Tutorial Class 4

Finders as Bailee
Right of a Bailee
General Lien
  Raman Ezhuthassan v. V. Devassi
 Where the bailee had the opportunity of inspection of the chattel and was
satisfied with its condition and also had it repaired at his own expense, the
bailor's warranty will not arise.

Clarification  In the cases where the bailee has relied on his own judgment and has
investigated the particular good, the implied warranty from the bailor does
not arise.
 However, if the bailor is aware of the particular fault, then regardless of the
investigation done by the bailee or reliance on his own opinion, there is an
obligation on the bailor to disclose the faults known to the bailor.
  Duty to take reasonable care of the goods (the level expected
from an ordinary prudent man with respect to similar goods as if
they are his own)
 Duty not to make any use of the goods which is not according to
the conditions of the bailment
 Duty not to mix, and to maintain the separate identity of the
bailor’s goods from his own
Duties of the  Duty to return the goods bailed, without demand, as soon as the
time for which they were bailed has expired, or the purpose of the
Bailee bailment has been accomplished
 Duty not to set up jus tertii, or to claim that the goods belong to a
third person, and thus deny the bailor the right to receive the
goods back
 Duty to return increase or profits to the bailor
 Duty not to make a contract inconsistent with the conditions of
bailment
 §168: The finder of goods has no right to sue the owner for
compensation for trouble and expense voluntarily incurred by him to
preserve the goods and to find out the owner; but he may retain the
goods against the owner until he receives such compensation; and
where the owner has offered a specific reward for the return of goods
lost, the finder may sue for such reward, and may retain the goods
until he receives it.

Finders as  §169: When a thing which is commonly the subject of sale is lost, if
the owner cannot with reasonable diligence be found, or if he
Bailees refuses, upon demand, to pay the lawful charges of the finder, the
finder may sell it—
(1) when the thing is in danger of perishing or of losing the greater part
of its value, or
(2) when the lawful charges of the finder, in respect of the thing found,
amount to two-thirds of its value.
  A finder is generally considered a bailee and has the duty to take
reasonable care of the goods.
 He cannot sue the owner for compensation of expenses
voluntarily incurred to preserve the goods and locate the owner.
Finders as  However, he has a right of lien over the goods until repayment for
Bailees the expenses incurred (otherwise under old English law, he would
have been liable of trover).
 The exception to the restriction on finders suing, under the
statute, is only for cases where the owner has offered a specific
reward for finding the goods lost.
  Right to Compensation
Rights of  Right to Expenses or Remuneration

