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Duties Of Bailee Under India Contract Act, 1872

Introduction

Bailment is a common-law arrangement that we can see in our day-to-day lives. For example – A gives his refrigerator for repair to B. So, B has temporary ownership of that refrigerator for a specific reason, with a stated or implied agreement between the two that the refrigerator will be returned once the purpose has been fulfilled. As a result, bailment can be defined as a contract in which the owner temporarily relinquishes physical custody of personal property (“chattel”) while still preserving ownership. Bailment is derived from the French word “baillier,” which means “to distribute”. The provisions relating to bailment are found in Chapter IX of the Indian Contract Act, 1872, from Sections 148 to 181.

Who is a Bailor?

The “bailor” is the owner who relinquishes custody of a property. The Indian Contract Act of 1872 defines ‘bailor’ and ‘bailment’ in Section 148. ‘Bailor,’ according to this section, is the person who delivers the products.

Who is a Bailee?

The bailee is the person who holds personal property in trust for the owner for a set amount of time and for a defined purpose, then returns the property to the owner after the purpose is completed. Bailee is also defined under Section 148. The ‘bailee’ is defined as the individual to whom the bailor delivers the goods.

Essential Elements of Bailment

Some elements are essential for a contract of bailment. They are as follows –

1. Delivery of Possession – The first important characteristic of bailment is that it involves the transfer of custody from one person to another for a limited time.

2. Delivery upon Contract – Things should be delivered for a specific purpose and with the understanding that once the purpose is fulfilled, the goods will be returned to the bailor.

3. Conditional Delivery – Bailment of goods is always made for a specific purpose, with the understanding that once that purpose is fulfilled, the goods will be returned to the bailor or disposed of according to his instructions.

Duties of Bailee in a Contract of Bailment

Now, let’s look into the duties of the bailee to which he is bound in a contract of a bailment –

1. Duty of Reasonable Care (Section 151)

In all cases of bailment, the bailee is required to take as much as care of the things bailed to him as a prudent man would take off his own goods of like size, quality, and worth in similar circumstances. If the bailee’s care falls short of this standard, he will be held accountable for the goods’ loss or damage, but not otherwise.

The bailee’s liability appears to be limited to negligence. The bailee’s first and most important responsibility is to look after the goods entrusted to him. Section 151 establishes a unified standard of care for “all bailment matters.” It makes no difference whether he is a gratuitous bailee or a bailee for reward.

Gopal Singh v. Punjab National Bank AIR 1976 Del 115

In this case, because a bank was forced to evacuate Pakistan with a large migration to India as a result of the country’s division, the bank was deemed not liable for items bailed to it in Pakistan and lost there. “No cast iron standard can be given down for the measure of care expected from a bailee,” the court stated, “and the nature and amount of care must vary with the posture of each instance.” The kind, quality, and bulk of the commodities bailed, the purpose of the bailment, and reasonably available facilities for safekeeping, among other factors, will be considered in assessing whether adequate care was exercised.

If the damage was caused by the bailee’s servant’s actions, the bailee would be liable if the servant’s actions were within the limits of his employment.

Bailee’s own Goods Lost with those of Bailor

The care to be taken is such a man of ordinary prudence would take care of his own goods. Thus, where the bailee’s own goods are lost along with the goods of the bailor, the bailor would naturally contend that he was taking as much care of the bailor’s goods as he did of his own. But this would not be the deciding factor.

In the case of, Calcutta credit corporation ltd v. Prince Peter of Greece AIR 1964 Cal 374, An automobile was delivered to a garage for maintenance when it caught fire. The garage was built in the style of a pucca hut, complete with wooden board walls. In addition to gasoline-powered vehicles, the garage now holds additional fuels such as thinners and paints. The garage was split by wooden walls, with a portion of it designated for cooking. The fire extinguishing system was ineffective. The compartment where the complainant’s car was stored could not be entered until 15 minutes after the fire was discovered because the room keys were not available.

The defendant was found liable to reimburse the plaintiff because he failed to exercise reasonable care.

The fact that the bailee is normally careless with his own property does not excuse him from being similarly careless with the bailor’s property unless the bailor is aware of his tendencies and thus knows what to expect. Even in these situations, the proper question to ask is whether reasonable care was taken.

Bailee when not liable for loss, etc. of thing bailed (Section 152)

In the absence of a special contract, the bailee is not liable for the loss, destruction, or deterioration of the bailed item if he has exercised the amount of care required by Section 151.

The conditions in which bailee is not liable-

If the bailee can establish that the loss or damage was caused by:

  1. An act of God.
  2. An act perpetrated by the Crown’s adversaries (i.e. an act of war).
  3. The consignor’s mistake (person sending the goods).
  4. A flaw in the product itself.

It’s worth noting that if the commodities are destroyed or lost while in the bailee’s custody without his fault, the bailor is responsible for the loss.

2. Duty Not to make Unauthorized Use

If the bailee makes any use of the bailed goods that is not in accordance with the terms of the bailment, he is obliged to compensate the bailor for any damage to the goods that occurs as a result of or during such use. Even if the bailee is not negligent and the damage is the result of an accident, if the bailee uses the goods in a manner that is inconsistent with the terms of the contract, he is accountable for any loss. The bailee must only utilise the goods for the purpose for which they were bailed to him. Any unlawful use of the goods would render the bailee completely responsible for any loss or damage. In such a circumstance, even an act of God or an unavoidable accident would be inadmissible.

Bailment when Voidable (Section 153) – A bailment contract is voidable at the bailor’s discretion if the bailee does anything to the bailed good that is contrary to the bailment’s terms.

