BAILMENT as per INDIAN CONTRACT ACT,1872

"Bailment", "bailor" & "bailee" defined [Section 145]: 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 instructions of the person delivering them. Bailor is the person delivering the goods. Bailee is the person to whom the goods are delivered. When a person, already in possession of goods belonging to another, contracts to hold them as bailee, he becomes the Bailee and the owner becomes Bailor, even though the goods may not have been delivered by way of bailment.

The essentials of bailment are:-
(1) Contract: Bailment may be express or implied.
(2) Delivery of the goods: Bailment involves delivery of possession of goods by bailer to bailee.
(3) Possession: Only possession in goods (and not ownership) is transferred.
(4) Modes of delivery [Section 149]: Delivery may be actual or constructive. Actual delivery is made by physically handing over the goods. Constructive or symbolic delivery means doing something which has the effect of giving delivery. e.g, delivery of railway receipt, handing over the key of car etc.
(5) Purpose: The delivery of goods must be for a certain purpose.
(6) Return of goods: The goods must be returned after the purpose in accomplished
(7) Consideration: The consideration is generally in the form of money payment either by the bailor or bailee. The detriment suffered by the bailor, in parting with possession of the goods, is a sufficient consideration to support the contract of bailment.

Duties of bailor are as follows:
(1) To disclose faults in goods [Section 150]:
-In case of gratuitous bailment: Bailor is bound to disclose known faults to bailee. If do not disclose then he may liable to bailee for damages from such non-disclosure.
-In case of non-gratuitous bailment: Bailor is liable for damages whether or not he was aware of the existence of faults.

(2) To bear expenses:
-In case of gratuitous bailment: Bailor shall repay all necessary expenses incurred by bailee for the purpose of bailment.
-In case of non-gratuitous bailment: Bailor is liable only extraordinary expenses, and not the ordinary expenses.

(3) Indemnify bailee for loss in case of premature termination of gratuitous bailment [Section 159]:
Bailor has the right to terminate the gratuitous bailment even it is for particular period. In such a case, Bailor has to indemnify the bailee the excess of loss over benefit.

(4) Indemnify bailee for loss when bailor's title is defective [Section 164]: Bailor is responsible to the Bailee for any loss which the Bailee may sustain by reason that the Bailor was not entitled to make bailment.
Example: A lends an old discarded motor cycle to B gratuitously for 3 months. B incurs 500 on its repairs. If A asks for the return of the motor cycle after 1 month, he will have to compensate B for expenses incurred by B in excess of the benefit derived by him.

(5) Receipt of goods back on termination of bailment: When bailee returns the goods in accordance with the terms, the bailor should receive them. If the bailor refuses to accept goods tendered by
bailee, he shall compensate the bailee for all necessary and incidental expenses incurred by him in keeping the things in good condition.


Duties of bailee are as follows:
(1) To take care of goods (Sections 151 & 152): The bailee is bound to take care of the goods bailed to him as a man of ordinary prudence. If bailee takes care of goods bailed as man of ordinary prudence then he will not be liable if there is loss to goods.

(2) Not to make unauthorized use of goods [Section 153]: Bailee shall act in conformity with the terms of contract of bailment. Where he does any act with regard to the goods bailed, inconsistent
with the terms, the contract becomes voidable at the option of bailor. The bailee  cannot set up an adverse title against the bailor.

(3) Compensation for damage to goods [Section 154]: Bailee shall use the goods according to terms and conditions of bailment. Where he does not use so and as a result, the goods suffer damage, he
shall duly compensate the bailor.
(a) Not to mix goods bailed with his own goods 
(b) With bailor's consent (Section 155): Where the bailee, mixes the goods bailed with his own goods, with the bailor's consent, both of them shall have interest in proportion to their shares in the mixture produced.
(c) Without bailor's consent: If the goods in the mixture:
-Can be separated [Section 156]: Property in the goods remains with the respective parties. Bailee bound to bear the expenses of separation or division, and also of any damage arising from the mixture.
-Cannot be separated [Section 157]: Bailee shall compensate the bailor for the loss of his goods.

(4) Return of the goods bailed [Section 160]: Bailee shall, without demand, return the goods bailed to the bailor, or deliver it according to his instructions. Such delivery shall be made as soon as the time for which they were bailed expires, or the purpose for which it had been bailed is accomplished.

(5) Compensation for failure to return [Section 161]: Where by the fault of the bailee, goods are not returned at the proper time and place. Bailee shall compensate bailor for any loss, destruction or deterioration of such goods from that time.

(6) To return any accretion to goods [Section 163]: If there is any profit or increase from goods bailed shall be delivered by the bailee to the bailor.
Example: A gives a cow to B. Cow has calf. B should deliver cow as well as calf.

(7) Delivery of goods to joint bailors [Section 165]: When goods are owned and bailed by joint owners, and in the absence of contract to the contrary, the bailee shall deliver them back to one of join owners, or according to the directions of one joint owners without the consent of all.

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