CONTRACT OF BAILMENT Bailment means the delivery of goods of a person to whom permission is given to have the goods of another person.

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TABLE OF CONTENTS
CONTRACT OF BAILMENT ............................................................. 2
Essential features of Bailment:-............................................................. 2
Kinds / Classification of Bailment: ....................................................... 3
RIGHTS AND DUTIES OF BAILER & BAILEE........................ 3
Rights of Bailer......................................................................................... 3
Duties of Bailer......................................................................................... 4
Rights of Bailee..........................................................................................5
Duties of Bailee..........................................................................................5
Finder of Lost Goods ................................................................................5
Termination of Bailment..........................................................................5
References ................................................................................................. 6

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CONTRACT OF BAILMENT
Bailment means the delivery of goods of a person to whom permission is given to have the goods
of another person.
Eg. - Delivery of clothes to a laundryman for washing and pressing is bailment.
Section 148 of Contract Act lays down that a bailment is the delivery of goods by one person to
another for a definite purpose and upon the agreement that they shall be returned or, disposed of
according to the directions of the deliverer when the purpose is accomplished.
Person delivering the goods-Bailer
Person whom it is delivered-Bailee
A bailor transfers possession, but not ownership, of a good to another party, known as the bailee,
in the event of a bailment. While the good is in the bailee's possession, the bailor is still the
rightful owner.
Essential features of Bailment:-
1. Agreement: Bailment is always created by an agreement between the bailer and the Bailee.
It may be express or, implied. (Finder of goods is an exception).
Eg.-Tobacco packages were lying in the godown of PH firm which were pledged with a bank as
security. The Income-tax officer ordered the seizer of the goods and so the keys of the godown
was handed over to the police. Owing to heavy rain, roof of godown leaked and tobacco stock was
damaged. The bank claimed the damages from the Government. It is held that the Government
stood in the position of Bailee and therefore liable to pay damages. Here, the bailment arises in an
implied way of act.
2. Delivery of Goods: Bailment involves the change of possession without giving ownership.
The possession means the right to keep control over the delivered goods. Hence, one who
has custody of goods without possession is not a Bailee and such custody does not
constitute bailment.
Eg.-A servant using his master's goods and a guest using his host's goods is not a Bailee.
Therefore, delivery of physical possession of goods is essential to establish a bailment. However
the ownership of goods is retained by the bailer with himself.
Delivery of possession may be of two kinds-
i. Actual delivery- when one hands over the physical possession of goods, i.e. physically
transfers the goods to another. For eg. - When a person gives his wrist watch for repair to
the watch-mechanic.
ii. Constructive delivery-when some act is taken to mean handling over of the physical
possession of goods, though in fact no physical transfer of goods is made at that time.
Eg.-Handling over of a key of the room or godown where goods are lying.

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3. Movable Property: Goods in bailment means every kinds of movable goods other than
money. Hence, bailment of immovable goods like land and building cannot be made.
4. Definite Purpose: Goods are delivered for some specific purpose i.e. for repairing of
goods, tailoring, security of goods or, deposit of security for a debt, etc.
5. Return or disposal of the specific goods: Once the purpose is achieved the goods is to be
returned to the bailer. Eg. - After setting the diamond in the golden ring goldsmith return
the ring to you.
6. Essentials of a Valid Contract: All essential elements of a valid contract should be present
in the bailment.
7. Ownership not transferred: i.e. ownership remains with the bailer. (Where the ownership
is transferred with the delivery of goods, such contracts are called Contract of Sale.)
Kinds / Classification of Bailment:
Contracts of bailment can be classified on two bases: i) Reward basis or, ii) benefit basis.
1. On the basis of Reward
a) Gratuitous bailment: A gratuitous bailment is that in which neither the bailer nor the
Bailee is entitled to any remuneration.
Eg. - Lending of motorbike to a friend.
b) Non-gratuitous bailment: A non-gratuitous bailment is that in which either the Bailee
or the bailer is entitled to some remuneration.
Eg. - Giving scooter or bike for repair, giving tailor cloth for stitching etc.
2. On the basis of Benefit
a) Bailment for exclusive benefit of bailer:
For eg. - Mr. X is going out of station. He leaves the valuable things with his neighbor for safety.
Here, Mr. X alone is being benefited by this bailment.
b) Bailment for exclusive benefit of Bailee:
For eg. - Lending your bike to your friend without charging.
c) Bailment for the mutual benefit of bailer and the Bailee:
For eg.-Giving cloth to a tailor for stitching.
RIGHTS AND DUTIES OF BAILER & BAILEE
Rights of Bailer
 Right to claim damages: Sec.151 0f Contract Act, Bailer can claim damages for a loss
that might have caused to that bailed goods.
 Right to terminate the contract: Sec.153 states that if Bailee does something which is
inconsistent with the terms and conditions of the bailment, then the contract can be

