I Year B.A., LL. B (Div.

-D and E) – Semester-I (2021)

2nd -Internal Assessment – Special Contracts

Topic:

‘Interpretative analysis of the duties of bailor and bailee’

NAME: KASHISH AHMED

DIVISION: D

PRN: 21010125309

COURSE: BA LL.B. (H)

BATCH: 2021-2026
 DUTIES OF A BAILOR

The Indian Contract Act defines a bailor as the person who delivers the goods under a bailment
contract.1 The term bailor is derived from the French verb ‘ballier’, which meaning "to deliver."
For instance, if A lends B his phone charger temporarily, B will return it after it has been used.
Here, A serves as the bailiff. Below are his responsibilities:

The bailor is responsible for all extraordinary bailment fees.

Section 158 of the Indian Contract Act stipulates that, for the purposes of the bailment, the bailor
is responsible for all expenditures, provided that the bailee receives no compensation. These
costs may include, but are not limited to, the cost of transporting or storing the commodities, as
well as any labour performed on them for the bailor by the bailee. The bailee is responsible for
all regular and reasonable expenditures incurred during the use of the property, whereas the
bailor is responsible for any unusual expenses.

To indemnify the bailee

The bailor is obligated to indemnify the bailee in the event that the bailee's usage of a faulty item
results in unfavourable repercussions. Section 164 of the Indian Contract Act states:

“The bailor is responsible to the bailee for any loss which the bailee 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.”

To receive the goods back

When the bailment contract's duration expires, the bailee is required to return the items to the
bailor. In furtherance of this, the bailor must accept their return. This provision is crucial because
the bailee is entitled to compensation for keeping the items after the bailment offer has expired.

To reimburse the bailee in instances of premature or complimentary bailment.

1
Section 148, Indian Contract Act 1872 Section 148, Indian Contract Act 1872
The bailor has the ability to terminate the bailment agreement whenever he chooses. Obviously,
this premature bailment occurs before the contract's expiration date, which might result in losses
for the bailee. In this situation, the loss should outweigh the profit. The requirement for receiving
this payment is:

Losses compounded by premature termination to the bailee < benefit he has derived out of
bailment.

In this circumstance, the bailor is obligated to reimburse the bailee.2

Here, the bailor is required to recompense damages that he alone was aware of and that were not
revealed.3

To reveal any known flaws

According to paragraph 1 of Section 1504 of the Indian Contract Act, the bailee is entitled to
learn from the bailor (to the bailor's knowledge and comprehension) about any defects in the
goods. If the bailee is harmed by the goods because the bailor failed to disclose any defects, he
was aware of, the bailee is entitled to reimbursement.

In 1949,5 one individual rented a motor-launch from another for a vacation. However, the motor-
launch caught fire, and A suffered damages because the fire-fighting equipment was ineffective.
Since he was aware of the failing motor-launch, the owner of the vessel was found responsible.

DUTIES OF THE BAILEE

2
Section 158, Indian Contract Act 1872
3
Coughlin v. Gillison, (1899) 1 Q.B. 145
4
Section 150, Indian Contract Act 1872
5
Read v. Dean, (1949) 1 K.B. 188
The individual to whom the items are transferred is known as the bailee. His tasks include:

1. To maintain appropriate care for the specified property

2. Refrain from making unauthorised use of the products
3. Not to combine his possessions with those that were forfeited
4. Not to establish a negative title
5. To return any additions to the merchandise, and
6. To return the merchandise.

To maintain appropriate care for the specified property

The bailee is obligated to take reasonable care of the property entrusted to him, using the
common sense and intelligence of an average man as a guide. This common sense is equivalent
to how a man would manage things of the same amount, weight, and value.6 However, this
responsibility is not absolute; its nature is only rigorous. This implies that the bailee is needed to
demonstrate that he was not negligent in handling the goods and that the loss happened despite
the fact that he exercised reasonable care. Therefore, the bailee has the burden of evidence.

Section 1527 of the Act states that the bailee is not compelled to reimburse the bailor for loss,
damage, or degradation if he can demonstrate that it was not due to his actions or inactions. The
following case laws provide clarification:

1. In Ultzen v. Nicols8, when a customer entered a restaurant, the server hung his coat.
When he stood up to go, though, the coat was gone. The owner was judged responsible
for the loss because he had a duty of care to both the coat and the owner.
2. In Coldman v. Hill9, (A) man donated his livestock to (B) for grazing. During the same,
he lost his livestock and did not make any attempt to recover it (by alerting the police,
etc.). Consequently, he was required to reimburse A for his losses.
3. Martin v. London County Council10: when a lady was hospitalised, she surrendered her
jewellery to the authorities for safekeeping. However, they failed. They were deemed
liable because there existed a contract of bailment (the lady is the bailor and the staff is
6
Section 151, Indian Contract Act 1872
7
Section 152, Indian Contract Act 1872
8
(1894) 1 Q.B. 92
9
(1919) 1 K.B. 443
10
(1947) K.B. 628
 the bailee) and the bailee failed to exercise a reasonable duty of care towards the
jewellery.
4. In Clarke v. Earnshaw, a person entrusted his property to another, who failed to protect
them (by locking and storing them properly). Therefore, he was responsible for their
theft.

