Bailment

M Vijay Bhaskar
Assistant Professor
NLUO,
Cuttack
Meaning of Bailment
Bailment is a type contract where
the property of one person
temporarily goes into the
possession of another person.
Even if the possession of goods
changes the ownership remains
the same .
According 148 of the Indian Contract Act
bailment is 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 they are delivered is
called the "bailee"..
Explanation to section 148
If a person already in possession of goods
of another contracts to hold them as a
bailee , he thereby becomes a bailee and
the owner becomes the bailor of such
goods, although they may not have been
delivered by way of bailment.

Example : Seller of goods can become the

bailee if the goods continue to be in his
possession even after the sale is complete.
For example, you deliver some gold to a
jeweler B to make bangles for your sister.
In this case you are bailor and B is bailee
and by delivering gold to B, a relationship
of bailment is created between you and
the jeweler
Kinds of Bailment
1. On the basis of reward
2. On the basis of benefit
3. On the basis of consent
 Rights of Bailor
 Right to claim damages in case of negligence [section 152]
 Right to terminate the contract in case of unauthorized use of
goods [section 153] 
 Right of claim compensation in case of unauthorized use of
goods [section 154] 
 Right to claim the separation of goods in case of unauthorized
mixture of goods[section 156] 
 Right to claim compensation in case of unauthorized mixture
of goods which cannot be separated [section 157]
 Right to demand return of goods [section160] 
 Right to claim compensation in case of unauthorized
retention of goods(section 161) 
 Right to demand accretion to goods [ section 163]
 Duties of Bailor
Duty to disclose all known defects-( sec
150)
 Duty to bear necessary and extraordinary
expenses (Sec 158)
Duty to indemnify loss for premature
termination of bailment-Sec(159)
Duty to indemnify the bailee against the
defective title of the bailor-(Sec164)
 Duty to receive back the goods-(Sec 164)
 Duties of Bailee
Duty to take care of the good (sec 151 to
152)
 Duty not to make any unauthorized use
of goods [section 154 ’
Duty not mix bailors goods with his own
goods[section 155 to 157]
Duty to return the goods[section
160&161] Duty to return accretions to
the goods [section 163]
 Rights of Bailee
 Right to claim damages [section 150]
 Right to claim reimbursement of expenses [section 158]

 Right to be indemnified in case of premature termination
of gratuitous bailment [section 159]
 Right to recover loss in case of bailor’s defective
title[ section 164] 
 Right to recover loss in case of bailors refusal to take the
goods back [section 164]
 Right to deliver goods to any of the joint bailors [section
165]
 Right to deliver goods to bailor in case of bailors defective
title[section 166]
 Cases
Duty of Bailor
Hyman & Wife V Nye & Sons 1881
Reed V Dean 1949

Duty of Bailee
Martin V London County Council 1947
Chellapan Pillai V Canara Bank 1988
Cheshire V Bailey 1905
Finder of Goods as a Bailee
 As per section 71 of the Indian Contract
Act ,1872 a person who finds goods
belonging to another and takes them into
his custody is subject to same
responsibility as a bailee
As finder of goods is a bailee so he is also
bound by the duty of reasonable care
Duties of a Finder of Goods
 Under Section 71 of the Contract Act, a finder of
goods has same duties with regards the goods found,
as that of a bailee. Hence,

1) The finder should take reasonable care of the goods

found.
2) He should not put the goods for his personal use.
3) He should not mix the goods found with his own
goods.
4) It is the duty of the finder of goods to find the real
owner of the goods and then to entrust the goods to
him
 Rights of a Finder of Goods

Rights of a finder of goods are as follows:

1) Right of lien: A finder of goods has the right to keep the goods
in his possession till he is paid his expenses. He can exercise
the right of lien against the goods found. This right is available
against the true owner until the finder of goods . receives
compensation for expenses and trouble incurred by him is
finding out the true owner and in preserving the goods found.
However, he has no right to sue the real owner for such
compensation.
2) Right to sue for reward(sec 168) : If the true owner of goods
has declared some award for the return of lost goods, the finder
can sue the owner for such award. He will have the right of
lien, over the goods till he receives t he award.
 Right of sale(Section 169 ): A finder of goods has a
right to sell the goods found by him under . the
following circumstances
1. Where the owner cannot, with reasonable
diligence, be found and if found, refuses to pay
the lawful charges of finder of goods, or
2. The goods found are such as is commonly the
subject of sale, or
3. The thing is in danger of perishing or of losing
the greater part of their value, or
4. When the lawful charges of the finder for
preservation and finding out the owner, amount to
two-thirds of the value of the thing.
Termination of Bailment
1. On the expiry of fixed 'period: If the goods are
bailed-for a fixed time,, the bailment is
terminated at the end of that period.
2. On the fulfillment of the object: If the goods
are bailed for some specific purpose or
purposes, the bailment is terminated on
fulfilling the object.
3. Inconsistent use of bailed: If the bailee uses
the goods in contravention of the terms of
bailment, the bailor may terminate the
bailment even before the term of bailment .
 4) Destruction of the subject matter: A bailment is
terminated if the subject matter of the bailment is
destroyed or because of some change in the nature of
goods bailed if the goods become incapable of being
used for bailment.
5) Termination of gratuitous bailment: a gratuitous
bailment can be terminated by the bailor at any time
even though the bailment was for a fixed period or
purpose. But in such a case, the loss to be suffered by
the bailee from such premature termination should
not exceed the benefit he had derived from the
bailment. If the loss exceeds the benefit, the bailor
shall indemnify the bailee.
6) Death: A gratuitous bailment is terminated by the
death of either the bailor or the bailee.
Duty of Care : Sec 151 v Sec 152
 Section 151 provides 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
Martin V London County Council 1947
KB 628

In India Sec 151 prescribes a uniform

standard of care in which a man of ordinary
prudence would take of this own goods of
the same type under similar circumstances.
If the care is below this standard he will be
liable for loss or damage to the goods
Section 152 provides 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
section151

ShantiLal V Tara Chand AIR 1933

Gopal Singh V PNB AIR 1976
Burden of proof is on the bailee to show
that he was exercising reasonable care
and if he succeeds in proving it then he
wont be liable

N R Srinivas Iyer V. New India Insurance

Co Ltd , 1983
Chesire V Bailey (1905) 1 KB 237