I Year B.B.A. L.L.

B (Hons) Semester-II (2022)

2nd -Internal Assessment
Subject – Special Contracts
TOPIC- Co-relationship and Compatibility of Bailee's Duties under the Indian
Contract Act: An Analysis

NAME: Ananya Chandola

DIVISION: B

PRN: 22010126106

COURSE: B.B.A. LL.B. (H)

BATCH: 2022-2027
 CONTENTS
INTRODUCTION...............................................................................................................................3
SECTIONS...........................................................................................................................................4
151.....................................................................................................................................................4
152.....................................................................................................................................................4
153.....................................................................................................................................................4
154.....................................................................................................................................................4
159.....................................................................................................................................................4
160.....................................................................................................................................................4
161.....................................................................................................................................................5
Part 1....................................................................................................................................................6
Set 1: Sections 151 and 152.............................................................................................................6
Set 2: Sections 153 and 154.............................................................................................................8
Set 3: Sections 159, 160 and 161.....................................................................................................9
Part 2..................................................................................................................................................10
Set 1: Sections 151 and 152...........................................................................................................10
Set 2: Sections 153 and 154...........................................................................................................11
Set 3: Sections 159, 160 and 161...................................................................................................11
Part 3..................................................................................................................................................13
Section 151.....................................................................................................................................13
Section 152.....................................................................................................................................14
Section 159.....................................................................................................................................14
CONCLUSION..................................................................................................................................16
 INTRODUCTION
The Indian Contract Act of 1872 serves as the primary legislation governing contractual
relationships in India. It establishes the essential components for a valid contract, such as
offer and acceptance, consideration, capacity to contract, free consent, and lawful object. It
also recognizes different types of contracts, including contracts of sale, contracts of
guarantee, contracts of indemnity, and contracts of bailment and pledge.

One crucial aspect of contract law is the concept of bailment, which frequently arises in law-
abiding societies. Bailment, as explained by Chitty, involves the separation of actual
possession of goods from the underlying possessory right. In this arrangement, the party
receiving personal property from another party (known as the bailee) temporarily possesses
and controls the property without acquiring ownership rights. The bailee's responsibility is to
fulfill the purpose of the bailment, ensuring the safekeeping and proper handling of the
property.

As contractual relationships become more complex, it is essential to understand that the

bailee can be held liable if they fail to provide a secure environment for the goods entrusted
to them. However, the bailee's liability is generally limited to exercising the care of an
ordinary prudent person, according to the standards expected of them. Nevertheless, specific
types of bailment contracts, such as those involving common carriers, require a higher level
of care to be exercised. Various sections of the Indian Contract Act, including Sections 151,
152, 153, 154, 159, 160, and 161, outline the specific duties and responsibilities that the
bailee must uphold regarding the property entrusted to them by the bailor.
 SECTIONS

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 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.” 1

152. Bailee when not liable for loss, etc., of thing bailed.—"The bailee, in the absence of any
special contract, is not responsible for the loss, destruction or deterioration of the thing
bailed, if he has taken the amount of care of it described in section 151.”2

153. Termination of bailment by bailee’s act inconsistent with conditions.—"A contract of

bailment is avoidable 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.”3

154. Liability of bailee making unauthorized use of goods bailed.—"If the bailee makes any
use of the goods bailed which is not according to the conditions of the bailment, he is liable
to make compensation to the bailor for any damage arising to the goods from or during such
use of them.”4

159. Restoration of goods lent gratuitously.—"The lender of a thing for use may at any time
require its return, if the loan was gratuitous, even though he lent it for a specified time or
purpose. But if, on the faith of such loan made for a specified time or purpose, the borrower
has acted in such a manner that the return of the thing lent before the time agreed upon would
cause him loss exceeding the benefit actually derived by him from the loan, the lender must,
if he compels the return, indemnify the borrower for the amount in which the loss so
occasioned exceeds the benefit so derived.”5

160. Return of goods bailed, on expiration of time or accomplishment of purpose.—"It is the

duty of the bailee to return, or deliver according to the bailor’s directions, the goods bailed,

1
The Indian Contract Act,1872, §151
2
The Indian Contract Act,1872, §152
3
The Indian Contract Act,1872, §153
4
The Indian Contract Act,1872, §154
5
The Indian Contract Act,1872, §159
without demand, as soon as the time for which they were bailed has expired, or the purpose
for which they were bailed has been accomplished.”6

161. Bailee’s responsibility when goods are not duly returned.—"If, by the default of the
bailee, the goods are not returned, delivered or tendered at the proper time, he is responsible
to the bailor for any loss, destruction or deterioration of the goods from that time.”7

6
The Indian Contract Act,1872, §160
7
The Indian Contract Act,1872, §161
 Part 1
Establish with legal reasoning, the co-relationship between the duties of a
bailee in each Set.