Bailee  Right of Lien

 Right to Sue
  §164: The bailor is responsible to the bailee for any loss which the
Right to 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
Compensation respecting them.
  §158: Where, by the conditions of the bailment, the goods are to be
kept or to be carried, or to have work done upon them by the bailee
for the bailor, and the bailee is to receive no remuneration, the bailor
shall repay to the bailee the necessary expenses incurred by him for
Right to the purpose of the bailment.
 This section applies where there are no agreed charges for work
Expenses or that is to be done on the goods bailed.
Remuneration  Where the bailee is required by the terms of bailment to keep or
carry the goods or to do some work upon them for the benefit of
the bailor, and the contract provides for no reward, the bailee has
a right to ask the bailor for payment of necessary expenses
incurred by him for the purpose of the bailment.
  The right to charges is different from the right to lien. Lien is
limited to cases where possession is retained by the bailee.
 On the other hand, the right to charges remains alive even after
Right to possession has been parted with, as the bailor is liable to the
bailee for enjoying the benefits of the latter’s services.
Expenses or  However, where the purpose of the bailment is for the benefit of
Remuneration the bailee, then the ordinary expenses would be borne by him.
 E.g. if a car is lent to a friend for a journey, he must bear expenses
of fuel and air, if it should chance to require it, for it is a burden
which is naturally attendant upon the use of the car.
  The bailee also has the right to retain the goods where the lawful
charges of the bailment are not paid.
 This right to retain the property until the charges due in respect of
this property are paid, is called “the right of lien”.
Right of Lien  Quoting Halsbury’s Laws of England: Lien is in its primary sense a
right in one man to retain that which is in his possession belonging to
another until certain demands of the person in possession are
satisfied. In this primary sense it is given by law and not by contract.
  There are two kinds of lien: particular and general.
 A bailee is ordinarily entitled only to particular lien, which attaches
only to the particular property in respect of which the charge is
due.
Right of Lien  §170: Where the bailee has, in accordance with the purpose of the
bailment, rendered any service involving the exercise of labour or
skill in respect of the goods bailed, he has, in the absence of a
contract to the contrary, a right to retain such goods until he receives
due remuneration for the services he has rendered in respect of
them.
  Exercise of labour or skill:
 Not every exercise of labour and skill, but it must be such that
Necessary improves the goods.
 A stable master would not be entitled to particular lien, but a
Elements of horse trainer would, where he has effected some improvement on
Bailee’s the horse.
 Hutton v. Car Maintenance Co.: Where the car was given to a
Particular Lien company to maintain it for a certain period in return for a fixed
amount, it was held to not be entitled to lien as it did not improve
the car but only maintain it in the former condition.
  In accordance with the contract: The labour and skill must have
Necessary been exercised in accordance with the purpose of the bailment
and the terms of the contract.
Elements of  Goods on which labour or skill bestowed: Only such goods can
Bailee’s be retained on which the bailee has expended his efforts for which
he claims compensation. He cannot retain any other goods which
Particular Lien belong to the bailor which are in his custody. This is what
distinguishes particular lien from general lien.
  Possessory right: The right to lien is dependent and is lost as soon
as the bailee relinquishes possession of the goods.
 Eduljee v. Café John Bros.:
Necessary  An old refrigerator was repaired and delivered to the owner in
satisfactory condition.
Elements of  However, a part of the repair money was left unpaid.
 The machine broke down again and the mechanic took certain parts
Bailee’s for repair, but subsequently claimed lien on them until the original
Particular Lien repair charges were paid.
 The court held that the delivery after repairs put an end to the lien
which the repairer had for the charges of repairs and could not be
revived merely because the repairer undertook further repairs out of
grace and not as a matter of fresh contract.
  The right of lien may also be defeated or excluded by an
agreement to the contrary.
 To that extent, a particular lien may also be converted to general
Right of Lien lien.
 This is because §171 states that no other persons than those
enlisted under the section would be entitled to general lien except
where there is a contract to the contrary.
  A bailee has the right to sue any person who has wrongfully
deprived him of the use or possession of the goods bailed or has
Right to Sue done them any injury.
 The bailee’s rights and remedies against the wrongdoer are the
same as those of the owner.
  General lien refers to the right to hold the bailed goods as security
for the general balance of the account.
 The right of general lien extends to any goods bailed, for any
amount due, whether in respect to those goods or any others.
General Lien  §171: Bankers, factors, wharfingers, attorneys of a High Court and
policy brokers may, in the absence of a contract to the contrary,
retain as a security for a general balance of account, any goods
bailed to them; but no other persons have a right to retain, as a
security for such balance, goods bailed to them, unless there is an
express contract to that effect.
  General lien of bankers attaches to all goods and securities which
are deposited with them as bankers by a customer or by a third
person on a customer’s account; provided that there is no
contract, express or implied, inconsistent with such lien.
Bankers  The banker has a general lien over all forms of commercial paper,
which are deposited by or on behalf of a customer in the ordinary
course of banking business.
 This principle does not, however, extend to valuables lodged for
safe custody.
  The requirements may be summed up as:
 Goods and securities which are deposited by or on behalf of the
customer
 Received in their capacity of “banker” (does not cover a title deed
mistakenly left on a table)
 Does not extend to deposit of valuables for safe custody (gold
Banker’s Lien ornaments pledged for the repayment of a load can still be retained
as security for the repayment of a second loan subsequently taken
by the borrower)
 Banker’s lien cannot extend to goods which are deposited for safe
custody or some other special purpose, as they will be excluded
from the spell of general lien, as the acceptance of the goods for a
special purpose implicitly excludes general lien.
  General lien cannot extend to money, which is deposited, as this
does not give rise to a relationship of bailment.
 Money is excluded from the definition of goods.
 Money deposited with a bank does not maintain its identity.
Banker’s Lien
 It would also be absurd for a banker to expect that a customer
depositing money for a business transfer, would agree to transmit
the money through the bank if he was to know it would be
withheld in exercise of the lien.
  However, where a customer has two accounts, one for deposits
and one for loans, the banker may transfer the money from the
former into the latter even without specific instructions from the
depositor to that effect.
Banker’s Lien  In case of money deposited, the term set-off is used instead of
lien.
 This principle also extends to joint accounts or accounts of two
firms who agree that the monies in both accounts be treated as
part of the same account for the purposes of general lien.
  Firm Jai Kishan Das Jinda Ram v. Central Bank of India Ltd.:
 A firm gave a sum of money to be remitted to a sugar mill.
 The mill refused to accept the amount, which then returned to the
bank.
Banker’s Lien  The bank then claimed lien on the amount for a balance due against
another firm with whom there was an agreement to combine
accounts for general lien.
 The court held that as the specific object with which the money was
given had failed, it was no longer bound by the incidence of trust
and therefore the bank had a valid lien over it.
  A factor is an agent entrusted with possession of goods for the
purpose of selling them for the principal.
 He has a general lien on the goods of the principal for the balance
Factor’s Lien of the account against the principal.
 In order for the lien to arise, it is necessary for the goods to have
been delivered to the factor in the course of business and in his
capacity as a factor.
  A wharfinger is a person who owns or keeps a wharf (a place
touching water, used for loading and unloading goods) or has
Wharfinger’s oversight or management of it.
Lien  They have general lien over goods bailed to them until the charges
due for the use of the wharf are paid.
  An attorney has the right to general lien over the proceeds of the
action that come to their hands, until their fees for professional
services are duly paid.
 Where the client terminates his services, the attorney can retain
the papers of the suit until the charges are paid.

Attorney’s Lien  However, if the attorney themselves decide not to act for the
client, they forfeit the lien and must hand over the papers whether
or not the costs are met.
 R.D.Saxena v. Balram Saxena:
 Advocates do not have the right to lien over their clients’ papers for
the unpaid fee. Files containing copies of the records cannot be
equated with the word “goods”.
  Policy brokers are insurance agents employed to effect policies of
marine insurance.
Policy Brokers  Their lien extends to any balance on any insurance account due to
them from the person employing them to effect the policy.