Bailment

Case: Goods and Contracts
A person gives his furniture to a person to transport
to his new house in another town.

A person gives his jacket to a drycleaner.

A company hires out public address system to a
person organising a music function.

What is common to the contracts?

… Cond
A person gives his furniture to a person to transport
to his new house in another town. (Carriage)

A person gives his jacket to a drycleaner. (Service)

A company hires out public address system to a
person organising a music function. (hire)

Bailment
Owner gives the custody and possession of his
goods to another person as a part of the contract.
The goods would need to be returned back to him.

Case: Lost Baggage
An airlines had put up the terms to the intending
passengers that in the case of loss of baggage, the
airlines would compensate the passengers for the
baggage at a standard rate of Rs. 300 per Kg. The
passengers were advised to buy an insurance to
cover additional loss.

A passenger lost his baggage which weighed 15
Kgs. The Airlines gave him Rs. 4500. The
passenger is demanding Rs. 12, 000, the full value
of the lost baggage.

Case: Drycleaner
A person gives his jacket to a dry cleaner.

Would it be acceptable to the customer if the
drycleaner did not return back the jacket by just
saying, “Sorry, it is lost” or “It must have gone to
another customer” or “It is misplaced”?

Summary
The person to whom goods are given is responsible
and must take care of the goods and return it back
to the owner.

Case: Washing for Repair
A person gave his washing machine for repairing to
a shop. As the shop did not have space inside, it
left the washing machine outside in its corridor.
There was no security or attendant for guarding the
premises. The washing machine was stolen.

Is the shop responsible for the loss of the washing
machine to the owner?

… Cond
A person gave his washing machine for repairing.
The shop had stored it properly and safely.
However, an unprecedented rain created a deluge
and all the washing machines in the shop as well as
all the expensive testing equipment of the shop got
damaged.

Is the person responsible for the loss of the
washing machine?

Summary
The owner who gives his goods in called Bailor

The person receiving the goods is called Bailee

The giving of goods is called Bailment

If the parties have provided on loss or damage to
the goods, the terms would apply.

In other cases, the bailee is responsible but not
absolutely.

Section 148: Bailment
Bailment bailor and bailee defined.- A "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 ".

Section 152: Liability of Bailee
Section 152. Bailee when not liable for loss, etc.,
of thing bailed.- 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.

Section 151: Degree of Care
Section 151. Care to be taken by bailee.- 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.

Section 152 and 151
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 …
(as much care of the goods … as a man of
ordinary prudence would, under similar
circumstances, take of his own goods of the same
bulk, quality and value…)

Summary of the Provisions
1. Is there any ‘special contract’? That is, have the
parties provided on the bailment aspect itself. If
yes, the terms will apply.
If not

2. Was the extent of care adequate? Test: An
owner of ordinary prudence would take care of his
own goods, of the same bulk, quality and value as
the goods bailed.

Case: Lost Courier Packet
Ramesh sent a courier containing an expensive
book. The courier company lost the packet.
Ramesh had signed the customer’s request. The
signed sheet had several terms. The terms were as
follows:

Relevant Terms

4. City Express will not provide any insurance
coverage for any consignments sent, even if the
value of the consignment is declared by the sender
or required to be declared by City Express.

… Cond
5. The liability of City Express for any loss or
damage to the shipment is limited to Rs. 100/- for
each consignment. Further, City Express will not be
responsible for any consequential losses.

Facts
R. S. Deboo: Drycleaner- M/s Leach and WaBomy

Customer: Hindlekar and family

There was a fire in the factory and the clothes got
destroyed.

The drycleaner offered to pay 20 times the
drycleaning charges as this was stipulated on the
back of the receipt limiting the liability of the
drycleaner.

Judgement: High Court
Terms and conditions printed on the reverse of a
receipt issued by the owner of the laundry or any
other bailee do not necessarily form part of the
contract of bailment in absence of the signature of
the bailer on the document relied upon. In absence
of signature of the bailer on the document relied
upon, the onus is on the bailee to prove that the
attention of the bailer was drawn by the bailee to
the alleged special conditions before the contract
was concluded and the bailee had consented
thereto expressly or by necessary implication as a
contractual term.

