CONTRACTS- II PROJECT

BAILEES DUTY OF CARE

INTRODUCTION
Social and economic transactions relating to goods and
services take place everyday. Societies which have wellestablished law of contracts and an effective judicial
system tend to reduce the transaction costs, facilitate
economic growth and social harmony. The legal provisions
pertaining to bailment in this regard play a crucial role in
the enforcement of the contracts.
Section -148 of the Indian Contract Act 1 defines Bailment as the change of
possession or delivery of goods from one person to another for some
purpose, upon a contract2. The bailee returns the goods to the bailor, the
owner of the goods, when the purpose is accomplished. 3 During the period of
the bailment, the title of the goods does not pass to the bailee; the bailor
continues to be the owner of the goods. In the case of bailment, it is
imperative for the bailee to be in control or have physical possession of
property in most cases or at least a symbolic4 or constructive possession.5
1 Referred to as ICA, henceforth.
2 The Indian Contract Act deals with bailment necessarily when it arises out of a
contract but bailor-bailee relationships can be formed even without an enforceable
contract. Otherwise bailment is a sui generis concept and consideration need not be
necessarily proven as stated in State Of Bombay (Now Gujarat) vs Memon
Mahomed Haji Hasam 1967 SCR (3) 938. Also see Trustees of the Port of Bombay v.
Premier Automobiles Ltd., AIR 1981 SC 1982, (1981) 1 SCC 228 ( Possession is the
essential requirement of bailment and may not even require the consent of the
bailee or a contractual relationship between bailor and bailee). Finder of goods and
involuntary bailments will not be covered by these sections as they are noncontractual. They are dealt with separately under S.71 and S.168-169.
3 Nilima Bhadbhade, Pollock and Mulla: The Indian Contract and Specific Relief Acts
vol 2 (14th edn, LexisNexis Butterworths Wadhwa Nagpur 2012)
4 For example: Having a receipt of the goods or renting out a safe deposit box.
5 , 'Bailment' ( ) <http://www.judiciary.state.nj.us/civil/charges/4.41.pdf> accessed
14 February 2014

This paper, through various case laws and precedents, attempts to analyse
the duties and responsibilities of a bailee and examines the doctrine of
reasonable care as per the English law and the Indian Contract Act.

A. DUTIES OF A BAILEE
Denning Lord Justice in Swan Hunter and Wigham Richardson v. France
Fenwick Tyne and Wear summarizes the duties of a bailee:
"The essence of the contract by a warehouseman is that he will store the
goods in the contractual place and deliver them on demand to the bailor or
his order. If he stores them in a different place, consumes or destroys them
instead of storing them, or if he sells them, or delivers them without excuse
to somebody else then he is guilty of a breach which goes to the root of the
contract."6

i.

DUTY TO TAKE REASONABLE CARE

S.151 and S.152 of the ICA stipulate the bailees duty of care. S.151 lays
down that bailee owes a duty of care to the goods as any ordinary,
reasonable and prudent man would owe to his own goods of similar quality
and quantity.7 S.152 stipulates that in the eventuality of the bailed goods
getting destroyed, the bailee would not be liable if it is proved that he has
taken reasonable care as enshrined in S.151.8
Under the English Common Law, the bailees duty is to ensure the same
quantum of care as expected from a prudent man and not to convert the

6 See Swan Hunter and Wigham Richardson Ltd. v. France Fenwick Tyne and Wear
Co. Ltd., The Albion, (1953) 1 WLR 1026).
7 Ibid.
8 See supra note 3.

goods for his own purposes.9 In Coggs v Bernard, English Law categorizes
bailments into six classes depending on which the standard of care is
decided.10
The ICA does not distinguish between different types of bailee and the
corresponding standard of care owed. It mandates the bailee to take
reasonable care since the diligence required of him is that of an average
prudent man. The Indian law does not provide any leeway to the bailee to
repudiate his liability simply because a difficult situation has arisen and this
is not sufficient to end the bailees duty.11

ii.

