Contract of Bailment

The Indian Contract Act,1872 deals only with general

principles of Bailment. For different types of bailment there
are separate Acts.

Definition (S.148 of IC, Act):

“The 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 directions
of the person delivering them.”

The person delivering the goods is called the ‘Bailor’

The person to whom the goods are delivered is called the ‘Bailee’
 Essentials of Bailment
1. There should be a Contract
2. Delivery of goods
3. Delivery of goods for certain
purpose
4. Return of the same goods
And should possess all the essentials of valid contract,
except consideration

Consideration may or may not exist. Absence of

consideration doesn’t invalidate contract of bailment
 Duties of Bailor
1. To disclose faults in goods bailed (S.150)
2. To repay usual expenses in case gratuitous
bailment (S.158)
3. To bear the extraordinary expenses in all
cases
4. To indemnify the bailee
i) For non-disclosure of faults in goods bailed
ii) For demanding back the goods bailed
gratuitously
iii) For bailor’s defective title
iv) For wrongful refusal to take back the goods
 Rights of Bailor
1. Right to termination (S.153)
2. Right to claim damages (S.151)
3. Right to claim compensation
i) for loss due to unauthorized use of goods(S.154)
ii) for unauthorized mixing goods (S.155-156)
4. Right to demand return of goods on expiry
or accomplishment of purpose of
bailment(S.160)
5. Right to claim any natural accretion to
goods bailed (S.163)
 Duties of Bailee
1. To take reasonable care of goods bailed
2. Not to make unauthorized use of the goods
bailed
3. Not to mix goods bailed with his own goods
if, mixes goods
i) with consent of bailor
ii) without consent of bailor
situations, a) goods can be separated
b) goods cannot be separated
4. Not to set up an adverse title (S.117 Indian
Evidence Act)
5. To return the goods
6. To return any accretion to the goods bailed
 Rights of Bailee
1. Right to return the goods
2. Right of immunity against delivery, if bailor has
no title
3. Right to apply to court to stop delivery
4. Right to compensation for loss incurred on
defective title
5. Right to indemnify for loss from goods returned
before expiry of bailment contract
6. Right to receive extraordinary expenses
7. Right to recover usual expenses in all gratuitous
bailment
8. Right to claim compensation for non-disclosure
of faults in the goods
9. Right to lien
Rights of Bailor & Bailee against 3rd
Person
Where 3rd person wrongfully deprives
the bailee of the use or possession of
goods or causes them any injury,
bailee may sue for remedies as
owner might have acted against such
person if no bailment was made.
 Finder of Goods
• A finder of goods belonging to others is not under
obligation to pick or take charge of goods
• If he takes into his custody he becomes a bailee(S.71) &
is responsible for goods as a bailee

Rights of a finder of goods:

1. Right to lien
2. Right to sue for reward
3. Right of Sale

Obligations of finder of goods:

1. Must take reasonable care. & not responsible for goods
getting destroyed despite his care
2. Must not use for his needs
3. Must not mix with his goods
4. Must try to find the owner, if not done, he will be liable as
trespasser
 Pledge
Definition (S.172 Indian Contract Act):
“ Bailment of goods as security for payment
of a debt or performance of a promise is
called pledge”
Bailor is called pledger/pawner
Bailee is called pledgee/pawnee

Distinction between Pledge & Bailment:

1. Purpose
2. Use of goods
3. Rights
4. Lien
 Rights & Duties of Pledger
Rights:
1. To receive back
2. To enforce preservation & proper maintenance
3. To redeem the debt
Duties:
1. Must disclose any material fault or risks in goods
2. Responsible to meet extraordinary expenses in
preservation of goods pledged
3. When pledgee exercises his right of sale, any
shortfall has to be made good by pledger
4. Liable for loss caused due to defects in his title
 Rights & Duties of Pledgee
Rights:
1. Right to retainer (S.173)
2. Right to retainer for subsequent advances
3. Right to extraordinary expenses
4. Right on default by pledger (sue/sell)
5. Right against its owner, when pledger’s title is
defective
Duties:
1. Required to take as much care as any person of
ordinary prudence
2. Must not put the goods to an unauthorized use
3. Bound to return goods on payment of debt
4. Any accruals to the goods should be delivered
accordingly