Set 1: Sections 151 and 152

Section 151 states that a bailee is bound to take reasonable care of the goods bailed to him.
“The bailee's liability extends to any damage caused by the negligence of his servants acting
within the scope of their employment while the use or custody with them or any fraud or
wrongful act within the scope of their authority or for the benefit of their master or in the
general course of employment.”8. In Alias v. EM Paul9, the Appellant entrusted his vehicle to
a garage for repair services. During the course of the repairs, one of the garage workers
negligently collided with the truck, causing injury to a third party named Benny. Notably, the
worker failed to provide adequate notice before starting the vehicle. As per the ruling of the
Kerala High Court, the bailee's decision to permit the servant to access and control the truck
was an act of carelessness and lack of caution. Section 152 imposes another duty on the
bailee, which is to not make any unauthorized use of the goods bailed. This duty
complements Section 151 as it focuses on preventing the bailee from utilizing the goods
beyond the scope of the bailment agreement. It ensures that the bailee does not act in a
manner that may damage or depreciate the goods or exceed the bailor's consent. In Taj
Mahal Hotel's case, a two-Judge Supreme Court bench held that hotels are free to print
exemption clause for any damage caused due to contributory negligence, acts of third party or
force majeure events. However, this exemption would always be subject to bailee discharging
its initial burden of duty of care which it requires to take under Section 151.10

The co-relationship between Sections 151 and 152 can be established through the following
legal reasoning:

a. Common Purpose: The duties prescribed in Sections 151 and 152 serve the
common purpose of safeguarding the bailor's interests and protecting the goods

8
POLLOCK & MULLA, THE INDIAN CONTRACT ACT, 1872 (1 5 th ed., 2015).
9
Alias v. EM Paul, AIR 2004 Ker. 214.
10
Yaksh Bhakhand, Bailee's Duty of Care: Evolution and Relation with Torts, 26 Supremo
Amicus [583] (2021).
 bailed. While Section 151 emphasizes the duty to take care, Section 152 complements
it by prohibiting unauthorized use, thereby maintaining the integrity and value of the
goods.

b. Reasonable Care and Limited Use: Section 151 emphasizes the standard of
reasonable care expected from the bailee. It implies that the bailee must handle the
goods diligently, avoiding any negligence or reckless behaviour that may cause harm.
The standard of care or diligence required of a bailee under this section is that of an
average prudent man in respect of his own goods of the same bulk, value and in
similar circumstances. The Privy Council in one of its earliest cases of bailment in
India relaxed the ambit of negligence while delivering the Judgement in Dwarkanath
Chaudhuri v. River Steam Navigation Co. Ltds. held that "In a moment of extreme
peril and danger, perfect presence of mind, accurate judgment and promptitude
cannot be expected. When a man is suddenly put in an extremely difficult position and
he gives a wrong order, it should not be attributed to want of nerve and skill as to
amount to negligence.”. Section 152, on the other hand, restricts the bailee's use of the
goods to only authorized purposes, ensuring that the bailor's ownership rights are
respected.

c. Preventing Loss or Damage: Sections 151 and 152 together aim to prevent loss,
damage, or depreciation of the goods bailed. By taking reasonable care and refraining
from unauthorized use, the bailee minimizes the risk of harm to the goods and
maintains their value, thus fulfilling the bailor's expectations.

d. Mutual Benefit: The duties prescribed in Sections 151 and 152 reflect the mutual
benefit underlying the bailment relationship. While the bailee has custody and
possession of the goods, the bailor entrusts them to the bailee for a specific purpose.
By complying with the duties, the bailee ensures the bailor's confidence and protects
their rights, establishing a mutually beneficial relationship. However, when the
damage to the goods bailed is caused due to reasons beyond the control of the bailee,
he is generally held to be not liable. This was held in Gopal Singh Hira Singh v.
Punjab National bank11 where due to the partition of India and Pakistan the bank was
not able to discharge his liabilities towards the Plaintiff and lost possession in