NOT TO MAKE UNAUTHORISED USE OF BAILED GOODS

S.154 of ICA permits the bailee to utilize the goods only as per the terms and
conditions of the bailor; otherwise he becomes liable for the damages that
arise from misuse of the goods.12 The plaintiff-bailor in Bombay Okara
Carrier v G.D. Iron And Metal Works was compensated for the damage
accrued in light of S.154.13

iii.

MIXING OF THE BAILORS GOODS WITH HIS OWN GOODS

Sections 155-157 of ICA deal with the mixing of the bailors and bailees
goods.

9 Port Swettenham authority v. T.W Wu and co(1979) AC 580

10 Coggs v Bernard) 2 Ld Raym 909
11 Nilima Bhadbhade, Pollock and Mulla: The Indian Contract and Specific Relief
Acts vol 2 (14th edn, LexisNexis Butterworths Wadhwa Nagpur 2012).
12 Nilima Bhadbhade, Pollock and Mulla: The Indian Contract and Specific Relief
Acts vol 2 (14th edn, LexisNexis Butterworths Wadhwa Nagpur 2012) 1524.
13 Bombay Okara Carrier And Ors. vs G.D. Iron And Metal Works And Anr. (1997)
117 PLR 648

a) Mixing of goods with bailors consent- Both would receive their

respective interest from the subsequent mixture, proportionate to their
respective shares.14
b) Mixing of goods without bailors consent Separable goods- the goods can be separated based on who it
belongs to but bailee must bear the expenses of any damages
caused arising from the mixture.15
Inseparable goods- Bailor is entitled to be compensated by the
bailee and recover for any damages arising.16
iv.

DUTY TO RETURN THE GOODS

S.160 of the ICA deals with duty of the bailee to return the goods as soon as
bailment period gets over or the specific purpose for which the goods were
bailed has been accomplished.17 The law does not make it mandatory for the
bailee to return the goods before the contractual period is over as he still has
to continue paying the hire charges unless the bailor decides to put an end
to the contract.18 The contract of bailment involves an implied contract to
return the goods once the contract comes to an end, even when no time is
mentioned.19 If the bailee can establish that he cant return the goods due to
14 This is dealt with in s.155 of ICA. Nilima Bhadbhade, Pollock and Mulla: The
Indian Contract and Specific Relief Acts vol 2 (14th edn, LexisNexis Butterworths
Wadhwa Nagpur 2012) 1525.
15 S.156 deals with this. Nilima Bhadbhade, Pollock and Mulla: The Indian Contract
and Specific Relief Acts vol 2 (14th edn, LexisNexis Butterworths Wadhwa Nagpur
2012) 1526.
16 This is dealt under S.157 of ICA. Nilima Bhadbhade, Pollock and Mulla: The Indian
Contract and Specific Relief Acts vol 2 (14th edn, LexisNexis Butterworths Wadhwa
Nagpur 2012).
17 Nilima Bhadbhade, Pollock and Mulla: The Indian Contract and Specific Relief
Acts vol 2 (14th edn, LexisNexis Butterworths Wadhwa Nagpur 2012).
18 Raman Ezhuthassan v V Devassi, (1957) Ker 542, AIR 1958 Ker 380.
19 Chaturgun v Shahzady, AIR 1930 Oudh 395.

