The document summarizes the key aspects of a contract of bailment under Indian law. It defines a bailment as the delivery of goods by one person (bailor) to another (bailee) for a certain purpose, to be returned or disposed of according to the bailor's instructions. The essential elements of a valid bailment are the delivery of goods, possession on a contract, and the obligation to return the goods. The duties of the bailor and bailee are also outlined, including the bailee's duty of reasonable care and the bailor's duty to disclose faults in goods bailed gratuitously. Exceptions and qualifications to these duties are discussed through case law examples.

1. Contract of
Bailment &
Pledge
By
Dr Sridevi Krishna
Asst.Professor
VVLC

2. Contract of Bailment
 Section 148: defines Bailment: a bailment is the
delivering 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
Bailee.
 It is not always necessary that possession of the
goods be delivered to the bailee. If he is already in
possession of the goods of another, he may contract
to become a bailee by way of bailment.

3. Essential elements of valid Bailment
 1) Delivery of goods by the bailor:
 Ex: Ultzen V Nicols:
 Facts: Plaintiff went to a restaurant to have his dinner. As
a voluntary courtesy, a waiter, took the overcoat of the
plaintiff and hung it on a hook behind the chair where the
plaintiff dined. After having dined, when the plaintiff
wanted to leave, he found that his overcoat was missing.
He sued the owner off the restaurant for the loss of the
coat.
 Held: the owner of restaurant was liable because by
taking the overcoat, although by voluntary courtesy, the
waiter had assumed the responsibility of the bailee.

4. Section 149
 The delivery to the bailee may be made by doing
anything which has the effect of putting in the
possession of the intended bailee or of any person
authorized to hold them on his behalf.
 Delivery of goods may be actual or constructive
delivery.
 Kaliaperumal v Visalakshmi Achi AIR 1938 Mad 42
 Facts: A lady engaged a goldsmith for melting old
jewelry to make some new ornaments. She delivered
the old jewelery to the gold smith but every evening
after the day’s work was over, she used to take the half
made jewelleries from the goldsmith and after putting
them in a box with a lock left it in a room of the
goldsmith while retaining the key with her.

5. Continue..
 One morning she found the jewelleries had been
stolen. She sued the goldsmith for the loss of
jewelleries.
 Held: the goldsmith was not liable for the loss of
jewelleries because each evening there was re-
delivery of the jewelleries to the lady and
consequently when they were stolen, They are not
in possession of the goldsmith.
 HC : held that delivery is an essential element of
bailment and mere leaving box in the room of
goldsmith while she retained the key, did not
constitute delivery within the meaning of section
149.

6. Elements continued..
 2) Delivery of Possession upon a contract:
 SC on sec148: State of Gujrat V Memon Mohammed:
 Certain goods were seized by custom officials, were
sold as unclaimed property. Subsequently seizure were
found unsustainable.
 Held: Government was held liable for the loss of goods
although the goods were not delivered to them on
contract.
 SC: they were in position of bailee. It is wrong to say
that there cannot be a bailment without an enforceable
contract.

7. Continued..
 The term “contract” in section 148 does not mean that there
should always be a formal contract. It may also be implied.
 Jubliee Mills Ltd V Gov General of India in Council AIR 1953
Bom 46.
 Facts: the Raily admin had permitted the plaintiff to keep certain
bale of cotton on the platform as no wagons were available. The
bales of cotton were damaged by a spark emanating from a
passing engine.
 Held: Raily admin were liable for by allowing the Plaintiff to keep
the goods at platform, and that they assumed responsibility of a
bailee.

8. Elements continued..
 3) Bailee bound to return goods or to dispose of according
to the direction of Bailor:
 United Breweries Ltd V State of AP(1997) AIR SC 1414: the
appellant sold beers in bottles to the customers. The customers
were required to pay cost of beer and to deposit a sum for bottles
which was refundable. The customers were advised to collect
empty bottles from the consumers and return them to the App
and get back their deposit for the bottle. For this purpose the App
issued a circular to its buyers which stated:-
 The refundable deposits were being collected on the bottles and
the crates.
 The app advised their customers to collect 40 paise per bottle
from the customers as deposit.
 The customers were advised to collect the empty bottles from the
consumers and return it to app