… Cond
It cannot be just assumed that the printed
conditions appearing on the reverse of the receipt
automatically become a contractual term or part of
the contract of bailment. It is to be found on
evidence in each case as to whether the alleged
printed condition on the reverse of the receipt
formed a part of the contract of bailment or not
depending upon the conduct of the parties. ….

… Cond
It is necessary for the Court to consider in each
case as to whether 'the alleged special term' was
reasonably and properly communicated by the
bailee to the bailer and as to whether the bailer in
fact assented thereto expressly or by necessary
implication.

(The Court did not consider this to be a ‘special
contract’)

… Cond: On Reasonable Case
The burden of proof is always on the bailee (dry
cleaner) to prove that the bailee took reasonable
care of the goods entrusted to him as a man of
ordinary prudence would have exercised. … it is for
the bailee to prove that the suit articles were in fact
lost as a result of fire and there was no negligence
on the part of the defendants (dry cleaner) which
resulted in the goods being destroyed by fire. The
question of negligence is always a question of fact
or at the most a mixed question of fact and law.

… Cond
In a case governed by Sections 151 and 152 of the
Contract Act, the non-return of article … by itself is
prima facie proof of negligence of the bailee. It is
not for the bailer to lead positive evidence proving
the negligence of the bailee in respect of
unreturned articles entrusted by the bailer to the
bailee. It is for the bailer to prove that the bailee is
duly exempted from his liability to pay the
reasonable amount of compensation for the value
of the articles not returned or that his liability is
restricted or reduced one and that the alleged
stipulation is binding on the bailer under the law of
the land.

… Cond: Insurance and Bailment

If a bailee receives an insurance amount in respect
of value of the goods bailed to him, the bailee is
bound to account for the said insurance amount to
the bailor as all such cases, the bailee is merely a
trustee for the insurance amount obtained in
respect of goods belonging to bailers.

No bailee is entitled to unjustly enrich himself by
retaining the insurance amount recovered by the
bailee in respect of his customer's articles.

N.R. Srinivasa Iyer v. New India
Assurance Co. Ltd. Madras

Facts
Mr. Iyer’s car was insured by the New India
Insurance. The car met an accident and was taken
to P. S. N. Motors Ltd., Trichur for repairing. The
insuarance company was intimated of the accident
and that the car was given to the P. S. N. Motors for
repair with a request to discharge its obligation
under the policy of insurance. The P. S. N. Motors
submitted an estimate to the insurance company.

… Cond
After a several correspondence, the two settled on
an estimate. Mr. Iyer was thus, informed:

We have pleasure to inform you that the revised
estimate of M/s. P. S. N. Motors Ltd., Trichur has
been approved by our head office, and they
have been advised to proceed with the repairs
and send us their final bill together with the
discharge voucher duly filled in and signed by
you for making the payment.

… Cond
Before the car could be delivered to Mr. Iyer, a fire
occurred in the workshop of the PSN Motors and
the car was destroyed. The garage was not insured.

Is the insurance company bailee of Mr. Iyer’s car,
on whose behalf the car has been sent to the
garage?

Judgement: Supreme Court
In a contract of insurance, there are mutual rights
and obligations both of the Insurer and the Insured.
Once the motor car is damaged it is the duty of the
car owner to take it to nearest repair shop. This is
done on behalf of the insurance company which
pays for such removal as well as the repairs. … the
Insurer took charge of the damaged car from the
scene of accident and got it moved to the nearest
repairer. The car virtually came into the custody of
the Insurer and the repairer took the custody for
and on behalf of the Insurer.

… Cond
When the Insurer has the option to replace the
Motor Car, it can take over the damaged car and
the Insured is bound to submit to the same. If the
Insurer on the other hand, exercised the option of
repairing the car, it is entitled not merely to choose
the repairer but also to determine the charges for
repairs to be negotiated and settled between the
Insurer and the repairer and the Insured has hardly
anything to do with it.

… Cond: Sub-Bailee
The Insurer became the bailee and the repairer
may have been initially pointed out by the bailor but
with whom the Insurer entered into negotiation,
arrived at a contract and agreed to get the car
repaired in discharge of an obligation under the
contract of insurance. Therefore, for this additional
reason the custody of the repairer is that of a sub-
bailee.