some cogent reasons like an accidental loss or fire then the bailee may be
excused.20
This principle has been highlighted in A.P. Industrial Infrastructure v
Mustaq Ahmed21 and The Kerala Handloom Finance v Bal. R. Arora 22
wherein the bailee had to follow the bailors instructions pertaining to the
return of goods when bailment period was over.
In the event of the bailed goods not suiting the purpose of bail, the bailee
can just notify the bailor. This situation hasnt been covered under the Indian
Contract Act.23
If the goods are not returned as per the contract 24, the bailee retains it at his
own risk and will be liable for any damages caused to goods even if he has
taken the standard care expected of him.25 In the event of the bailor refusing
to accept the goods at the appropriate time from the bailee as per the
contract, the bailee will have to be compensated for any additional
expenditure incurred irrespective of whether the goods were returned in
damaged26 or perfect condition.27 Clearly, these provisions are important
instruments for enforcing the contract.
20 According to S.152 of ICA, if reasonable care has been taken by bailee, in
absence of any special contract, he is not responsible for a loss.
21 A.P. Industrial Infrastructure v Mustaq Ahmed, 1997 (4) ALT 11
22 The Kerala Handloom Finance v Bal. R. Arora, (1994) 2 MLJ 215
23 Isufali Hassanally v. Ibrahim (23 Bom. LR 403)
24 This has been covered by S.161 of the ICA.
25 Nilima Bhadbhade, Pollock and Mulla: The Indian Contract and Specific Relief
Acts vol 2 (14th edn, LexisNexis Butterworths Wadhwa Nagpur 2012) 1530.
26 The Dominion Of India vs Adam Haji Pir Muhamed Essac, AIR 1953 Mad 217,
(1952) 2 MLJ 713
27 Great Northern Railway Co v Swaffield, (1874) LR 9 Ex 132 (where the plaintiffbailee send back the bailors horse after four months as the bailor hadnt collected it
on time and then sued for additional expenses incurred)

B. DOCTRINE OF REASONABLE CARE

The doctrine of reasonable care to be taken by the bailee was brought out in
Southcotes case, which laid down one of the earliest standards of care in
Common Law. This was followed for years until it was overruled in the Coggs
v Bernard case. The Southcote v Bennet28 case struck down the distinction
between things to be kept and things to be kept safely. Plaintiffs goods
were stolen out of defendants possession by defendants servant and the
bailee was held strictly liable. The judges did not consider the extent and
quality of care taken by the defendant. This judgment in Southcote case was
criticized by Lord Holt in Coggs v Bernard29 saying it was too hard a ruling.
Lord Holt in his judgment categorized bailment into six different types on the
basis of the negligence of the bailee and the consideration he received.
Where no consideration flows from the bailor to bailee, there must be gross
negligence on bailees part for him to be liable. Lord Holt referred to this as
depositum. So in an event where a bailor gives his cycle to a friend (bailee)
to take care of while he is away and the cycle gets stolen, the bailee will not
be liable if he proves to have taken reasonable care of it.

The Indian Courts, however, differ from the Common Law 30 when there is a
possibility that the imposition of such a low standard of care could lead to
the bailee having made use of the cycle, in which case this would cease to
be a depositum and the bailee would have unfair advantage over goods of
the bailor.

28 Southcote v Bennet, 4 Co. Rep. 83b; Cro. Eliz. 815 (1601)

29 Coggs v Bernard, (1703) 2 Ld Raym 909
30 Sri Narasimhaswami v Muthukrishna Iyengar, 1962 AIR (Mad) 244 lays down
The English law draws a distinction between a gratuitous bailee and a bailee for
reward or hire in the matter of the degree of care to be taken by the bailee to avoid
liability for loss or damages. A bailee for reward is bound to use ordinary care of a
reasonable man and his failure to use such care is deemed to be negligence. But an
involuntary or gratuitous bailee who is said to have a naked bailment of goods
entrusted is liable for loss arising only out gross neglect, fraud or breach of
directions.

Where one has to deposit ones bag at counter before entering a shop, the
bailment occurs not out of the bailors choice but out of compulsion. In this
case, if only grave negligence would give rise to bailees liability, such a
decision becomes unfair towards the helpless bailor.
As per Lord Holt, minor negligence on the part of the bailee would be enough
to make him liable for his actions if he benefits from such possession of
goods. This is called commodatum. In these cases, there is a flow of
consideration from bailor to bailee. If goods were destroyed even after the
bailee took prudent care, he would still be incriminated. Ironically, if the
goods had remained with its original owner, he would have received no
compensation for his loss; but since it was with the bailee, he is entitled to
receive damages. 31
Houghland v. RR Low following Coggs v Bernard also laid down that the
care required to be taken by the bailee would vary from case to case. But the
judge did not agree with the strict categorization laid down by Lord Holt. He
also said:
For my part, I have always found some difficulty in understanding just what
was "gross negligence," because it appears to me that the standard of care
required in a case of bailment, or any other type of case, is the standard
demanded by the circumstances of that particular case.32
The Indian Contract Act, however, did not endorse the categorization made
by Common law. The courts have made a uniform standard of care to be
taken by the bailee regardless of the type of bailment.33
The Bilaspur Central Bank v The State Of Madhya Pradesh case
established that The distinction between gross and simple negligence has
also disappeared, and gross negligence is said to be negligence with a
vituperative epithet.34

