1st Year BBA.LL.B [Hons.

] – Semester-II (2022-23)

2nd Internal Assignment – Special Contracts

Co-relational analysis and Errata identification

NAME S M GIRISHA SHREENITHI

DIVISION C

PRN 22010126221

COURSE BBA.LL.B (Hons.)

BATCH: 2022-2027
 Establish with legal reasoning, the co-relationship between the duties of a
bailee in each Set. Specifically, there is a co-relationship between Sections
151 and 152, Sections 153 and 154, and finally Sections 159, 160, and 161.

SECTIONS 151 AND 152

DESCRIPTION OF THE PROVISIONS:

Section 151 of the Indian contract act states that in any situation of bailments, the bailee is
legally bound by the act to exercise due care to the goods bailed. The standard of care that is
required to be taken by any bailee is provided with a few conditionalities. Firstly, the bailee
should exercise a level of reasonable care that a man of ordinary prudence would take. The
standard of care that is prescribed to the bailee is that, the bailee has to take care as they
would with goods of similar nature, that is in terms of quantity, quality, and value1.

On the other hand, section 152 of the Indian contract act gives the liability of bailee in case
the rule is laid out in the case of non-compliance with section 151. This implies the fact that
the bailee would be exempted from the liability of section 151 if due care was exercised by
him.2

However, in the case of defiance of section 151 of the act, the burden of proof would fall
automatically on the bailee to show his exercise of reasonable care. The bailee has to place
before the court multiple conclusive pieces of evidence that he had taken reasonable care to
avoid reasonably foreseeable damages and has taken all reasonable cautions to ward off
reasonably apprehended risks like theft, loss, and deterioration of the good. Proving the above
facets would enable a bailee from absolving his liability. This principle has been laid down in
the case of Kuttapa v. State of Kerala3. In this case, a port authority was held liable for the
goods bailed in the absence of evidence of reasonable and due care exercised by them.

1
§151, Indian Contract Act, 1872, Act No. 9 of 1872
2
§152, Indian Contract Act, 1872, Act No. 9 of 1872
3
Kuttapa v. State of Kerala (1988) 2 KLT 54
CONTRACT TO THE CONTRARY

In the case of Bombay Steam Navigation Co Ltd v Vasudev Baburao Kamat 4, the phrase
contract to the contrary was interpreted. The court held that there was an option for the bailee
to contract himself out of the rule imposed in section 151 of the act. But to the contrary in the
case of Mahendra Kumar Chandulal v CBI5, It was held that the phrase ‘in the absence of
a special contract’ would provide the duty of care to be concentrated and not diluted.

CORRELATION

When the two sections are read in conjunction, they form a comprehensive framework
reflecting the obligations, responsibilities, and corresponding liabilities. Moreover, the
sections also show a cause-and-effect relationship. The violation of section 151 acts as the
cause and the effects or the consequences are traced in section 152. In essence, Section 152
acts as a direct consequence or outcome for the bailee's dereliction of duty in violation of
Section 151's obligations.

SECTIONS 153 AND 154

DESCRIPTION OF THE SECTIONS

Sections 153 and 154 of the Indian contract act deal with the termination of the bailment and
the liability of the bailee in case of unauthorized use of the goods. Section 153 of the act
states that the bailor has the option of terminating the contract in case the Bailee acts
inconsistent with the stipulations provided in the contract. For instance, a horse lent for
carriage purposes shall not be used for racing purposes. In case it is used to so, the bailor has
the right to terminate the contract and ask for the goods to be returned immediately. Section
153 can be seen demarcating more or less the right of the bailor in case of inconsistent acts of
the bailee6.

On the other hand, section 154 of the act delineates the liability a bailee would face when he
or she makes unauthorized use of the bailed goods. In case of the bailee using unauthorized
uses, the bailee shall be liable to the extent of any damage arising to the goods by such use of
4
The Bombay Steam Navigation Co. vs Vasudev Baburao Kamat, (1927) 29 BOMLR 1551
5
Mahendra Kumar Chandulal v CBI, AIR 1984 Guj (NOC) 53
6
§153, Indian Contract Act, 1872, Act No. 9 of 1872
the bailed goods. For example, going according to the example provided above, if the horse
sustains any kind of injury while being used for racing, the bailee shall be held liable for the
same. This provision holds the bailee liable for their conduct whenever they exceed the
authorized scope of use7.