11
Gopal Singh Hira Singh v. Punjab National bank, AIR 1976 Del. 115.
 Pakistan, the Court held the bank to be not liable due to loss caused by reasons
beyond its control.12

Set 2: Sections 153 and 154

Section 153 deals with the avoidance of a contract of bailment at the option of the bailor. It
states that if the bailee performs any act concerning the goods that are inconsistent with the
conditions of the bailment, the bailor has the right to avoid the contract of bailment. In other
words, if the bailee acts in a manner that goes against the agreed-upon terms or conditions of
the bailment, the bailor can choose to terminate the contract.

Section 154, on the other hand, focuses on the liability of a bailee who makes unauthorized
use of the goods that have been bailed to him. It states that if the bailee uses the goods for a
purpose that is not permitted by the terms of the bailment, he becomes liable for any damage
or loss that may occur as a result of such unauthorized use. This section holds the bailee
responsible for any harm caused due to his non-compliance with the conditions of the
bailment.

Talking about the co-relationship between these two sections:

a) Section 154 can be seen as an extension of Section 153: While Section 153
primarily deals with the care and diligence the bailee must exercise while the
goods are in his possession, Section 154 focuses on the ultimate duty of the bailee
to return the goods to the bailor. Illustration-According to section 153, If A lets B,
for hire, a car for his own use, and B starts to drive it, it would be a termination of
the agreement of bailment on the option of A. In addition to this, under section
154 If A lets B, for hire, a car for his own use only, and C, B’s relative, starts to
drive it, and the car crashes despite reasonable care on the part of C, it would be a
termination of the agreement of bailment on the option of A.
b) Setting the standard of care: Section 153 sets the standard of care that the bailee
must meet during the possession of the goods, and Section 154 emphasizes the
final act of returning the goods to the bailor. Both sections work in conjunction to
ensure that the bailee maintains the goods in a safe and secure condition while
they are in his possession and subsequently returns them to the bailor.

12
AVTAR SINGH, LAW OF CONTRACT ACT AND SPECIFIC RELIEF ACT 682 (12th ed., 2017).
 It is important to note that these duties can be subject to any specific agreements or
terms between the bailor and the bailee. If the bailor and bailee have entered into a
contract that modifies or adds to the duties mentioned in Sections 153 and 154, those
contractual terms will prevail.

Set 3: Sections 159, 160 and 161

According to Section 159, even if an agreement to borrow was made for a certain amount of
time or purpose, the lender has the right to demand return at any moment if they gratuitously
lend anything for use. However, if returning the possession before the specified time would
result in a loss for the borrower that is higher than the benefit received from the borrowing,
the lender must make up the difference if they force the return and the lender has acted in a
way that relies on the defined time or objective of the loan.

Without a formal demand, Section 160 creates the bailee's obligation to return the goods or
provide them in accordance with the bailor's instructions. This obligation becomes due after
the agreed-upon duration of the bailment has passed or the intended use of the commodities
has been satisfied.

In accordance with Section 161, if the bailee fails to deliver, return, or tender the goods at the
appropriate time, they are accountable for any subsequent loss, destruction, or degradation of
the items. This implies that if the bailee does not return the items as needed, they are then
responsible for any harm or damage the commodities may sustain going forward. For
example, in the case of Shaw & Co v Symmons & Sons13, The defendant was held liable as
he failed to return the goods on time and the goods got damaged in a fire. In a similar case of
Rampal Ramchand Agarwal v Gourishankar Hanuman Prasad14, the defendant was held
liable for the loss of goods after getting stolen as he refused to return the goods on time.

The relationship between these paragraphs emphasises the duties of the bailor, the bailee, and
the repercussions of default. Section 159 deals with the lender's authority to ask for the return
of items that were freely given and the potential requirement for payment in some situations.
Section 160 creates the bailee's obligation to give back the goods after the designated period
of time or for the defined purpose, and Section 161 makes the bailee responsible for any
future loss, destruction, or degradation of the items if this obligation is broken.