9. Continued..
 The bottles were to be collected by trucks of the App, who were
also authorized to issue a receipt against which the app would
issue a credit notes. In next booking the customers would get
advantage of these credit notes.
 Held: it was found that the scheme of recycling the bottles and
crates would keep down the costs and ultimately would have the
effect of reducing the price of beer and encouraging the
customers to buy beer in large quantities. It was also found that
the rate at which customers were required to make the deposit of
the bottles was less than the cost of the beer bottles.
 The SC concluded that the intention of the brewer did not appear
to have been to sell the beer bottles, on the contrary the brewer
was trying to ensure that the bottles in which the beer was
supplied to consumers through its customers were brought back
to it so that they could be used again. Thus there was no sale of
bottles but only a bailment.

10. Kalyani Breweries Ltd V State of West Bengal
Facts: The App brewed and sold beer in
bottles and the customers were required pay
the exact cost of the bottles, apart from the
price of the contents. The empty bottles could
be retained by the customers, but if any
customer wanted to return the bottles, the
exact cost of the bottles paid by him was to be
refunded to him.
Held: there was only sale of bottles, rather
than bailment. The deposit amount of bottles
was therefore, liable to sale tax.

11. Duties of bailor
 Section 150: classifies bailors as:-
 A gratuitous bailor ಅನಪ ೇಕ್ಶಿತ
 A bailor for reward ಅಪ ೇಕ್ಶಿತ
 A gratuitous bailor is one who lends his goods
without consideration. Since he receives no
consideration, his duty is much less than that of a
bailor for reward. He is bound to disclose to the bailee
the fault in the goods bailed. He is liable to disclose
the faults which he is aware and which interferes in its
use. He is not liable for faults or defects in the goods
lent of which he is not aware.

12. Bailor for Reward
 Section 150: 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.
 A hires a motor car from B. the car has defective
brakes and is unsafe though B is not aware of it
and A is injured. B is liable to compensate for the
injury because according to section 150 a bailor
for reward is responsible for such damage and it
is immaterial whether he was aware or not aware
of the existence of fault in the goods bailed.

13. Other duties
 Section 158: where, by the condition 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, the
bailee is to receive no remuneration then it is the
bailor duty to repay the bailee the necessary
expenses incurred by him for the purpose of bailment.
 Section 164: the bailor is responsible to bailee 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.

14. Duties of bailee
1. Duty of reasonable care
2. Duty to return the goods bailed
3. Duty to make proper use of the goods bailed
4. Duty not to mix his own goods with the goods of
bailor
5. Duty to deliver any increase or profit to the bailor.
6. Duty not to question the title of the bailor.

15. Duties of Bailee
 1) Duty of Reasonable care
 English law maintains two categories a) bailee for reward
and bailee without reward
 Martin V London County Council
 Facts: the P was admitted as a patient to the paid hospital
of the defendant. After being admitted, she entrusted a
gold necklace and a cigarette case to the officials of the
hospital. The said officials kept it in a safe where they were
stolen.
 Held: the D were liable because they were guilty of not
having taken as much care as was required from the
nature and quality of articles deposited with them.

16. Continued..
 The gratuitous bailee will be liable only if he is guilty of
willful or gross negligence.
 But in modern period courts apply the same standard
of care for both types of bailee.
 In India: Section 151: it does not make any such
distinction.
 In all cases of bailment the bailee is bound to take as
much care of goods bailed to him as a man of ordinary
prudence would, under similar circumstances, take
care of his own goods of the same bulk, quality and
value as the goods bailed.

17. Calcutta Credit Corporation Ltd V Prince Peter of Greece
AIR 1964 Cal 374
 Facts: A car received for repairs by an automobile garage was
damaged by fire. The garage was a structure, walled by wooden
planks. In the garage were put not only vehicles containing
petrol but also other combustibles like thinners and paints. The
garage was partitioned by wooden walls and a part of it was
allowed to be used for cooking purpose. There was inadequate
arrangement for extinguishing fire. The room in which P’s car
was parked could not be opened for 15 min after the fire was
noticed, as the keys of the room were not available.
 The Defendant pleaded that P had knowledge that the car was
parked in a certain way and that estoppel should apply against
them. Volenti non fit injuria applies.
 Held: Defendants were liable as they have not taken due care.