CORRELATION

The association between Sections 153 and 154 of the Indian Contract Act displays a distinct
connection between right and liability. These sections outline the repercussions of a common
cause, which is the bailee's unauthorized use of the goods. Section 153 is primarily concerned
with the effect on the bailor's rights, whereas Section 154 is concerned with the effect on the
bailee's liability. The inclusion of both sections illustrates the legal idea that every right has a
related liability.

Thus, it becomes clear from studying each of these parts as a whole that they comprise an
extensive structure. In reaction to the bailee's unauthorized activities, section 153 gives the
bailor the authority to terminate the bailment setup. As a remedy, this termination enables the
bailor to take full advantage of their rights to set things right. However, Section 154
establishes the bailee's liability for the items' unauthorized use. This Section guarantees that
the bailee gives the consequences of their conduct by holding the bailee liable for any
damage that results from this usage.

SECTIONS 159, 160 AND 161

DESCRIPTION OF THE SECTIONS

Section 159 is about the restoration of the goods that have been lent gratuitously. As per
Section 159, the bailor, who lent his goods to a bailee for no reward, has the right to demand
its return even if the gratuitous bailment was agreed upon for a specific period or a purpose.
However, the bailor would be liable for the loss caused due to the return, in case the loss
incurred due to such return is greater than that of the benefit gained by such bailment8.

Section 160 pertains to the duty of the bailee to return the bailed goods. The bailee must
restore the goods and deliver them to the bailor after the expiry of the bailment or the purpose

7
§154, Indian Contract Act, 1872, Act No. 9 of 1872
8
§159, Indian Contract Act, 1872, Act No. 9 of 1872
of such bailment is accomplished. The return of such goods shall be made without any
demand from the bailor9.

When goods are not promptly returned, the bailee is liable under Section 161. It specifies that
the bailee will be liable to the bailor for any harm, destruction, or deterioration of the
commodities that occurs after that point if the goods are not returned, delivered, or tendered
as required by the bailee's breach.10

CORRELATION

The three sections 159, 160, and 161 pertain to the return and restoration of the bailed goods
and the rights and duties of the bailor and bailee in such conditions. The three sections,
though not similar in functioning or structuring, three of them concern themselves with the
return of the bailment. Section 159 is like the bailor concerning the return of goods, section
160 is like the duty of the bailor and section 161 is like the liability of the bailee in case of the
dereliction of the duty presented above. This 3-way relationship may be seen as the result of
juxtaposing rights, duties and liabilities.

Section 160 forms the corresponding duty of the bailee concerning the right of the bailor
enshrined in section 159. And section 161 acts as the corresponding liability of the duty
presented in 160.

Evaluate, whether there is any lack of compatibility of the duties with each
other in their respective sets, particularly in light of such a claimed co-
relation between them.

SECTIONS 151 AND 152

Section 151 declares that the individual who receives commodities for transitory safekeeping
or usage, known as the bailee, is obligated to maintain the same degree of care as a person of
ordinary sagacity would exhibit towards their things of comparable quantity, quality, and
worth.

9
§160, Indian Contract Act, 1872, Act No. 9 of 1872
10
§161, Indian Contract Act, 1872, Act No. 9 of 1872
Section 152, on the other hand, states that, without any specific agreement, the bailee shall
not be held liable for the forfeiture, obliteration, or depreciation of the entrusted property, if
they exercised the degree of care outlined in Section 151.

The incongruity arises as a result of Section 151 advocating a greater level of care than
Section 152. While Section 151 requires the bailee to use the same caution as a person of
ordinary prudence, Section 152 only requires the bailee to exercise the caution outlined in
Section 151, subject to a clause that can lower the liability of a bailee.

To correct this inconsistency, we must either alter or construe the aforementioned clauses in a
way that reconciles their requirements. This might be achieved by legislative changes or
judicial interpretation, guaranteeing a consistent and clear explanation of the bailee's
responsibilities.

SECTION 153, 154

Following a comprehensive examination of sections 153 and 154, it is clear that their
restrictions against the unauthorized use of bailed goods pose substantial limits. These parts,
in particular, fail to adequately deal with instances in which the unauthorized use of the goods
was done in good faith or owing to urgent situations. Furthermore, the sections primarily
focus on the bailor's remedy in the case of harm to the goods, failing to account for scenarios
in which the commodities may profit from unauthorized use.

In the hypothetical case, A bails her diamond pendant to B to use it as wedding jewellery, and
B, acting in good faith, goes beyond the terms of the initial agreement and decides to have the
pendant polished by a jeweller, increasing its value. The current provisions do not
specifically address such a scenario. Sections 153 and 154 focus exclusively on harm to the
products, without specifically recognizing scenarios in which unauthorized use results in a
favourable outcome for the commodities themselves.