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terminated by the bailer. Eg. - X lends a car to Y. But, Y starts using it as a taxi. Seeing
this, X has full right to terminate the contract.
 Right to claim compensation: Bailer can claim compensation if any damages is done to
the goods or, if some losses are incurred with regards to the goods bailed. (Sec.154, 156 &
157)
 Right to demand back the at any time the goods lent without charges:
(Under Sec.159)
 Bailer entitled to any profit accrued from the goods bailed: Sec.163 states that the bailer
is entitled to any profit accrued from the goods bailed. Eg.-X hands over his car for safe-
custody to Y.Y uses it as a taxi and earns Rs.2000 .X is entitled to get that profit of Rs.2000.
Duties of Bailer
 To disclose the known material faults:-Sec.150 of Contract Act states that bailer is
bound to disclose those faults in the goods of which he is aware, which shall interfere
in the use of such goods.
Eg. - If goods are bailed for hire, the duty of bailer is still greater to disclose the faults.
B takes a cycle on rent from A. The brakes are not working .The fact is not known to A but B
meets with an accident because of that brake failure. Now, A has to compensate B for all the
damages.
 To repay necessary expenses: Sec.158
Eg. - X lends a cow to Y for safe custody. Suppose cow falls ill and Y has to incur certain medical
expenses. If bailment is gratuitous (without reward), then X must reimburse Y for normal feed and
medical expense as well. If it is non-gratuitous (with reward), X must repay the medical expenses
as it comes in extraordinary expenses.
 To indemnify Bailee for excess loss:Sec.159 of Contract Act states that if the bailment
is gratuitous (without reward) and is made for specified time or purpose, but bailer
compels him to return the goods in between that is before time, then the bailer should
indemnify the Bailee for any loss incurred.
Eg. X lends a scooter to Y without any charges for one month. Y spent Rs.300 on its repair, then
he drives for 15 days and got a benefit of Rs.200 .On 16th day X asked the scooter back, now X
should indemnify Y for Rs.100.
 To Bear the normal risks of wear and tear of goods
 To pay back the loss due to lack of title of goods to be bailed: Sec.164 of Contract
Act states if the bailer was not entitled for the bailment ,and the Bailee suffers any loss
due to that reason, it is the responsibility of the bailer to pay back the loss.
Eg.-X found a bike not belonging to him and bailed it to Y for safe -custody. Z the actual owner
come to know about the fact, and recovered the bike certain amount of compensation from Y
through court. Here, X is bound to pay the amount of compensation.

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 To receive back the goods bailed: After the expiry of the bailment, it is the duty of
bailer to get back the goods, if he refuses to do so then he has to pay compensation for
the expense incurred by the Bailee on the custody of goods.
Rights of Bailee
 To claim damages:(Sec.150)If the bailer has bailed the goods without disclosing the
defects and due to that Bailee has suffered a loss ,then he can claim the damages from the
bailer.
 To claim necessary expenses :( Under Sec.158)
 Right to be indemnified:(Sec.159)If the bailer demands the goods before time and due to
that Bailee suffered a loss, then Bailee is to be indemnified by the bailer .
 Right of Particular lien:-Lien means a right to retain the possession of the goods till the
promise made by the owner is fulfilled. Eg.-When a Bailee has rendered a service, he has
the right to retain the thing or, good until and unless he receive any remuneration for the
same. (Sec.170)
 Right to general lien: To retain for general balance as a security. For eg. Bankers in lieu
of loan delivered retain the bonds or property (Sec.171)
Duties of Bailee
 To take reasonable care of the goods bailed :( Under Sec.151)
 Not to make unauthorized use of goods bailed :( Under Sec.154)
 To return the goods :( Under Sec.160)
 To return any accretion i.e. increase to the goods bailed :( Under Sec.163) the Bailee is
bound to return the added accrued value from the goods bailed. Eg.-J leaves a cow in the
custody of K to be taken care of. Cow gave birth to a calf. K is bound to deliver the cow as
well as the calf to J.
Finder of Lost Goods
A person who finds goods belonging to another and takes them into custody is subject to the same
responsibility as a Bailee.
Termination of Bailment
Expiry of time
Accomplishment of purpose
Unauthorized use
On death of either party
Termination by bailor
Destruction of subject matter
To conclusion it can be said that, the person to whom the goods are delivered under the contract
of bailment is called bailee. He is bound to act accordingly the direction of bailee. Bailor and bailee
have right and duties under the contract act.

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References
West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.
http://www.vuhelp.net/threads/17018-What-is-contract-of-bailment-Explain-fully-the-rights-and-
duties-of-the-bailee
https://legaldictionary.net/bailment/
http://legal-dictionary.thefreedictionary.com/bailment
http://www.lawsofpakistan.com/contract-of-bailment-duties-of-bailor-baile/
http://vle.du.ac.in/mod/book/view.php?id=9549&chapterid=14945
https://en.wikipedia.org/wiki/Bailment