Refrain from making unauthorised use of the products

The contract must stipulate that the items delivered by the bailor to the bailee are for a certain
purpose. If the bailee utilises the products for an unintended purpose and losses result, the bailee
is responsible for compensating the bailor for the resulting harm.11 These losses may be the result
of an accident or lack of carelessness on the part of the bailee.

For example, A exclusively lends B his laptop for typing reasons. If B downloads software
containing viruses, the laptop will become worthless and B will be required to reimburse A for
the damage.

Not to combine his possessions with those that were forfeited

When the bailee combines his products with the bailed items, there are three possible outcomes:

1. If the bailor agrees, the bailee and bailor shall split the earnings proportionally from the
mixture,12
2. If the bailor does not agree, the bailee is responsible for any losses caused by the
separation or combination,13
3. If the bailor does not agree and the combination is irretrievable, the bailor is entitled to
full reimbursement from the bailee.14
4. If the mixture or separation is the result of an accident, an act of God, an unauthorised
third party, or the bailee's oversight, the mixture belongs to both the bailor and bailee (in

11
Section 154, Indian Contract Act 1872
12
Section 155, Indian Contract Act 1872
13
Section 156, Indian Contract Act 1872
14
Section 157, Indian Contract Act 1872
 an equitable proportion). However, the bailee is responsible for any damages incurred by
the same.

Not to establish a negative title

The bailee must only hold the items of the bailment contract for and on behalf of the bailor. He
does not retain the right to retain the items and refuse to return them to the bailor. If he provides
the items to a third party (other than the bailor), the bailee must demonstrate that the third party,
not the bailor, has the legal right to hold the commodities.15

To return any additions to the merchandise

Normally, the bailee is required to return the items to the bailor after the contract of bailment has
been fulfilled. This also implies that any profits gained from the commodities must be returned to
the bailor, and the bailee cannot retain them.

For example, if A lends B his cow for a set amount of time and the cow gives birth while in B's
possession, A would be responsible for the calf. B is obligated to return the cow and calf to A
upon contract termination.16

To return merchandise

After the contract of bailment has expired, the bailee must return the goods to the bailor without
the bailor's request. When the bailor instructs the bailee to return the items after completion or

15
Section 117 of the Indian Evidence Act 1872
16
Section 163, Indian Contract Act 1872
completion of the job, the bailee must comply.17 If the bailee refuses to do so and any losses
occur, he is obligated to reimburse for any losses.18

In the case of Shaw & Co. v. Symmons & Sons19, A handed B certain volumes to be bound, but
B did not return them after a reasonable period of time had passed. During this period, an
unintentional fire broke out on the grounds, destroying the volumes. Thus, A had the right to
reimbursement from B.

AN ANALYSIS OF THE DUTIES OF THE BAILOR AND BAILEE

The commodities included in a contract of bailment may be either gratuitous or not gratuitous. In
the first scenario, neither the bailor nor the bailee profit. In this kind of bailment, the bailor is
required to advise the bailee of any known defects or defects that might impede the bailee's
performance of the contract. In a non-gratuitous bailment, however, the bailor is compelled to
disclose any knowing defects to the bailee; otherwise, he is liable for all losses caused by the
concealed defect. This is one of the provisions whose only purpose is to benefit the bailee. In
exchange, the bailee must ensure that he does not mistreat or damage the item while in his
possession and that he returns it on time. In Hyman and wife v. Nye and Sons20, the case was
based on the assumption that the defendant provided the prosecution with a defective carriage,
which broke and caused injuries to the prosecution. The defendant was found accountable even
though he was ignorant of the malfunctioning carriage, since it was his responsibility to supply a
functional carriage. Additionally, the bailor is obligated to notify the bailee if the items are
hazardous.

