the pawner, though they are in the possession of the pawnee. Only movable property may be pledged. There must be actual or constructive delivery. The bailor must be in possession of goods in the legal sets i.e. under a legal right or title. RIGHTS OF A PAWNEE The rights of a pawnee are as under:-

1) RIGHT OF RETAINER The pawnee may retain the goods pledged for: a) Payment of debt. b) For all interest on the debt. c) For all necessary expenses, incidental to the possession or for the preservation of the goods pledged. 2) RIGHT TO EXTRA-ORDINARY EXPENSES The pawnee is entitled to receive from the pawner extra-ordinary expenses incurred by him for the preservation of the goods pledged. But the pawnee has no right to retain the goods for the extra-ordinary expenses as in the case of necessary expenses. This right to receive the extra-ordinary expenses may be exercised by filing the suit for the recovery of such expense. 3) RIGHT WHERE PAWNER MAKES THE DEFAULT If the pawner makes default in payment of the debt or performance at the stipulated time of payment, the pawnee has two rights: a) File a suit for recovery of debt or for the performance of promise and retain the goods pledged as collateral security. b) Sell the things pledged after giving the pawner reasonable notice of the sale. If the proceeds of such sale are less than the amount due in respect of the debt, the pawner is still liable to pay the balance. If the proceeds of the amount are greater than the amount due, the pawnee shall pay over the surplus to the pawner.

..7.. PAWNERS RIGHT TO REDEE The defaulting pawner has the right to redeem the goods pledged at any subsequent time before the actual sale of the goods. But in such case he must pay, in addition any expenses which may have come up because of his default. Thus, once the pawnee sells the goods the rights of the pawner is extinguished. But so long as the sale has not taken place the pawner has the right to redeem the goods on payment of the debts and additional expenses, if any.

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