JAIPUR NATIONAL UNIVERSITY

Seedling School of Law and Governance

Law of Contract- II
Topic: Bailment

Submitted To: Submitted By:

Akshita Jinda Ma’am Lakshya Khandelwal
Assistant Professor BBA LLB 4th Sem
SSLG R Id: R32931
JNU, Jaipur

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 Acknowledgement

I am grateful for the support and assistance I received from various individuals in completing
this assignment. I want to express my appreciation to those who taught me valuable lessons
throughout this process, as their guidance and feedback made the assignment more
manageable. I also want to thank the college management for providing me with this valuable
opportunity.
I look forward to participating in similar events in the future. I want to clarify that I am the
sole creator of this assignment and it is authentic. Lastly, I want to acknowledge the
contribution of individuals and legal websites for enhancing my understanding of the
project's subject matter.

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 INDEX:
• Bailment:
(i) What Is Bailment?
(ii) Essential elements
a. Different forms of Bailment
b. Two classifications of Bailment Rewards

• Duries:
(i) Duties Of a Bailor
(ii) Duties Of a Bailee

• Rights:
(i) Rights Of a Bailor
(ii) Rights Of a Bailee

• Termination Of Bailment

Bailment [Section 148-171]

Bailment Duties of Bailor

Rights of Bailor Termination
and Bailee of Bailment
and Bailee

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 BAILMENT

(i) WHAT IS BAILMENT?

The word “Bailment” has been derived from the French word “ballier” which means “to
deliver”. Bailment etymologically means ‘handing over’ or ‘change of possession’. As per
Section 148 of the Act, bailment is the delivery of goods by one person to another for some
purpose, upon a contract, that the goods 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”.

➢ Example: Where ‘X’ delivers his car for repair to ‘Y’, ‘X’ is the bailor and ‘Y’ is
the bailee.

➢ Example: X delivers a piece of cloth to Y, a tailor, to be stitched into a suit. It is

contract for bailment.

(ii) Essential Elements:

The essential elements of a contract of bailment are—

(1) Contract: Bailment is based upon a contract. The contract may be express or
implied. No consideration is necessary to create a valid contract of bailment.

(2) Delivery of goods: It involves the delivery of goods from one person to another for
some purposes. Bailment is only for moveable goods and never for immovable goods
or money. The delivery of the possession of goods is of the following kinds:

i. Actual Delivery: When goods are physically handed over to the bailee
by the bailor. Eg: delivery of a car for repair to workshop

ii. Constructive Delivery: Where delivery is made by doing anything

that has the effect of putting goods in the possession of the bailee or
of any person authorized to hold them on his behalf. Eg: Delivery of
the key of a car to a workshop dealer for repair of the car.

(3) Purpose: The goods are delivered for some purpose. The purpose may be express or
implied.

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(4) Possession: In bailment, possession of goods changes. Change of possession can
happen by physical delivery or by any action which has the effect of placing the
goods in the possession of bailee. The change of possession does not lead to change
of ownership. In bailment, bailor continues to be the owner of goods as there is no
change of ownership. Where a person is in custody without possession, he does not
become a bailee.

➢ For example, servants of a master who are in custody of goods of

the master do not become bailees.

Similarly, depositing ornaments in a bank locker is not bailment, because ornaments

are kept in a locker whose key are still with the owner and not with the bank. The
ornaments are in possession of the owner though kept in a locker at the bank.

(5) Return of goods: Bailee is obliged to return the goods physically to the bailor. The
goods should be returned in the same form as given or may be altered as per bailor’s
direction. It should be noted that exchange of goods should not be allowed. The bailee
cannot deliver some other goods, even not those of higher value. Deposit of money
in a bank is not bailment since the money returned by the bank would not be identical
currency notes.

Contract
ESSENTIALS OF BAILMNET

Delivery of goods

Purpose

Possession

Return of Goods

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a. Different forms of Bailment: Following are the popular forms of bailment;

1. Delivery of goods by one person to another to be held for the bailor’s use.

2. Goods given to a friend for his own use without any charge.

3. Hiring of goods.

4. Delivering goods to a creditor to serve as security for a loan.

5. Delivering goods for repair with or without remuneration.

6. Delivering goods for carriage.

b. On the basis of reward, bailment can be classified into two types:

(1) Gratuitous Bailment: The word gratuitous means free of charge. So, a
gratuitous bailment is one when the provider of service does it gratuitously

i.e. free of charge such bailment would be either for the exclusive benefits of bailor
or bailee.