In addition, the obligations of the bailor and bailee are structured so as to mirror and complement
one another. On the one hand, the bailee is responsible for taking care of the commodities while
in his possession, ensuring that he does not ignore or mismanage them. However,
notwithstanding his caution, the bailor is responsible for any harm that occurs.21

17
Section 160, Indian Contract Act 1872
18
Section 161, Indian Contract Act 1872
19
(1917) 1 K.B. 799
20
(1881) LR 6 QBD 685
21
Lyell v. Ganga Das, ILRC (1875) 1 AII 60
In circumstances where the commodities in the bailee's custody have been damaged, the bailee
must demonstrate that they took adequate and reasonable precautions to avoid the harm. If they
are successful, they are exempt from compensating the bailor for any losses inflicted. In the case
of L.M. Co-operative Bank v. Prabhudas Hathibhai, a tobacco-filled warehouse was turned
over to the bank as the defendant's promise. In exchange, the bank gave the keys to t22he police.
The tobacco was harmed by severe precipitation. The defendant was the bailor and the bank was
the bailee in this instance. The bank had the burden of evidence in order to avoid paying
compensation for the damaged tobacco.

SHORTCOMINGS IN THE CONTRACT OF BAILMENT

1. The idea of "duty of care" is the first and greatest deficiency that requires addressed. In
several instances, it has been hard to determine whether the bailee took enough care of
the items before they were destroyed. In the precedent-setting case of Shanti Lal v. Tara
Chand23, “No cast-iron standard could be laid down for the measure of the care due
from him and the nature and amount of care must vary with the posture of each case.”
2. The duty of care is very crucial because it determines who is responsible for the majority
of the damages caused to the products. If the bailee causes damage to the items while in
his custody, he must reimburse the bailor. Only if he can establish that the harm was
caused notwithstanding his diligent duty of care would he be excused from liability.
Therefore, the issue arises: who will pay for losses caused by a third party or an act of
God? When a mixing of products occurs due to the aforementioned causes, the bailee
suffers the loss; nonetheless, the bailor and bailee divide the benefits equitably. However,
in the general situation of damages, the Act does not specify who is responsible for losses
incurred by persons other than the bailor and bailee. As indicated obliquely in Coldman
v. Hill24, the bailee was required to demonstrate that he "reasonably" attempted to recover
the bailor's lost property; otherwise, he was required to pay the bailor for the actions of a
third party.

22
AIR 1966 Bom 134
23
1933 All 158
24
[1918-19] All ER Rep 434
 3. Does the notion of bailment apply to agreements and commitments that are not
necessarily contracts? In Chaturgun v. Shahzady25, the defendant (bailee) had borrowed
jewellery from the prosecution (bailor) for a party. The jewellery was taken, but the
defendant denied responsibility since there was no contract between them. The court
determined that an implicit contract existed between them, and as a result, the bailee was
required to reimburse the bailor for the loss of his possessions. There are many domestic
and emotional agreements created nowadays that are not necessarily contracts. The
question then arises as to whether a specific instance constitutes a violation of an implicit
contract or only a loss of commodities between two parties who achieved an agreement
due to their connection.

TABLE OF AUTHORITIES

Cases
(1881) LR 6 QBD 685.................................................................................................................................7
(1894) 1 Q.B. 9............................................................................................................................................4
(1917) 1 K.B. 799........................................................................................................................................7
(1919) 1 K.B. 443........................................................................................................................................4
(1947) K.B. 628...........................................................................................................................................5
25
AIR 1930 Oudh 395
[1918-19] All ER Rep 43.............................................................................................................................9
1933 All 158................................................................................................................................................8
AIR 1930 Oudh 395....................................................................................................................................9
AIR 1966 Bom 134.....................................................................................................................................8
Coughlin v. Gillison, (1899) 1 Q.B. 145......................................................................................................3
Lyell v. Ganga Das, ILRC (1875) 1 AII 60.................................................................................................8
Read v. Dean, (1949) 1 K.B. 188.................................................................................................................3
Statutes
Section 117 of the Indian Evidence Act 1872..............................................................................................6
Section 148, Indian Contract Act 1872 Section 148, Indian Contract Act 1872..........................................2
Section 150, Indian Contract Act 1872........................................................................................................3
Section 151, Indian Contract Act 1872........................................................................................................4
Section 152, Indian Contract Act 1872........................................................................................................4
Section 154, Indian Contract Act 1872........................................................................................................5
Section 155, Indian Contract Act 1872........................................................................................................5
Section 156, Indian Contract Act 1872........................................................................................................5
Section 157, Indian Contract Act 1872........................................................................................................6
Section 158, Indian Contract Act 1872........................................................................................................3
Section 160, Indian Contract Act 1872........................................................................................................7
Section 161, Indian Contract Act 187..........................................................................................................7
Section 163, Indian Contract Act 1872........................................................................................................6