18. Continued.
If he has taken the amount of care expected
of him under section 151 he is not liable.
Section 152: he will not be liable for the
loss, destruction, or deterioration of the
thing bailed. But if there is a special contract
fixing the responsibility of the bailee for
such loss, or destruction or deterioration of
the thing bailed then he may be liable for
the same.

19. UOI V Amar Singh AIR 1960 SC233
 Facts: some goods were consigned from Quetta
in Pakistan to New Delhi. After the goods were
carried by Pakistan Raly, they were carried by
Indian Rly as the forwarding Rly. The goods were
lost in the transit. The liability of forwarding Rly is
governed by section 72 of Rly act, according to
which liability for the loss of goods bailed to the
Rly is subject to provisions Rly act, and that
bailee under sec 151,152 and 161 of ICA.
 SC: Held: the Indian Rly is guilty of negligence
for they did not take as much care of the goods
as an ordinary man would have taken of his own
goods

20. Involuntary Bailee
 There may also be situations wherein a person may
become a bailee without his choice or consent. Such
a bailee is called involuntary bailee. Such a bailee
will not be liable for mere negligence.
 A play writer sent a manuscript of a play to a
producer who had never asked for it and he lost it,
the producer is not liable.
 Finder of goods: Section 71: A person who finds
goods belonging to another and takes them in to his
custody, is subject to the same responsibility as a
bailee.

21. Finder of goods
Section 169: the finder of goods
may sell the goods found:
If the thing is in danger of perishing
or of losing the greater part of its
value or
When the lawful charges of the
finder in respect of the thing found
amount to 2/3rd of its value.

22. 2. Duty to return the goods bailed
 Section 160: It is the duty of the bailee, to return, or
deliver according to the bailor’s directions the goods
bailed without demand, as soon as the time for which
they bailed has expired, or the purpose for which they
were bailed has been accomplished.
 Section 161: if the goods are not returned, delivered
or tendered at the proper time because of the default
of bailee, he will be responsible to the bailor for any
loss, destruction or deterioration of the goods from
that time.

23. 3. Duty to make proper use of the goods bailed
Section 153: the bailee is to make proper use
of goods bailed to him. A contract of balment
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
bailment.
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.

24. 4. Duty not to mix his own goods with the goods of the Bailor
 If the goods are not separable.
 If the goods are separable.
 Section 155: it is the duty of the bailee not to mix his
own goods with the goods of the bailor. But if he does
so with the consent of the bailor, then both he and the
bailor shall have an interest, in proportion to their
respective shares, in the mixture thus produced.
 Section 156: if he does so without the consent of the
bailor, and the goods are separable, the property in
the goods shall remain with the parties and the bailee
shall be bound to bear the expenses of separation
and also any damage arising from the mixture.

25. 5. Duty to pay increase or profit to the Bailor
 Section 163: A bailee is bound not only to return the
goods bailed but is also under obligation to return any
increase or profit which accrued from the goods
bailed.
 A leaves a cow in the custody of B to be taken care
of. The cow has a calf. B is bound to deliver the calf
as well as the cow to A.

26. 6.Duty not to question the title of bailor
 Section 166: 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 is not responsible to
the true owner in respect of such delivery.
 Section 167: if a person, other than the bailor, claims
goods bailed, the proper procedure for him to apply to the
court to stop delivery of the goods to the bailor, and to
decide the title to goods.
 In case of several joint bailors/owners: if several joint
owners of goods bail them, the bailee may deliver them
back to or according to the directions of one joint owner
without the consent of all in the absence of any agreement
to contrary.

27. Rights of Bailee
 Section 158: Right to recover necessary expenses
incurred on bailment.
 where, by the condition 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, the bailee is to receive no
remuneration then it is the bailor duty to repay the bailee
the necessary expenses incurred by him for the purpose
of bailment.
 Section 164: Right to recover compensation from the
bailor : the bailor is responsible to bailee 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.