(2) Non-Gratuitous Bailment: Non gratuitous bailment means where both the
parties get some benefit i.e. bailment for the benefit of both bailor & bailee

For the
exclusive
Gratuitous Bailment

benefit of the bailee

Bailment

Non-Gratuitous

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 DURIES
(i) Duties Of a Bailor

(1) Duties of Bailor: The duties of bailor are spelt out in a number of Sections
[Section 150, 158, 159, 164]. These are categorized under the following
headings:

These are enumerated hereunder:

(i) Bailor’s duty to disclose faults in goods bailed [Section 150]: The
bailor is bound to disclose to the bailee faults in the goods bailed, of
which the bailor is aware, and which materially interfere with the use
of them, or expose the bailee to extraordinary risks; and if he does not
make such disclosure, he is responsible for damage arising to the
bailee directly from such faults.

(ii) If the goods are bailed for hire, the bailor is responsible for such
damage, whether he was or was not aware of the existence of such
faults in the goods bailed.

Example 1: A lends a horse, which he knows to be vicious, to B. He

does not disclose the fact that the horse is vicious. The horse runs away.
B is thrown and injured. A is responsible to B for damage sustained.

Example 2: A hires a carriage of B. The carriage is unsafe, though B is

not aware of it, and A is injured. B is responsible to A for the injury.

The condition for the liability of the bailor is:

The bailor should have the knowledge of the defect and the bailee
should not be aware

The defect in the goods must be such as exposes the bailee to

extraordinary risks or materially interferes with the use of goods.

(iii) In Hyman & Wife v. Nye & Sons (1881), A hired from B a carriage
along with a pair of horses and a driver for a specific journey. During
the journey a bolt in the under-part of the carriage broke away. As a
result of this, the carriage became upset and A was injured. It was held
that B was liable to pay damages to A for the injury sustained by him.
The court observed that it was the bailor’s duty to supply a carriage fit
for the purpose for which it was hired.

Sometimes, the goods bailed are of dangerous nature (e.g., explosives).

In such cases it is the duty of the bailor to disclose the nature of goods.
[Great Northern Ry’.case (1932)]

(2) Duty to pay necessary expenses [Section 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 (gratuitous bailment), the bailor shall repay to the bailee the
necessary expenses incurred by him and any extraordinary expenses incurred
by him for the purpose of the bailment. However, in case of non-gratuitous

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 bailment the bailor is liable to pay the extraordinary expenses.

➢ Example: A hired a taxi from B for the purpose of going to Gurgaon

from Noida, during the journey, a major defect occurred in the
engine. A had to pay ` 5000 as repair charges. These are the
extraordinary expenses and it is the bailor’s duty to bear such
expenses. However, the usual and ordinary expenses for petrol, toll
tax etc. are to be borne by the bailee itself.

(3) Duty to indemnify the Bailee for premature termination [ Section 159]: The
bailor must compensate the bailee for the loss or damage suffered by the bailee
that is in excess of the benefit received, where he had lent the goods gratuitously
and decides to terminate the bailment before the expiry of the period of
bailment.

(4) Bailor’s responsibility to bailee [Section 164]: The bailor is responsible to the
bailee for the following:

(i) Indemnify for any loss which the 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, respecting them (defective title in goods).

(ii) It is the duty of the bailor to receive back the goods when the bailee
returns them after the time of bailment has expired or the purpose of
bailment has been accomplished. If the bailor refuses to take delivery of
goods when it is offered at the proper time the bailee can claim
compensation for all necessary expenses incurred for the safe custody.
Example: X delivered his car to S for five days for safe keeping.
However, X did not take back the car for one month. In this case, S can
claim the necessary expenses incurred by him for the custody of the car.

(ii) Duties Of a Bailee

(1) Take reasonable Care of the goods (Section 151 & 152): 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.

➢ Example 1: If X bails his ornaments to ‘Y’ and ‘Y’ keeps these ornaments
in his own locker at his house along with his own ornaments and if all the
ornaments are lost/stolen in a riot ‘Y’ will not be responsible for the loss to
‘X’. If on the other hand ‘X’ specifically instructs ‘Y’ to keep them in a
bank, but ‘Y’ keeps them at his residence, then ‘Y’ would be responsible
for the loss [caused on account of riot].
➢ Example 2: A deposited his goods in B’s godown. On account of
unprecedented floods, a part of the goods was damaged. It was held that, B
is not liable for the loss (Shanti Lal V. Take Chand).

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 Exception: Bailee when not liable for loss, etc., of thing bailed [Section 152]: 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) Not to make inconsistent use of goods (section 153 & 154): As per Section 154, 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.

➢ Example 1: A lends a horse to B for his own riding only. B allows C, a

member of his family, to ride the horse. C rides with care, but the horse
accidentally falls and is injured. B is liable to make compensation to A for the
injury done to the horse.