13
Shaw & Co v Symmons & Sons, (1917) 1 KB 799
14
Rampal Ramchand Agarwal v Gourishankar Hanuman Prasad, Air 1952 Nag 8
 Part 2
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.

Set 1: Sections 151 and 152

Based on the premise discussed above, potential arguments can be made which may suggest
an incompatibility between these sections:

a. Potential Conflict due to vague usage of terms: The phrase "all cases of bailment"
in Section 151 seems to indicate that it covers all situations where goods are bailed.
However, Section 152 creates an exception by suggesting that the bailee may be
required to take care of the goods beyond the standard of ordinary prudence if there is
a special contract. This exception raises the question of whether Section 152
contradicts or limits the scope of Section 151.

b. Higher Standard of Care: Section 152 implies that in certain situations with a
special contract, the bailee is obligated to exercise a higher standard of care than that
of a person of ordinary prudence. This can be seen as a potential conflict with Section
151, which sets the standard of care as that of a person of ordinary prudence. The
question arises as to whether these two sections can be reconciled, given the potential
disparity in the level of care expected from the bailee.

c. Potential Conflict between Bailor and Bailee: The duty in Section 151 focuses on
the bailee's obligation to take care of the goods, while Section 152 emphasizes the
bailor's right to terminate the bailment if the bailee makes unauthorized use. This can
lead to a conflict of interests between the bailee's duty to exercise care and the bailor's
right to terminate the bailment based on unauthorized use.

d. Vague Scope: The Act does not provide clear guidance on how the duties in
Sections 151 and 152 should be interpreted in relation to each other. It does not
explicitly state whether the prohibition on unauthorized use in Section 152 modifies
 or supplements the duty of care in Section 151. This lack of clarity contributes to the
potential lack of compatibility between the two sections.

Set 2: Sections 153 and 154

The lack of compatibility between these two sections can be viewed as follows:

a. Conflicting Obligations: Section 153 imposes a duty on the bailee to return the
goods once the time or purpose of the bailment has ended. However, Section 154
provides the bailor with the right to terminate the bailment and demand the return of
the goods if the bailee makes unauthorized use or acts inconsistently with the terms of
the bailment. This creates a potential conflict between the bailee's duty to return the
goods and the bailor's right to terminate the bailment.

b. Bailee's Obligation vs. Bailor's Right: Section 153 emphasizes the bailee's duty to
return the goods, while Section 154 focuses on the bailor's right to terminate the
bailment and demand the return of the goods. These sections appear to present
divergent perspectives, with one emphasizing the bailee's obligation and the other
highlighting the bailor's right.

c. Lack of Clarity: The lack of clarity arises from the fact that Section 154 does not
specify whether the bailor's right to terminate the bailment and demand the return of
goods is absolute or conditional. It is unclear whether the bailor can exercise this right
even if the bailee has complied with the duty to return the goods under Section 153.

Set 3: Sections 159, 160 and 161

The given sections conflict based on the following observations:

1. Duty to Conduct Business According to Principal's Directions: Section 159 states

that an agent is bound to conduct the business of the agency according to the
principal's directions. This duty requires the agent to act in strict accordance with the
principal's instructions. However, this duty may clash with the duties mentioned in the
subsequent sections.

2. Duty to Exercise Reasonable Skill and Diligence: Section 160 imposes a duty on
the agent to exercise reasonable skill and diligence in performing their tasks. This
duty requires the agent to act with care and competence in executing their
responsibilities. However, the duty to follow the principal's directions in Section 159
may hinder the agent's ability to exercise their judgment and expertise fully. If the
principal's instructions conflict with what the agent considers reasonable and diligent,
the agent may face a dilemma in fulfilling both duties simultaneously.

3. Duty to Render Accounts and Information: Section 161 states that an agent must
render accounts to the principal regarding the agency's transactions and provide all
necessary information related to the agency. This duty aims to ensure transparency
and accountability. However, the duty to provide information and render accounts
may clash with the duty to follow the principal's directions in Section 159. If the
principal's instructions involve withholding certain information or not fully disclosing
the details of transactions, the agent may find it challenging to fulfil both duties
concurrently.
 Part 3
Make an errata by identifying the probable errors of drafting in the
provisions and give an ideal solution in the nature of proposing a ‘model
draft’ particularly in respect of Section 151, Section 152 and Section 159 of
the Act.