This absence in the aforementioned sections raises issues regarding the applicability and
sufficiency of the present legal framework in dealing with the difficulties that arise from the
unauthorised but beneficial usage of bonded goods. It emphasises the importance of a
thorough and nuanced strategy for dealing with circumstances in which unauthorised use of
the commodities leads to upgrades or advantages rather than harms11.

11
Critical Analysis of the Duties of Bailor and Bailee ,JCLJ (2022) 824
 SECTIONS 159, 160 AND 161

Following a comprehensive investigation and analysis of the provisions described in sections

159, 160, and 161, it is clear that there are no direct inconsistencies relative to the rights and
obligations expounded within these sections. A nuanced assessment, on the other hand,
reveals the existence of an indirect bias, resulting in an apparent imbalance in favour of the
bailor within the scope of the bailment contract conditions expressed above.

Section 159, in particular, specifies the circumstances under which the bailor may be held
liable for any damage experienced by the bailor. Notably, such responsibility arises only
when the severity of the loss exceeds the transaction's advantages.

Section 161 specifies the bailee's responsibilities, stating that the bailee is responsible for all
losses, damages, and degradation caused by the goods if they are not returned to the bailor
within the time limit specified. This disparity in the level of obligation ascribed to the two
contract parties illustrates the fundamental contradiction that pervades this trio of provisions.

In effect, this mismatch in responsibility distribution creates an inherent bias in the bailment
contract favouring the bailor. While the bailor is protected from losses until they exceed the
advantages received, the bailee is fully responsible for any negative repercussions resulting
from failing to return the items within the term specified. The fundamental discrepancy
contained within the construction of these interrelated parts is the disparity in the degrees of
obligation assigned to the contractual parties.

However, the presence of such a discrepancy is not sufficient to render the provisions invalid
or unlawful. Rather, it calls for a careful assessment of the larger legal context within which
these parts function to assess the logic and rationale for the bailor-bailee distinction. An
examination of legal concepts such as justice, rationality, and the overarching goals of the
legal system controlling bailment contracts may be part of such an examination.

Make an erratum by identifying the probable errors of drafting in the

provisions and give an ideal solution like proposing a ‘model
draft’ particularly in respect of Section 151, Section 152, and Section 159 of
the Act.
 SECTION 151

Section 151 of the Indian contract act, concerns itself with the degree of duty of care that
ought to be exercised by a bailee. In this case, the main flaw is that there is no distinction
when it comes to a gratuitous and a non-gratuitous bailee. While it is important to not let both
types of bailee derelict their duty, there should be provisions that draw a fine line between the
duties of a gratuitous and a non-gratuitous bailee.

A non-gratuitous bailee should be exempted from the deterioration of the goods unless the
same happens due to his gross negligence. A non-gratuitous bailee beside from paying a
particular consideration to the bailor is also expected to take the same duty of care and is
made liable for the same duty of care as a gratuitous bailee.

Secondly, due to its intrinsic subjectivity and lack of a definite definition within legal
contexts, the phrase "man of ordinary prudence" might give rise to legal interpretation
concerns. This expression is often used in a variety of legal concepts and standards, notably
in the field of negligence and other areas where a person's conduct or behaviour must be
evaluated.

The phrase "man of ordinary prudence" refers to a hypothetical norm of behaviour that would
be anticipated by an average, moderately careful person under identical circumstances.
However, identifying what constitutes "ordinary prudence" is debatable and varies based on
the facts and circumstances of a case. It incorporates subjectivity into the legal analysis since
different people may have different ideas about what is acceptable.

Therefore, it is contended that a bailment contract shall stipulate the care that must be taken
towards the goods and the same shall be verbally mentioned in the contract. The bailee must
be made to follow the instructions of care that are contractually provided in the bailment
agreement to avoid any sort of inconsistencies.

MODEL DRAFT
151. Care to be taken by bailee. —In all cases of bailment, the bailee is bound to take as
much care of the goods bailed to him as per the stipulations in the contract or if not
mentioned as a man of ordinary prudence would, under similar circumstances, take of his
own goods of the same bulk, quality and value as the goods bailed.

SECTION 152

The words reflected in section 152, ‘in the absence of any contract’ has a wide range of
interpretation. Normally the lawmakers and interpreters of law would believe that the bailee
would have a squiggle room to limit their extent of liability and the parties of the contract
would also have the power to increase the liability of the bailee.