➢ Example 2: ‘A’ hires a horse in Kolkata from B expressly to march to

Varanasi. ‘A’ ride with due care, but marches to Cuttack instead. The horse
accidentally falls and is injured. ‘A’ is liable to make compensation to B for
the injury to the horse.

As per Section 153, a contract of bailment is voidable 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.

➢ Example: A lets to B, for hire, a horse for his own riding. B drives the horse
in his carriage. This is, at the option of A, a termination of the bailment.

(3) Not to mix the goods (Section 155, 156 and 157): Bailee is not entitled to mix up
the goods bailed with his own goods except with the consent of the bailor. If he, with
the consent of the bailor, mixes the goods bailed with his own goods, both the parties
shall have an interest in proportion to their respective shares in the mixture thus
produced (Sec. 155).

If the bailee, without the consent of the bailor, mixes the goods bailed with his own
goods and the goods can be separated or divided, the property in the goods remains
in the parties respectively bailee is bound to bear the expenses of separation and
division and any damage arising from the mixture (Sec. 156).

➢ Example: A bails 100 bales of cotton marked with a particular mark to B. B,

without A’s consent, mixes the 100 bales with other bales of his own, bearing
a different mark; A is entitled to have his 100 bales returned, and B is bound
to bear all the expenses incurred in the separation of the bales, and any other
incidental damage.

If the bailee, without the consent of the bailor mixes the goods of the bailor with his
own goods in such a manner that it is impossible to separate the goods bailed from
the other goods and to deliver them back, the bailor is entitled to compensation by
the bailee for loss of the goods (Sec. 157).

➢ Example: A bails a barrel of Cape flour worth ` 4500 to B. B, without A’s

consent, mixes the flour with country flour of his own, worth only ` 2500 a
barrel. B must compensate A for the loss of his flour.

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(4) Return the goods (Section 160 & 161): It is the duty of bailee to return, or deliver
according to the bailor’s directions, the goods bailed without demand, as soon as the
time for which they were bailed, has expired, or the purpo.se for which they were
bailed has been accomplished. [Section 160]

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. [Section 161]

➢ Example – X delivered books to Y to be bound. Y promised to return the

books within a reasonable time. X pressed for the return of the book. But
Y, failed to deliver them back even after the expiry of reasonable time.
Subsequently the books were burnt in an accidental fire at the premises of
Y. In this case Y was held liable for the loss.

(5) Return an accretion from the Goods [Section 163]: In the absence of any contract
to the contrary, the bailee is bound to deliver to the bailor, or according to his
directions, any increase or profit which may have accrued from the goods bailed.

➢ Example: A leaves a cow in the custody of B. The cow gives birth a calf.
B is bound to deliver the calf as well as the cow to A.

(6) Not to setup Adverse Title: Bailee must not set up a title adverse to that of the bailor.
He must hold the goods on behalf of and for the bailor. He cannot deny the title of
the bailor.

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 RIGHTS
(i) RIGHTS OF A BAILOR

Rights of Bailor: Broadly rights of bailor are also the duty of the bailee can be categorized
as under:

The following are the rights of bailor:

(1) Right to terminate the bailment (Section 153): A contract of bailment is voidable
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.

➢ Example: A lets to B, for hire, a horse for his own riding. B drives the horse
in his carriage. This is, at the option of A, a termination of the bailment.

(2) Premature Termination (Section 159): When the goods are lent gratuitously, the
bailor can demand back the goods at any time even before the expiry of the time fixed
or the achievement of the object.

➢ Example: A, while going out of station delivered his ornaments to B for safe
custody for one month. But A returned to station after one week. He may
demand the return of his ornaments even though the time of one month has
not expired.

However, due to the premature return of the goods, if the bailee suffers any loss, which
is more than the benefit actually obtained by him from the use of the goods bailed, the
bailor has to compensate the bailee.

(3) Right to file a suit against a wrong doer [Section 180 and section 181]:

(i) Suit by bailor & bailee against wrong doers [Section 180]: If a third person
wrongfully deprives the bailee of the use or possession of the goods bailed,
or does them any injury, the bailee is entitled to use such remedies as the
owner might have used in the like case if no bailment had been made; and
either the bailor or the bailee may bring a suit against a third person for such
deprivation or injury.
(ii) Apportionment of relief or compensation obtained by such suits
[Section181]: Whatever is obtained by way of relief or compensation in any
such suit shall, as between the bailor and the bailee, be dealt with according
to their respective interests

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(4) Right to sue the bailee: The bailor has a right to sue the bailee for enforcing all the
liabilities and duties of him. It includes:

(i) Right to claim compensation for loss caused to the goods by the
negligence of the bailee.