… Cond: Morris Case
"Once a man has taken charge of goods as a bailee
for reward, it is his duty to take reasonable care; to
keep them safe; and he cannot escape that duty by
delegating it to his servant. If the goods are lost or
damaged, whilst they are in his possession, he is
liable unless he can show - and the burden is on
him to show - that the loss or damage occurred
without any neglect or default or misconduct of
himself or of any of the servants to whom he
delegated his duty."

… Cond
When the car was in the custody of the sub-bailee,
it was destroyed by fire that occurred in the
repairer's workshop. The sub-bailee was bound to
take the same care as a man of ordinary prudence
would take in regard to his own goods of the same
quality and value as was expected of the bailee.
Now no evidence has been led by the defendants to
explain what amount of care the bailee or the sub-
bailee took in respect of the car. When the custody
is of the bailee or the sub-bailee, the burden is on
them to show how they handled the car.

State of Gujarat v. Memon Mahomed
Haji Hasan

Facts
Custom authorities had seized a truck and left it
unattended for a long time in an open space while
the case was pending. The parts of the car got
pilfered.

Bailment is dealt with by the Contract Act only in
cases where it arises from a contract but it is not
correct to say that there cannot be a bailment
without an enforceable contract.

… it is not necessary to incorporate it into the law of
contract and to prove a consideration.

… Cond
There can, therefore, be bailment and the
relationship of a bailor and a bailee in respect of
specific property without there being an enforceable
contract. Nor is consent indispensable for such a
relationship to arise. A finder of goods of another
has been held to be a bailee in certain
circumstances.

Trustees of the Port of Bombay v.
Premier Automobiles Ltd.

Facts
Premier Automobiles Ltd. imported machinery from
Italy to Bombay. The Bombay Port Trust, under the
Bombay Port Trust Act took charge of the goods on
landing and took it to its warehouses from where
the goods could be collected. While the machinery
was being carried on a trolley by the employees of
the Board, it fell down and got damaged.

There was no contract between the Port Trust and
Premier Ltd. The Board was performing a function
vested in it by the law.

It is well settled that the essence of bailment is
possession. It is equally well settled that a bailment
may arise, as in this case, even when the owner of
the goods has not consented to their possession by
the bailee at all…

… Cond
A bailment is not therefore technically and
essentially subject to the limitations of an
agreement, and the notion of Privity used cannot be
introduced in an area where it is unnecessary, for
bailment, as we have said, arises out of
possession, and essentially connotes the
relationship between a person and the thing in his
charge. It is sufficient if that possession is within the
knowledge of the person concerned. It follows that
a bailment may very well exist without the creation
of a contract between the parties and it essentially
gives rise to remedies which, in truth and
substance, cannot be said to be contractual.

What is learnt?
• A bailment is the delivery of goods, by one person to another,
for some specified purpose, and upon a contract that they
shall, when the purpose is accomplished, be returned
otherwise disposed of according to the directions of the person
delivering them.
• The person delivering the goods is called as the Bailor.
• The person to whom they are delivered is called Bailee.
• Essential elements of contract of bailment
– There must exist express or implied contract between bailor and bailee,
– Delivery of goods
– The possession of goods must change, though temporarily
– Ownership of goods is retained by the bailor
– The delivery of the goods is for some specified purpose ( as security for
debt, for repair, or for conversion of form etc.)

contd
– When the purpose for which the bailment is created, is
accomplished, the goods are to be returned or disposed
according to the instruction of the bailor, the goods returned
should be same ones which were bailed.
– Bailment is possible only of goods i.e., of movable property and
chattels and not of immovable property.
Duties of the bailor
1. To disclose faults in goods bailed
2. Repayment of(extraordinary) expenses
3. To receive back the goods

contd
• Rights of bailor
– Restoration of goods lent gratuitously
– Entitled to increase of profits to goods bailed
– Enforcement of rights
– Claim for compensation
– Right of termination
• Rights of bailee
– Right to compensation
– Right to remuneration
– Right of particular lien
• Duties of bailee
– Duty of reasonable care of goods bailed
– Not to make unauthorised use of goods bailed
– Not mix the goods
– Return the goods without demand

Bailment

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