28. Right to Lien
 Lien means to retain.
 It does not give any right of property or ownership to
bailee.
 If the bailee has rendered any service by exercise of
labour or skill in respect of the goods, he gets the right to
retain the goods until he gets the remuneration for the
services rendered.
Lien may be:
 Particular Lien
 General Lien

29. Particular Lien
 It is a lien of bailee in respect of goods bailed for which
he has rendered any service by the exercise of his
labour or skill.
 Section 170: Where the bailee has, in accordance with
the purpose of the bailment, rendered any service
involving the exercise of labour or skill in respect of the
goods bailed, he has, in the absence of a contract to the
contrary, a right to retain such goods until he receives
due remuneration for the services he has rendered in
respect of them.
 A delivers a rough diamond to B, a jeweller, to be cut and
polished, which is accordingly done. B is entitled to
retain the stone till he is paid for the services he has
rendered.

30. Continued..
Lien by finder of goods S 168
Pawnee S 173-174
Agent S 221
Unpaid seller S 47
Partner S 52 of partnership act

31. General Lien
 Under general lien the bailee has a right to retain goods
bailed to him as a security for general balance of
accounts.
 Section 171:General lien of bankers, factors,
wharfingers, attorneys and policy-brokers.—Bankers,
factors, wharfingers, attorneys and policy-brokers may, in
the absence of a contract to the contrary, retain as a
security for a general balance of account, any goods
bailed to them; but no other persons have a right to retain,
as a security for such balance, goods bailed to them,
unless there is an express contract to that effect.

32. Section 171
 Bankers lien: they can exercise lien over gold
ornaments and fixed deposits. They can retain the
goods for the satisfaction of a debt.
 There must be a contract in express terms.
 Factors: a factor is an agent who is entrusted with
the possession of the goods of his principal for the
purpose of sale.
 Wharfingers: he is a person who keeps a wharf, a
platform in a harbour on which goods are kept for the
purpose of loading or unloading the ships.
 Attorneys: they have lien over papers or articles
delivered to them by their clients until their fees are
paid.

33. continued
 R.D Sasxena V Balaram Prasad Sharma AIR 2000
SC 2912
 SC: looking from the angle of definition under 148
and 171, it cannot be said that case papers entrusted
by the client to his counsel are the goods in his hands
upon which he can claim a lien till his fees or other
charges incurred are not paid. Thus GL is not
available to advocates in respect of the case papers
entrusted by the client to him.
 Policy Brokers: he is a person affecting a policy of
marine insurance. He can retain until his charges are
paid.

34. Right to sue Wrongdoer
 Section 180: If a third person wrongfully
deprives the bailee of the use of or
possession of the goods bailed, or does them
any injury, the bailee is entitled to such
remedies as the owner might have used as if
there was no bailment; and either the bailor or
bailee may bring a suit against third person
for such deprivation or injury.

35. Contract of
Pledge

36. Contract of Pledge
 Section 172: the bailment of goods as security for
payment of a debt or performance of a promise.
 Bailor is called Pawnor
 Bailee is called as Pawnee
 Essentials of Pledge:
 1) Delivery of possession of the property pledged.
 It may be actual or constructive

37. Continued..
 2) the delivery for securing a debt
 3) special interest of the pawnee: the pawnee is
entitled to retain the goods pledged for the payment
of the debt, interest and expenses incurred by him for
the preservation of the goods.
 4) Pawnee to retain the pledged goods until debt is
fully paid

38. Who can pledge?
 Pledge can be made by the owner of the goods.
 Exceptions: a person who is not a owner but with the
consent of the true owner, having possession of goods
can make a pledge.
 1) Pledge by Mercantile Agent
 Section 178: where a mercantile agent is, with the
consent of the owner, in possession of goods or the
documents of titles to the goods, any pledge made by
him, when acting in the ordinary course of business,
shall be valid; provided that the pawnee acts in good
faith and has not, at the time of pledge, notice that the
pawnor has no authority to pledge.

39. Continued..
 2(4) Sale of goods act, 1930
 “document of title” includes a bill of lading, dock-warrant,
warehouse keeper’s certificate, wharfingers’ certificate, railway
receipt, [multimodal transport document,] warrant or order for the
delivery of goods and any other document used in the ordinary
course of business as proof of the possession or control of goods,
or authorizing or purporting to authorize, either by endorsement or
by delivery, the possessor of the document to transfer or receive
goods thereby represented;
 2(9)
 “mercantile agent” means a mercantile agent having in the
customary course of business as such agent authority either to sell
goods, or to consign goods for the purposes of sale, or to buy
goods, or to raise money on the security of goods;