But on reading this section, more specifically the above-mentioned phrase, in consonance
with section 151 of the Indian contract act, it would defeat the purpose of section 151 of the
act. While section 151 imposes liability on someone as a result of dereliction of his duty, the
subsequent act provides room for escaping such liability by merely mentioning a clause in the
contract.

However, the Supreme Court determined in the case of Bombay Steam Navigation Co v.
Vasudev Baburao Kamat that the clause does not expressly forbid the bailee from
restricting the scope of its duties. If it does, it is restricting the autonomy of the individual
from entering into a bailment agreement of his choosing.

The aforementioned reading of section 152 is undesirable, as it gives the bailee a way to
circumvent the minimum level of care that he is required to uphold to safeguard the bailor's
interests. When sections 151 and 152 are interpreted together, the meaning that can be
reached in section 151 requires the bailee to exercise the bare minimal measure of care for the
bailed goods, and in the case of section 152, that degree of care is not increased by any
contract. Only the minimal standard of care outlined in section 161 of the Indian Contract Act
of 1872 will determine the bailee's culpability12.

MODEL DRAFT

Changes made are highlighted

12
Singh, A. (2017). Contract and Specific Relief. India: Eastern Book Company.
152. Bailee when not liable for loss, etc., of goods bailed. —The bailee, in the absence of
any special contract enhancing his or her liability, is not responsible for the loss, destruction
or deterioration of the goods bailed, if he has taken the amount of care as mentioned in the
contractual obligations or as much as a man of ordinary prudence.

SECTION 159

Section 159, has 3 major flaws when interpreted in the light of the contract of bailment and
the general legal jurisprudence.

Firstly, it is of utmost importance to emphasize the loss and the importance of

indemnification that shall be owed by the bailor to a gratuitous bailee. The mere
indemnification of the loss only when the derived benefit of the gratuitous bailment is lesser
than the loss suffered is not fair towards the gratuitous bailor. This can be viewed in the light
of section 151 of the same act, in 151 the duty of care of the bailee towards the bailor is the
same in all cases of bailment, be it for reward or not for a reward. But when it comes to the
duty of the bailor towards that of a bailee, prejudice can be noted between the gratuitous and
non-gratuitous bailees.

Therefore, whenever a bailor behaves in a way that, as a result of their actions, the untimely
return of the bailed item, in violation of the predetermined timeframe or designated objective,
would result in adverse consequences greater than the benefits obtained from said bailment, it
is the bailors’ profound duty to provide compensation, without being limited to just offsetting
the difference between the suffered loss and the compensation provided.

The second flaw is that there is very lucid and confusing language that is being employed in
this section. the terms lender and loan have suddenly replaced the words bailor and bailment
in this section only. Such anomaly is not seen in any other provisions of the act.

It has to be fundamentally noted that even though bailment and loan may look the same from
a layman’s point of view, it is not so jurisprudentially.

A temporary transfer of control or custody of an object is shared between a loan and a

bailment, yet there are important differences between the two. The primary purpose of a loan
is to benefit the borrower, albeit the lender retains ownership. It has a set time limit, might be
free or require payment, and gives the borrower additional power. While the bailee of a
bailment has temporary possession but no ownership rights, a bailment is often made for a
specific reason. Bailment imposes some limitations on the usage of the bailee and may be
free or for payment. Its length can also vary. Ownership stays with the bailor, and it is
necessary to return the good. Therefore, the usage of words related to a loan is a major flaw
and requires the scrutiny of lawmakers.

Thirdly, in this section, the word ‘thing’ has been used in places where ‘goods’ out to have
been used. The word thing in a legal context has a very broad spectrum of interpretation. The
word "thing" is used in legal settings to refer to any object, entity, or asset that has physical
existence or can be subject to custody and control. It is frequently used as a blanket phrase to
describe any kind of valuable asset, whether it be material or immaterial.

For instance, in the case of a bailment contract, the bailment of something like an intellectual
asset is impossible. Therefore, it is contended that the word ‘thing’ should be replaced by
‘goods’ just like any other provision of the section. this should be done so, as the word
‘goods’ would direct us to a more specific interpretation of what can be bailed and what
cannot be.

MODEL DRAFT
Changes are highlighted.

159. Restoration of goods lent gratuitously. —The bailor of good for use may at any time
require its return, if the bailment was gratuitous, even though he bailed it for a specified time
or purpose. But if, on the faith of such bailment made for a specified time or purpose, the
bailee has acted in such a manner that the return of the goods bailed before the time agreed
upon would cause him loss, the bailor must, if he compels the return, indemnify the bailee to
the extent of the loss incurred regardless of the degree of benefit gained from the limited
bailment period.