m Contract of Bailment is a special contract.

The word
³Bailment´ is derived from the french word ³Ballier´
which means to deliver.It means handing over of the
goods from one person to other person.It involves only
change in possession and not ownership
m `elivery of goods from one person to other person
m For some purpose
m And when the purpose is accomplished
m The goods to be retuned or disposed off according to
the directions of the owner
m Is called ³Bailment´
m There are two parties
m The person delivering the goods is known as ³Bailer´
m The person to whom the goods are delivered is known
as ³Bailee´
m Example: A takes book from library to read and returns
after examination. This is a contract of Bailment
m There are two parties in the contract of bailment
i.e.Bailor and bailee
m There is only one contract between two parties
m Such contract may be express or implied.
m It involves delivery of possession of goods from bailor
to bailee.
m `elivery of goods may be actual or constructive
m `elivery of goods may be for some purpose i.e. skillful
work,custody,use etc
m The goods must be retuned or disposed of after the
purpose is accomplished.
m Goods means every kind of movable property except
money and actionable claim
m 1.To disclose known faults:
m It is the first duty of bailor to disclose the known faults
about the goods bailed.Bailor must disclose any extra-
ordinary risks attached with the use to bailee.If he does
not disclose,he is responsible for any damage caused to
bailee.
m E.g.:A lends a horse to B,for which A knew that the
horse was vicious.He did not disclose it to B.The horse
runs away throwing B.A is responsible for B¶s injury.
m a.To bear extra-ordinary expenses:
m There are two types of expenses ordinary and extra
ordinary.Generally ordinary expenses are to be bore by
bailee and extra-ordinary expenses are to be done by
bailor.
m If extra ordinary expenses on goods are borne by
bailee on behalf of bailor then it is the duty of bailor to
reimburse bailee.
m For e.g. A hires a motor launch to b for holiday.the fire-
extinguisher on launcher was not working.B got it
repaired.A is liable to pay B the charges of repairing.
m x.To indemnify bailee for premature termination of
Bailment
m A gratuitous bailment can be terminated by bailor at
any time,but if loss is occurred to bailee due to
premature termination of contract,then bailor will have
to indemnify bailee.
m For e.g.:A took ` ` player on hire from B¶s video
parlor and ` ` was not working properly.A incures
expenses of Rs.100/- on repairing of ` ` after taking
permission from B.Before A watch the movie and make
use of ` `,B asks A to return the ` `.Here B will
Have to compensate A for expenses incurred in excess
of benefit derived.
m ë.To receive back the goods:
m u


 


 




 












 


  
m .To indemnify baileeO
m 
 

 


 


 


 







    




  