31 Richard A. Epstein , 'The Many Faces of Fault in Contract Law: Or How to Do

Economics Right, without Really Trying ' ( December 2008) <Richard A. Epstein >
accessed 20 February 2014
32 Houghland v. RR low (luxury coaches) (1962) 1 QB 694
33 Sheik Mahamad Ravuther vs The British India Steam, 1 Ind Cas 977

Section 151 of the Indian Contract Act does not distinguish between a
gratuitous bailee and a bailee for consideration. It lays down for both one
standard, as much care as a man of ordinary prudence would take of his own
goods in similar circumstances. The standard must be one and the same so
far as it is a question of principle. This was established in the case of Secy.
Of State vs Ramdhan Das Dwarka Das Firm.35
The bailee cannot escape liability by claiming to have delegated his task to
another entity.36 The only occasion the bailee is not held liable is when the
loss has been caused by Act of God or Act of third parties.37
The Indian Courts have, thus, dealt with the topic of reasonable care of
bailee in a more prudent and fair manner than the English Courts.

C. BURDEN OF PROOF
In the event of the goods getting lost or damaged while being in bailees
possession, the onus of disproving the apparent negligence lies with the
bailee himself.38 This is because only the bailee would know what caused
such loss. If he can prove that due care had been taken, he would be
absolved of all the liabilities.39 When a bailee claims he was not negligent or
that he was excused by an exception clause he must show what happened to
the goods. If the goods get damaged without any negligence on the part of
the bailee, he would not be liable for such damages. If they were lost or

34 The Bilaspur Central Co-op Bank Ltd vs The State Of Madhya Pradesh, 1958 AIR
1959 MP 77
35 Secy. Of State vs Ramdhan Das Dwarka Das Firm AIR 1934 Cal 151, 150 Ind Cas
189
36 See supre note 35. But various High Court cases have held that bailee can
contract himself out of liability
37 Nilima Bhadbhade, Pollock and Mulla: The Indian Contract and Specific Relief
Acts vol 2 (14th edn, LexisNexis Butterworths Wadhwa Nagpur 2012) 1505.
38 Central Bank Of India vs Grains And Gunny Agencies, AIR 1989 MP 28
39 Hirji Khetsey and Co. v. B. B. and C.I. Railway Co., AIR 1914 Bom 154

damaged by a slight breach,40 he may be protected by the exemption clause.

But, if he leaves the cause or damage undiscovered, then he is liable. 41 Such
conduct would be a fundamental breach against which the exemption clause
will not protect him.42

D. CONCLUSION
Bailor-bailee relationships arise almost every day when one avails oneself of
the services of tailors, dry cleaners, jewelers etc. Therefore, it is important to
have stringent legal provisions that govern these transactions. They would
help not only in better enforcement of contracts, but also compel both
parties to discharge their responsibilities reducing thereby the transaction
costs. The Indian Courts have interpreted the legal provisions well and dealt
with bailment and its various branches with utmost care and prudence.

40 not going to the root of the contract

41 This is because it is then quite likely that the goods were stolen by one of his
servants; or delivered by a servant to the wrong address; or damaged by reckless or
wilful misconduct; all of which the offending servant will conceal and not make
known to his employer.
42 Levison and another v Patent Steam Carpet Cleaning Co Ltd, [1977] 3 All ER 498.