Section 151
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 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.
15

The expression "In all cases" connotes an absence of room for exemptions to the
aforementioned provision. Nevertheless, Section 152 stipulates that in the absence of a
particular agreement and with the exercise of reasonable care, the bailee shall not be held
accountable for any harm. To effectuate a remedy, it is imperative that the aforementioned
section be rectified.

One could contend that the expression "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" is gender-biased and confines itself to the male gender. To redress this issue, it may be
advisable to employ language that is more inclusive and gender-neutral with the aim of
advancing equality and eradicating any conceivable bias.

Model Draft:

Care to be taken by bailee.—In all cases with a special contract

of bailment the bailee is bound to take as much care of the goods
bailed to them as a person of ordinary prudence would, under
15
Id. At 1: The Indian Contract Act,1872, §151
 similar circumstances, take of their own goods of the same bulk,
quality and value as the goods bailed.

Section 152
152. Bailee when not liable for loss, etc., of thing bailed.—The bailee, in the
absence of any special contract, is not responsible for the loss, destruction or
deterioration of the thing bailed, if he has taken the amount of care of it
described in section 151. 1 6

As per the clause, the bailee shall not be held liable for any damage, loss, or degradation of
the bailed object if they have exercised the degree of care as specified in Section 151.
Notwithstanding, it may be imperative to provide a more precise definition of the term "the
amount of care" to eliminate any potential vagueness.

Additionally, the pronoun "he" ought to be substituted with "they" to prevent gender
specificity.

Model draft

Bailee when not liable for loss, etc., of thing bailed.—The

bailee, in the absence of any special contract, is not responsible
for the loss, destruction or deterioration of the thing bailed, if
they have applied reasonable care for safeguarding it as
described in section 151.

Section 159
159. Restoration of goods lent gratuitously.—The lender of a thing for use may
at any time require its return, if the loan was gratuitous, even though he lent it

16
Id. At 2; The Indian Contract Act,1872, §152
for a specified time or purpose. But if, on the faith of such loan made for a
specified time or purpose, the borrower has acted in such a manner that the
return of the thing lent before the time agreed upon would cause him loss
exceeding the benefit actually derived by him from the loan, the lender must, if
he compels the return, indemnify the borrower for the amount in which the loss
so occasioned exceeds the benefit so derived . 1 7

While the section in question does not contain any apparent errors, it may lead to
misinterpretation due to its confusing and convoluted language. The text must be drafted in a
manner that enhances the comprehension of the requirements, and the language must be
refined and elucidated to ensure that the objectives and obligations of both the lender and
borrower are unambiguously articulated. It is necessary to rephrase certain phrases in the
section, such as "on the faith of such loan" and "amount in which the loss so occasioned
exceeds the benefit so derived." These phrases should be modified to read "depending on the
loan" and "difference between the loss and the gain, if any," respectively. This will enhance
the comprehensibility of the section.

Furthermore, the pronoun "he" ought to be substituted with "they" to prevent gender
specificity.

Model draft

Restoration of goods lent gratuitously.—The lender of a thing

for use may at any time require its return, if the loan was
gratuitous, even though they lent it for a specified time or
purpose. But if, depending on the loan made for a specified time
or purpose, the borrower has acted in such a manner that the
return of the thing lent before the time agreed upon would cause
him more loss than benefit, the lender must, if he compels the
return, indemnify the borrower for the difference between the
loss and the gain, if any

17
Id. At 5; The Indian Contract Act,1872, §159
 CONCLUSION

"The test of a reasonable man is what it takes to attribute liability. " It is a simple rule that is
followed in all judgements and decrees given across India. In order to preserve property
rights and facilitate a variety of business transactions, the Indian Contract Act's concept of
bailment is an essential instrument. The legislation provides a thorough legal framework that
defines and regulates the arrangement that exists between the bailor and the bailee whereby
the bailor entrusts the bailee with custody of their property for a certain purpose and duration.
Bailment encourages secure and equitable transactions by establishing clarity and
responsibility, which boosts the general effectiveness of business operations. To safeguard
their interests and property, both people and corporations should be aware of their rights and
responsibilities under bailment. There are certain anomalies in the given sets of sections
which needs to be worked out for a smooth application of the legislation.