 e.g.:A has stolen the watch of B and gives it to watch
repairer C for bailment of repairing.B finds his stolen
watch in C¶s shop and claims damages.C can claim
damages from A.
m 1.To enforce bailee¶s duties:
m The bailor has a right to enforce the duties of bailee e.g.
m 1.Right to claim damages in case of loss caused to
goods.
m 2.Right to claim compensation for unauthorized use of
goods.
m 3.Right to claim damages for negligently mixing the
goods.
m a.To terminate the contract of Bailment
The bailor has a right to terminate the contract if bailee
does any inconsistent act with the goods.
m x.To demand back the goods:
m In gratuitous bailment,bailor can demand the goods
from bailee at any time.But if bailee has not derived
any benefit from the goods,then bailor has to
compensate bailee
m ë.To claim accretion
m If there is any increment in the goods bailed,it is the
right of bailor to demand those goods along with any
increment received during the period.
1.To take reasonable case of goods bailed:
It is the duty of bailee to take care of the goods bailed
in the same way as the man of ordinary prudence takes
care of his own goods.If goods are damaged due to
bailee¶s negligence then he is responsible to pay
damages to bailor.And if goods are damaged inspite of
bailee¶s reasonable care then bailee is not responsible to
compensate bailor
m e.g. M was admitted to a hospital where her
jewellery was handed over to hospital
authorities for safe custody. The jewellery
was stolen. The hospital authorities are liable
for the loss.
m a.Not to make Unauthorized Use:
m The bailee must use the goods in the manner
specified in the contract.If he makes any inconsistent
use and the goods get damaged,then he is liable to
compensate bailor for loss.
m Œr e.g.A lends his elephant to B for riding for 7 days.B
uses elephant for carrying the logs of wood.The
elephant is injured.B is liable to make compensation to
A for injury caused to elephant.
 m x.Not to mix own goods with bailed goods.
The bailee must not mix the goods of bailor with his own
goods and must keep them separate.If he mixes the goods with
bailor¶s consent,then both the parties shall have proportionate
interest in the mixture of goods.But if he mixes the goods
without bailor¶s consent and if:
1. Goods are separable : then the bailee is bound to bear the cost
of separation
2. Goods are insaparable : then the bailee will have to
compensate for cost of goods.
m E.g A gives one bag of tur-dal and one bag of rice to
grocer(gain-merchant)B,for cleaning.`ue to negligence
on part of B,food gains of two bags are mixed and
mixture is beyond separation.B must compensate A for
loss.
m ë.Not to set ± up an adverse title:
The bailee must hold the goods on behalf of bailor.
Bailee cannot set any adverse title on goods bailed.
Eg:A gives his suit to B¶s laundry for washing.B wears
the coat and attends the party.A¶s coat gets damaged
due to B¶s negligence.B is liable for it.
m . To return goods with accretion:
The bailee is bound to deliver the goods bailed to bailor
along with any increase or benefit received or goods
during bailment.
Eg:A leaves a cow in custody of B to be taken care
of.The cow gives birth of calf during bailment.B is
bound to deliever cow as well as calf to A.
m ÿ. To return the goods:
it is the duty of bailee to return the goods or to dispose
of the goods according to the directons given by bailor.
If he makes delay then he is responsible for any
damage.
Eg:A lent Book to B.The time of bailment was over.a
demanded the book.B neglected to return.A fire
accidentally broke in B¶s house and the book is
burnt.Held,B is liable for the loss.
m 1.To enforce bailor¶s duties:
m It is the right of bailee:
m (i)To claim compensation for non-disclosure of
known defects.
m (ii)To claim damages for defective title
m a.To deliever the goods to one of the joint owners:
m If goods bailed belong to several joint bailors,bailee
may return the goods to any one of them.
m x.Right to stop delivery:
m If a person,other than bailor claims the goods,then
bailee may apply to court to stop delivery of goods and
to decide the title.
m ë.Right against Trespass:
m If any third person wrongfully deprives the bailee from
possessing or using the goods,he may bring action
against that party.
m .Bailee¶s lien:
m If bailor refuses to pay to bailee for skillful work the
bailee has a right to retain the goods as ³lien´.
m `efinition:
- ien¶ is a right to retain possession of the goods
belonging to another until some debt or claim is paid.
The right depends on possession, and it is lost as soon
as possession of goods is lost. Therefore it is also called
a ³Possessory ien´
There are two types of lien:
(1)Particular ien
(2)General ien
m This lien is available to the bailee against only those
goods in respect of which he has rendered some service
involving skill or labour.But if bailee does not complete
the work within the agreed time,he cannot exercise the
right of lien.
m For e.g:¶A¶ gives a piece of gold to jeweler -B¶to
prepare jewellery.B has a right of lien uptil A does not
pay the making charges of jewellery.
m This right is a right to retain all the goods or any
property of another untill all the claims of holder are
atisfied.It is also a right to retain the property of
another for a general balance of account.This right is
available to special bailees like
banker,factor,Wharfinger,attorneys of high court,policy
brokers etc.
m For e.g.Jewellery and share certificates are given to
banker as a security for loan.The banker may retain
both the securities until the claims are fully satisfied.
m It is a right to retain the
possession of goods over
which skillful work is
exercised.
m There is increment in value
of goods due to skillful
work.
m Skill full work or labor is
exercised on goods.
Particular IEN
m It is a right to retain all the
goods until all the claims of
holder are satisfied.
m There is no increment in
value of goods.
m No skillful work is done on
goods by bailee.
General ien
m The right is available
against only those goods on
which skillful work is done.
m Thus right is available
against charges of skillful
work only.
m This right is available to any
type of bailee such as
cobbler, tailor, jeweler,
etc«.
Particular ien
m This right is available
against all the goods in
possession of bailee.
m This right is available
against general balance of
account.
m This right is available to
special bailees such as
banker, factor, wharfinger,
etc..
General ien
m `efinition (sec172):
m The bailment of goods
m As a security for payment of debt or performance of a
promise
m Is called pledge.
m Eg:- A borrows Rs.5000 from B and gives his gold
chain as a security for payment of debt. This bailment
is called pledge.
There are two parties to pledge.
m The person who is the owner of goods is called
³pledge´ or ³pawnor´.
m The person to whom the goods are given as a security
is known as ³pledgee´ or ³pawneeÔ
m It is special contract. All the essential of valid contract
are applicable to it.
m There are two parties to pledge: pawnor and pawnee.
m The contract may be express or implied.
m It includes movable proprety only.
Eg: even a passbook mat bepledge
m `elivery of goods is necessary to complete a pledge
m Pledge is a special kind of bailment.
m `elivery of goods should be by the way of security.
m `elivery of goods from one
person to another for some
purpose & when it is
accomplished goods are
returned or disposed off.
m Bailment can be for different
purpose . i.e. skillful work,
use, safe custody, etc«..
m Bailment is a wider term. It
includes pledge.
Bailment
m Pledge means bailment of
goods as a security for
payment of a debt or
performance of a promise.
m Pledge can only be for one
purpose i.e. security for
performance of promise.
m Pledge is a narrower term. It
does not include bailment.
Pledge
m In case of default by bailor
to pay charges to bailee,
bailee may retain the goods
as lien.
m There are two parties known
as Bailor and Bailee.
m In Bailment, Bailee may use
the goods if the contract so
provides.
Bailment
m In case of default by pawnor
to repay the debt, the
pawnee after giving notice,
may sell the goods.
m There are two parties known
as Pawnor and Pawnee.
m In pledge, Pawnee has no
right to use the pledged
goods.
Pledge
(1) The inconsistent act of bailee:
A contract of bailment is voidable at the option of the
bailor, if bailee does any act with regard to the goods
bailed, inconsistent with the condition of the bailment.
eg:- -B¶ hire a horse for his own riding from -A¶
instead of riding -B¶ drives the horse in his carriage
-A¶ can terminate the bailment.
ºa Bailment without any consideration
In the case of gratuitous bailent,the bailor can at any time
exercise his option to terminate the contract take back the
goods bailed to the bailee.
ºx By paying compentation:
In the case of gratuitous bailment bailee has right to
indemnify against premature termination of the contract by
the bailor for any loss sustained.
ºë `eath of any party:
In the case of gratuitous bailment,if bailee or bailor expired
at that very moment the contract of bailment terminated.
m 1.Right to get back goods:
m Œn performance of promise or repayment of loan and
interest,the pawnor is entitled to get back the goods
pledged.
m a.Right to redeem debt:
m  uite often a time is stipulated for the payment of the
debt.If pawnor makes default in payment of the debt,he
may still redeem the goods pledged before the actual
sale of goods.
m x.Preservation and Maintenance of goods:
m The pawnor has a right to see that the pawnee preserves
the goods pledged properly.
m ë.Suplus on sale:
m In case of sale of pawned goods,if the proceeds exceeds
the amount of debt,then the pawnor is entitled to
surplus
m 1.To compensate:
m It is the duty of pawnor to compensate the pawnee for
any extraordinary expenses incurred by him.
m a.To pay the debt
m It is the main duty of pawnor to meet his obligation on
stipulated date according to the terms of contract.
m 1.Right of Retainer
m The pawnee has a right to retain the pledged goods
untill
1. Principal amount of `ebt is paid.
2. Interest due on the debt is paid
3. Expenses incurred by him in respect of preservation
of property is paid.
m a.Right to extra-ordinary expenses:
m The pawnee is entitled to receive from pawnor extra-
ordinary expenses incurred by him for preservation of
property.
m x.Right against true owner
m When pawnor¶s title over the goods is defective.
m i.e.He has pledged the goods under a voidable
contract(e.g. fraud),the pawnee acquires a good title
over the goods,provided he was innocent.
m ë.Pawnee¶s Rights in case of Pawnor¶s default:
m He may file a suit against pawnor for the debt.
m He may sell the goods pledged after giving reasonable
notice.
m He may recover from pawnor,any dficiency arising on
sale of goods.
m 1.To take care of goods pledged.
m 2.Not to make unauthorised use of goods.
m 3.Not to mix the goods with his own goods.
m 4.To return the goods on receipt of dues.
m 5.To deliver the goods with accretion,if any
m ›



