Business

Bailment

Bailment is an act, contract (with or without signed paper) between bailee and bailor. Bailee is the person who is given product/item/property or anything which is actually the property of bailor. It is for a specific time period.

After that, bailor has the right to take and Bailee has a responsibility to return back. These must be carefully used under instructive manner.

In simple words, it is changing the possession but not the ownership. The product/property will be returned to the owner or sold out or disposed but won’t be of person has possession. This is known as Contract of Bailment.

The Main Types of Bailment

Gratuitous Bailment

Where the bailee does not charge nay thing for the bailment it is called gratuitous bailment.

Bailment for Reward

When the bailor charges any thing for his services it is called bailment for rewards.

Bailment for Use

When the bailor delivers an article to the bailee for use by the later in any general or specific way, this is called a bailment for use.

Illustration

X delivers his watch to Y for the latter to use it for one month. Here bailment is bailment for used.

Bailment of Safe Custody

If valueable goods or even coins or notes in box are deposited for protection, it is called bailment for safe custody.

Illustration

X gives his watch to Y for the latter to keep it in safe custody for two months.

Bailment for Mutual Benefit

When the bailor delivers his articles to another for repair or gives his goods to carrier for carriage, it is known as bailment for mutual benefit.

Bailment for Pledge

It is a contract whereby an article is deposited with a lender as security for the payment of a loan or performance of a promise.

Bailment for Finding of lost Goods

If a person already in possession of the lost goods of another, he thereby becomes the bailee and the owner becomes the bailor.

Essentials of Bailment

Delivery of Goods

It consists in the delivery of goods.

Moveable Property

There can be bailment of moveable property only. It involves change of possession. Mere custody without possession is not bailment.

Temporary Purpose

The delivery must be for some temporary purposes.

Contract

The delivery is made upon a contract, express or implied.

Returnable

The goods must be returned to the owner or disposed of according to the directions of the bailor.

Object of Bailment

The bailment may be for safe custody or for use or for hire.

Alteration

If the goods bailed are in the mean time altered in shape, i.e. cloth made into jacket, still the contract is one of the bailment.

Already Possession of Goods

If a person already in possession of the goods of another contracts to hold them as a bailee, and the owner becomes the bailor, of such goods although they may not have been delivered by way of bailment.

Redelivery of Goods

In some circumstances of the bailor may claim a redelivery of the goods deposited.

Rights of Bailor

1. Rights of Taking Back the Goods Bailed

The bailor has right to take back the goods bailed as soon as the purpose of bailment is completed. If the bailee defaults in so returning, the bailor has right to receive compensation.

2. Right in Case of Unauthorized Goods Use

The bailor is entitled to terminate the contract of bailment if the bailee makes the unauthorized use of the goods bailed.

3. Right to Goods Bailed before Stated Period

The bailor may get back his goods before the time stated in the contract of bailment with the consent of the bailee.

4. Right to Dissolution of Contract

The bailor may dissolve the contract if the conditions of bailment are disobeyed by the bailee.

5. Right to Gratuitous Goods

The bailor has right it terminate the contract of gratuitous bailment at any time even before the specified time, subject to the limitation that where such a termination of bailment causes loss in excess of benefit, the bailor must compensate the bailee.

6. Right in Share of Profit

The bailor has share in the increase or profit gained from the goods bailed if there is provision in the contract.

Rights of Bailee

1. Right to Recover Damages

A bailee has right to recover damages from the bailor if he suffers any loss due to defects of the goods bailed.

2. Right to Receive Compensation

A bailee is entitled to receive compensation from the bailor for any loss resulting from the defect in the bailor’s title.

3. Right of Legal Action

A bailee may take necessary legal action against the person who wrongfully deprives him of the use of goods bailed or does them any injury (Sect. 180)

4. Right to recover Bailment Expenses

Bailee is entitled to be reimbursed for all legitimate expenses incurred for any purpose of bailment.

5. Right of Lien

Where the bailee has rendered any service for the purpose of bailment, he has right to retain such goods bailed until he receives due remuneration for his services in absence of contract to the contrary. (Sect. 170)

6. Right of Indemnity

The bailee has right to receive the amount of indemnity from bailor for any loss which he may sustain by reason that the bailor was not entitled to make the bailment or to receive back the goods, or to give directions respecting them. (Sect. 164)

Duties and Liabilities of Bailor

1. To disclose Facts

The important duty of the bailor is to disclose the faults in the goods bailed in so for as they are known to him; and if he fails to do that he will be liable to pay such damages to the bailee as may have resulted directly from the faults. (Sect. 150)

Illustration

X hires a carriage of Y. The carriage is unsafe, though Y is not aware of it, and X is injured. Y is responsible to X for the injury.

2. Payment of Extraordinary Expenses

Section 158 provides that all the necessary expenses incurred by the bailee in connection with the bailment, must be paid by the bailor.

3. To Indemnity Bailee

The bailor is bound to pay the bailee for any loss which the bailee may sustain by reason that the bailor was not entitled to make the bailment. (Sect. 164)

4. Warning to the Bailee

When the things are is danger i.e explosive goods, the bailor must give extraordinary warning to the bailee.

Duties and Responsibilities of Bailee

1. To Take Care of Goods Bailed

The bailee is bound to take as much care of the goods entrusted to him as a man of ordinary prudence. (Sect. 151)

2. To Avoid the Inconsistent Act

A contract of bailment is voidable at the option of the bailor, if the bailee does any act with regard to the goods bailed, inconsistent with the conditions of the bailment (Sect. 153)

3. The Authorize Use of Goods

If the bailee makes any unauthorized use of the goods bailed, he is liable to make compensation to the bailor for any damage arising to the goods from or during such use of them. (Sect. 154)

4. Not to Mix Bailor’s Goods

The bailee is bound to keep the goods of the bailor separate from his own where the mixture without the consent of the bailor is inseparable, the bailor is entitled to be compensated by the bailee for the loss of the goods. (Sect. 155, 156, 157)

5. To Return the Goods

It is the duty of the bailee to return, or deliver the goods bailed according to the bailor’s directions. (Sect. 160)

6. Responsibility in case of default

If the goods are not returned, delivered or tendered due to default of the bailee, he is responsible to the bailor for any loss of the goods from that time. (Sect. 161)

7. To Return any Profit from the Goods

The bailee is bound to deliver to the bailor, or according to his directions, any increase or profit which may have accrued from the goods bailed. (Sect. 163)

8. Not to Set Up Adverse Title

The bailee has no right to deny the bailor’s title or set up against the bailor his own title or the right of a third party.

Section 148 of the contract Act 1872 defines “A bailment is a 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 direction of the person delivering. The person delivering the goods is called the “bailor”. The person to whom they are delivered is called the “bailee”.

Illustration

Where X lends some ornaments to Y to be used in a marriage, the transaction is one of the bailment.

X gives cloth to Y, a tailor to make into a coat. Here X is the bailor and Y is the bailee.

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