40. Essentials of S178
 The pledge should be by mercantile agent.
 The mercantile agent must have obtained the
possession of goods or documents to title in his
capacity as mercantile agent and with the consent of
the owner.
 He must pledge the goods while acting in the
ordinary course of his business.
 The pawnee should have acted in good faith

41. 2)Pledge by person in possession under a voidable contract
 Section 175-A: when a pawnor has obtained possession of the
goods pledged by him under a voidable contract( 19 & 19A) but the
contract has not been rescinded at the time of the pledge, the
pawnee acquires a good title to the goods, provided he acts in good
faith and without notice of the pawnor’s defect of the title.
 Philips V Brooks Ltd.
 Facts: a person North, went to the plaintiff’s shop and selected some
jewelry. He falsely represented himself to be Sir George Bullough, a
man of credit and thereby persuaded plaintiff to take payment by
cheque, and hand over the ring immediately. The cheque was
subsequently dishonored. Before the plaintiff could avoid the
contract on the ground of fraud by North, he had pledged the goods
to the defendant. The defendant had taken the ring in good faith.
 Held: the pledge was valid.

42. 3)Pledge by a person with a limited interest
 Section 179: Where a person pledges goods in which he has
only a limited interest, the pledge is valid to the extent of that
interest.
 A pledges the goods to B for Rs 5000 and B makes a sub-
pledge of those goods for Rs. 8000, A gets a right to take back
those goods only by paying Rs. 5000 only.
 4) Pledge by seller in possession after sale
 Section 30(1) of SGA: Where a person, having sold goods,
continues or is in possession of the goods or of the documents
of title to the goods, the delivery or transfer by that person or
by a mercantile agent acting for him of the goods or
documents of title under any sale, pledge or other disposition
thereof to any person receiving the same in good faith and
without notice of the previous sale shall have the same effect
as if the person making the delivery or transfer were expressly
authorized by the owner of the goods to make the same.

43. Continued..
 5) Pledge by buyer in possession after sale: section
30(2):Where a person, having bought or agreed to buy
goods, obtains with the consent of the seller,
possession of the goods or the documents of title to the
goods, the delivery or transfer by that person or by a
mercantile agent acting for him, of the goods or
documents of title under any sale, pledge or other
disposition thereof to any person receiving the same in
good faith and without notice of any lien or other right of
the original seller in respect of the goods shall have
effect as if such lien or right did not exist.

44. Rights of Pawnee
1) Right to retain the goods pledged
2) Right to recover extraordinary
expenses incurred by him.
3) Right to suit to procure the debt
or sale of pledged goods.

45. Right to retain the goods
 Section 173: The pawnee may retain the goods
pledged, not only for payment of the debt or the
performance of the promise, but for the interests of the
debt, and all necessary expenses incurred by him in
respect of the possession or for the preservation of the
goods pledged.
 Section 174: The pawnee shall not, in the absence of a
contract to that effect, retain the goods pledged for any
debt or promise other than the debt or promise for
which they are pledged; but such contract, in the
absence of anything to the contrary, shall be presumed
in regard to subsequent advances made by the
pawnee.
 For subsequent advances made it can be retained.

46. 2) Right to recover extraordinary expenses
 Section 175: The pawnee is entitled to receive from the
pawnor extraordinary expenses incurred by him for the
preservation of the goods pledged.
 Ex: if he has arranged bank locker for safety of goods etc.
 3) Right of suit and sale
 Section 176:If the pawnor makes default in payment of
the debt, or performance; at the stipulated time or the
promise, in respect of which the goods were pledged, the
pawnee may bring a suit against the pawnor upon the
debt or promise, and retain the goods pledged as a
collateral security; or he may sell the thing pledged, on
giving the pawnor reasonable notice of the sale.

47. Continued..
The right under S 176 is
disjunctive in nature
The pawnee has a choice
either to retain and sue the
pawnee or sell the goods after
giving a reasonable notice.

48. Right to redeem by Pawnor
 Section 177:If a time is stipulated for the payment of
the debt, or performance of the promise, for which
the pledge is made, and the pawnor makes default in
payment of the debt or performance of the promise at
the stipulated time, he may redeem the goods
pledged at any subsequent time before the actual
sale of them, but he must, in that case, pay, in
addition, any expenses which have arisen from his
default.
 There cannot be any such agreement which takes
away this right.