 



 
















 
u






  














  


  





m 




 
 

  

 

 

 



 

º1 Pledge by Mercantile agent:
Mercantile agent is an agent who has the authority to
sell the goods, consign goods, assign and to buy goods
on behalf of principal in ordinary course of business
provides that pledge by mercantile agent is valid if
following conditions are fulfilled:
m Agent must be in possession of goods
m Agent must have taken consent of principal
m If pawnee acts in good faith
m Pawnee must have no notice about pawner¶s defective
title.
ºa Pledge after sale:
If seller is having possession of goods belonging to
buyer, after sale, can create a valid pledge provided
m Seller has possession of goods
m He has taken consent of buyer
m Pawnee is acting in good faith
m Pawnee has no notice about defective title.
e.g.:S sold 100 bags of wheat to B,for which delivery and
price to be paid three months later.Before the goods are
delivered,s pledges the goods to p,who is unaware
about defective title of S.The pledge is valid,
(x Pledge by co ± owner:
Œne of the several co ± owner of goods, in possession
and with the consent of co ± owner may create a valid
pledge if pawnee is unaware about defective title.
ºë Pledge under voidable contract:
when a person obtains possession of goods under a
voidable contract, a pledge created by him is valid
provided
m The contract has not been rescinded before pledge.
m The pawnee acts in good faith
m The pawnee has no notice of pawnor¶s defective title.
º Pledge by finder of goods:
when a person pledges goods in which he has only
limited interest then the pledge created by him is
valid only to that extent.
Eg: F finds a diamond ring on a road, and he pledge it
to P for rs.15000 .F had incurred rs. 5000 in finding
the true owner and preservation of property. The
owner can get the ring by paying rs. 5000 to P , the
pledgee
ºÿ Pledge before purchase :
when buyer is in possession of property before
fulfillment of condition or before making payment can
make a valid pledge if
m Pawnee is acting in good faith
m Pawnee has no notice of defective title