(ii) Right to claim compensation for unauthorized mixing of goods

(iii) Right to claim damages for unauthorized use of the goods

(iv) Right to demand back goods.

(v) Right to any accretion to the goods bailed.

(ii) RIGHTS OF A BAILEE

(1) Rights of bailee: As a matter of fact, all the duties of the bailor are the rights of the
bailee. In addition to that, the bailee has the following other rights also.

(2) Right to Deliver the Goods to any one of the Joint Bailors [Section 165]: If several
joint owners bailed the goods, the bailee has a right to deliver them to any one of the
joint owners unless there was a contract to the contrary.

➢ Example: A, B and C are the joint owners of a harvesting combine. They

delivered it on hire to D for one month. After the expiry of one month, D may
return the “combine” to any one of the joint owners namely, A, B or C.

(3) Right to indemnity (Sec. 166): Bailee is entitled to be indemnified by the bailor for
any loss arising to him by reasons that the bailor was not entitled to make the bailment
or to receive back the goods or to give directions in respect to them. If the bailor has
no title to the goods, and the bailee in good faith, delivers them back to, or according
to the directions of the bailor, the bailee shall not be responsible to the owner in
respect of such delivery. Bailee can also claim all the necessary expenses incurred by
him for the purpose of gratuitous bailment.

(4) Right to claim compensation in case of faulty goods (Sec. 150): A bailee is entitled
to receive compensation from the bailor or any loss caused to him due to the failure
of the bailor to disclose any faults in the goods known to him. If the bailment is for
hire, the bailor will be liable to compensate even though he was not aware of the
existence of such faults.

(5) Right to claim extraordinary expenses (Sec. 158): A bailee is expected to take
reasonable care of the gods bailed. In case he is required to incur any extraordinary
expenses, he can hold the bailor liable for such expenses.

(6) Right to Apply to Court to Decide the Title to the Goods [Section 167]: If the
goods bailed are claimed by the person other than the bailor, the bailee may apply to
the court to stop its delivery and to decide the title to the goods.

➢ Example: A, a dealer in T.V. delivered a T.V. to B for using in summer

vacation. Subsequently, C claimed that the T.V. belonged to him as it was
delivered only for repairs, to A and thus, B should deliver it to him. In this
case, B may apply to the Court to decide the question of ownership of the
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 T.V. so that he may deliver it to the right owner.

(7) Right of particular lien for payment of services [Section 170]: Where the bailee
has (a) in accordance with the purpose of bailment, (b) rendered any service involving
the exercise of labor of skill, (c) in respect of the goods, he shall have (d) in the
absence of a contract to the contrary, right to retain such goods, until he receives due
remuneration for the services he has rendered in respect of them. Bailee has, however,
only a right to retain the article and not to sell it. The service must have entirely been
formed within the time agreed or a reasonable time and the remuneration must have
become due.

➢ This right of particular lien shall be available only against the property in
respect of which skill and labor has been used.

(8) Right of general lien (Sec. 171): Bankers, factors, wharfingers, attorneys of a High
Court and policy brokers will be entitled to retain, as a security for a general balance
of amount, any goods bailed to them in the absence of a contract to the contrary. By
agreement other types of bailees excepting the above given five (Bankers, factors,
wharfingers, attorneys of a High Court and policy brokers) may also be given this
right of general lien.

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 TERMINATION OF BAILMENT
A contract of bailment shall terminate in the following circumstances:

1. On expiry of stipulated period: If the goods were given for a stipulated period, the
contract of bailment shall terminate after the expiry of such period.

2. On fulfillment of the purpose: If the goods were delivered for a specific purpose, a
bailment shall terminate on the fulfillment of that purpose.

3. By Notice:

(i) Where the bailee acts in a manner which is inconsistent with the terms of the
bailment, the bailor can always terminate the contract of bailment by giving
a notice to the bailee.

(ii) A gratuitous bailment can be terminated by the bailor at any time by giving a
notice to the bailee. However, the termination should not cause loss to the
bailee in excess of the benefit derived by him. In case the loss exceeds the
benefit derived by the bailee, the bailor must compensate the bailee for such
a loss (Sec. 159)

4. By death: A gratuitous bailment terminates upon the death of either the bailor or the
bailee.

5. Destruction of the subject matter: If the original condition of the bailed goods does
not exist or is destroyed, the contract of bailment is automatically terminated,
because the purpose will not be fulfilled or the performance of the contract is
impossible.

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 Bibliography:
1) Books:
➢ Bare Act: Indian Contract Act, 1872

2) Websites:
➢ https://static.careers360.mobi/media/uploads/froala_editor/files/Part-2-Unit-
2%3A-Bailment-and-Pledge.pdf

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