The document discusses the key concepts of bailment and guarantee/indemnity under Indian contract law. It defines bailment as the delivery of goods by one person to another for a specific purpose where the goods are to be returned. It outlines the rights and duties of the bailor and bailee. It also discusses pledge as a type of bailment where goods are delivered as security for a debt. The document then defines indemnity and guarantee, distinguishing between their roles and liabilities. It concludes with examples of liability allocation among joint guarantors.

2. A delivers a piece of cloth to the tailor to
be stitched into a suit.
 A lends a book to B to be returned after
examination.
 A sells certain goods to B who leaves them in
A ‘s possession.
 An insurance company places a damaged
insured car of A in possession of R, a
repairer .
 E’s ornaments having been stolen and
recovered lying in Police custody.

3. What is Bailment?
• Section 148 defines Bailment as:
“The delivery of goods by one to another
person 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‟,
and the person to whom goods are delivered
is called the „Bailee‟.

4. 1. Goods: Bailment can be effected only with
respect to goods.
2. Delivery: Delivery of goods by one person
to another is essential.
 „Delivery‟ includes:
 Physical delivery
 Constructive delivery
 Symbolic delivery

5. 3. To be returned
 Without demand unless agreed
otherwise.
4. In specie
 i.e., the same goods are to be
returned and not the equivalent.
 including any accretion, e.g.,
bonus shares, calf born to a cow.

6. 1. To disclose faults in goods
 Only known faults where
bailment is gratuitous.
 All faults including not known
but existing at the time of
bailment in case of non-
gratuitous bailment.

7. 2. To bear expenses
 Gratuitous Bailment: All expenses –
ordinary or extra-ordinary.
 Non-Gratuitous Bailment: Only
extra-ordinary expenses.
3. To indemnify for loss caused
because of defective title.

8. 1. To take care of the goods
bailed
 As much care as a man of
ordinary prudence will take in
respect of his own goods of the
same nature and value.
2. Not to make unauthorized
use of goods

9. 3. Not to mix bailor’s goods
with his own/other bailor’s.
 If does, then:
 Where goods can be separated
 Bailee to bear cost of separation.
 Where goods can not be
separated
 Bailor to be compensated for loss.
4. To return the goods in specie

10.  Section 172
“Pledge is the
bailment of goods as
security for payment
of debt or
performance of a
promise.”

11. Discussion on Bailment
applicable to pledge also.
 Right
of a pledgee to effect sale of goods
without intervention of Court (Sec.176):
 After giving reasonable notice to the pledger.
 Sale without reasonable notice
shall make pledgee liable to pay
damages to the pledger.
 However, sale will be valid.

12. Indemnity and Guarantee
Meaning and Definition of
Indemnity
Section 124 defines a contract of indemnity
as “A contract of indemnity is a contract
whereby one party promises to save the
other from loss caused to him by the conduct
of the promisor himself or by the conduct of
any other person.
Definition of Indemnity under Section 124 is
restrictive [Gajnan Moreshwar v. Moreshwar
Madan].

13.  Diversified views expressed by courts.
 According to earlier view – indemnifier does
not become liable until the indemnified has
incurred on actual loss.
 But according to later view – indemnifier may
compel the indemnifier to place him in a
position to meet liability.

14. Meaning and Definition
A contract of guarantee is defined by the
Indian Contract Act, as “A contract to
perform the promise or discharge the
liability of a third person in case of his
default. The person who gives the
guarantee is called the „Surety‟, the
person for whom the guarantee is given is
called the „Principal Debtor‟, and the
person to whom the guarantee is given is
called the „Creditor‟.”

15.  In case of guarantee, surety has a secondary
liability but in case of indemnity, the liability
of the indemnifier is primary.
 A contract in which „A‟ says to „B‟, „If you
lend ₤20 to „C‟, I will see that your money
comes back‟

16.  Onthe other hand, an undertaking in these
words, „If you lend ₤20 to „C‟, and he does
not pay you, I will‟ is a contract of guarantee.

17.  Secondary but co-extensive
 Unlessotherwise agreed, it can be neither
less nor more than the liability of the
principal debtor.
 MinorPrincipal Debtor vis-à-vis Liability of
Surety.

18.  Specific Guarantee
 Continuing Guarantee

19. A guarantee is a “specific guarantee”, if it is
intended to be applicable to a particular
debt and thus comes to an end on its
repayment.
A specific guarantee once given is
irrevocable. Even the death of the surety
does not result in revocation of the
guarantee. Legal successor(s) continue to
remain liable. However, their liability shall
be limited to the value of the assets
inherited.

20.  A guarantee which extends to a series of
transactions is called a “continuing
guarantee”, e.g., (i) fidelity guarantee,
(ii) overdraft.
 The death of the surety operates, in the
absence of any contract to the contrary,
as a revocation of a continuing
guarantee, so far as regards future
transactions (Section 131).

21.  Where joint sureties have guaranteed an
equal amount
 Liability shall be equal.
 Where joint sureties have guaranteed
different amounts

22. Liability shall be equal
subject to the amount
guaranteed (Section 147).

23. 1. „A‟, „B‟ and „C‟ as sureties for „D‟, enter into
three several bonds, each in a different
penalty, namely, „A‟ in the penalty of
Rs.10,000/-, „B‟ in that of Rs.20,000/-, „C‟ in
that of Rs.40,000/-, conditioned for „D‟s duly
accounting to „E‟. „D‟ makes default to the
extent of Rs.30,000/-. „A‟, „B‟ and „C‟ are
each liable to pay Rs.10,000/-.
2. In the above example, if „D‟ makes default to
the extent of Rs. 40,000/-, „A‟ is liable to
pay Rs.10,000/-, and „B‟ and „C‟ Rs.15,000/-
each.