3. Duty Not to Mix the Goods (Sections 155-157)

The bailee must retain the bailor’s goods’ independent identity. He shall not combine his personal belongings with those of the bailor without his permission. It is possible, however, that a bailee will mix up the bailed items with his own. In this instance, one of the following three possibilities should be considered:

Section 155 – If the goods are mixed with the bailor’s consent, both parties will have a proportionate stake in the resulting combination.

Section 156 – If the mixture is produced without the bailor’s consent and the items may be separated or divided, the parties retain their individual ownership of the commodities, but the bailee is responsible for the separation costs as well as any damage caused by the mixture.

Section 157 – If the bailee, without the bailor’s consent, mixes the bailor’s goods with his own goods in such a way that it is difficult to separate the bailed goods from the other products and hand them back, the bailor is entitled to compensation from the bailee.

4. Duty to Return the Goods (Sections 160-161, 159, 162, 165)

Section 160  It is the bailee’s responsibility to return or deliver the goods bailed in accordance with the bailor’s instructions, without demand, once the time for which they were bailed has ended or the purpose for which they were bailed has been fulfilled.

Section 161 If the commodities are not returned, delivered, or tendered on time due to the bailee’s default, he is liable to the bailor for any loss, destruction, or degradation of the items during that period.

The plaintiff in Shaw & Co. v Symmons & Sons [(1917)1 KB 799 entrusted books to the defendant, a bookbinder, to be bound, with the latter pledging to return them in a reasonable amount of time. The defendant failed to deliver all of the volumes that were then bound within a reasonable time after the plaintiff demanded them, and they were later burned in an accidental fire on his property. The defendant was found accountable for the loss of the books in damages.

If the bailee is unable to return the items due to no fault of his own, such as when goods are taken pursuant to valid government instructions, the bailee is not accountable.

Section 159 – Termination of Gratuitous Bailment

When goods are bailed gratuitously, that is, when the lender of the commodities is not entitled to any payment for the items at any moment, even if he lent them for a specific period of time or for a specific purpose. However, if the bailee has acted in reliance on the loan made for a specific time or purpose in such a way that the bailee’s loss would be greater than the benefits derived if the goods were demanded back before the agreed time, the bailor must, if he compels the return, indemnify the bailee for the amount in which the loss occasioned exceeds the benefits derived.

A gratuitous bailment is terminated by the death either of the bailor or of the bailee (Section 162).

Section 165 – Bailment by Several Joint Owners

In the absence of any agreement to the contrary, if any joint owners of goods are bailing them, the bailee may deliver them back to, or according to the directives of, one joint owner without the consent of the others.

5. Duty not to set up an Adverse Title (Sections 166-167)

Section 166 – If the bailor has no title to the goods and the bailee brings them back to the bailor in good faith or pursuant to the bailor’s instructions, the bailee is not liable to the owner.

Section 167 – If someone other than the bailor claims the goods bailed, he can ask the Court to block the goods from being delivered to the bailor and determine who owns the commodities. The bailee has a legal obligation to return the goods to the bailor alone. He cannot refuse to return the items to the bailor by claiming just title, which means that the third person’s title is superior to the bailor’s. Only through a court of law can a third party that claims a better title than the bailor gets delivery from the bailee.

6. Duty to Return Increase (Section 163)

The bailor has the right to increase or benefit from the commodities bailed, according to this provision. In the absence of a contract to the contrary, the bailee is obligated to deliver any increase or profit that may have accrued from the commodities bailed to the bailor, or according to his directives.

Unless otherwise agreed, the bailee is obligated to refund to the bailor any natural rises or profits accruing to the commodities throughout the bailment period.

Motilal v. Bai Mani AIR 1924 Bom. 233

Here, Mani, the daughter of Girdharilal Dalpatram, was the plaintiff in a dispute with Achratal over 48 shares in the Ahmedabad Ginning and Manufacturing Company. Arbitration was used to resolve that conflict. As a result, Girdharilal transferred twenty-four shares to Achratal; the remaining twenty-four shares were to remain in Girdharilal’s possession, but he was only to keep Rs 1100 from the dividends; the remainder was to be paid to Achratal and Gulab. Girdharilal transferred five of the twenty-four shares he kept in 1883 in exchange for Rs 7,500 borrowed from Achratal. Gridharilal did not pay extra profits over Rs 1100 to Gulab after Achratal died in 1885. It was held that new shares are an increase and Gulab was entitled to them also.

Conclusion

The notion of bailment entails transferring things to another for a specified purpose, whereas the concept of pledge entails transferring assets to another for the purpose of keeping them as a security for debt repayment.

It can be concluded that a bailment is a contract in which a person is given ownership of certain commodities for a specific purpose with the understanding that the goods will be returned or disposed of once the purpose has been fulfilled. Bail is not the same as a license or a sale. As previously stated, the bailee has six key duties. A bailment contract can be canceled by either the parties or by the operation of law.

Bibliography

1. The Indian Contract Act, 1872.

2. Law of Contract and Specific Relief, Dr. Avtar Singh, Eastern Book Company, 12th edition, 2017.

3. Contract II, Dr. R.K. Bangia, Allahabad Law Agency, 2020.

4. Law of Contract I & II, Dr. S.S. Srivastava, Central Law Publications, 2018.

5. Gopal Singh v. Punjab National Bank AIR 1976 Del 115

6. Calcutta credit corporation ltd v. Prince Peter of Greece AIR 1964 Cal 374,

7. Shaw & Co. v Symmons & Sons [(1917)1 KB 799

8. Motilal v. Bai Mani AIR 1924 Bom. 233

This Article has been written by Yogita Tripathi, 3rd Year LL.B Student at G.J. Advani Law College.

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