Introduction

• Bailment is an agreement that could be oral or written mutually agreed upon between the person giving possession and the person taking possession, which might involve consideration.
• Bailment as defined in Section 148 of the Indian contract Act, 1872 is the delivery of goods by one person to another for some specific purpose, upon a contract that these goods are to be returned when the specific purpose is complete.
  • For example, A delivering his car for service at the service center is an example of bailment.
  • Illustration: If A gives his car to B, his neighbor, for 10 days, but at the same time he keeps one key with himself and during this period of 10 days he used to take the car. Now this will not be a case of bailment as A is keeping control over the property bailed.

Essentials of Bailment

• Delivery of Possession
  • The main characteristic of a bailment is that the delivery contemplated is for a temporary purpose. Delivery may be actual or constructive.
    • Actual delivery may be made by handing over something to the bailee.
    • Constructive or symbolic delivery may be made by doing something which has the effect of putting the goods in the possession of the intended bailee.
• Delivery should be upon contract
  • Delivery of goods should be made for some purpose and upon a contract that when the purpose is accomplished the goods shall be returned to the bailor.
• Delivery should be upon same purpose
  • Bailment of goods is always made for some purpose and is subject to the condition that when the purpose is accomplished the goods will be returned to the bailor or disposed of according to his mandate.

Kinds of Bailment

On the basis of reward

• Gratuitous bailment:
  • The bailment of products without any charges or reward is Gratuitous bailment. In this type, there is no requirement to pay any charges by the bailee for the bailment.
• Non gratuitous bailment:
  • The bailment for some reward or charges is non gratuitous bailment. It is required to pay some charges to the bailor by the bailee.

On the basis of benefit

• Bailment contract made for the exclusive benefits of the bailor.
• Bailment made for the exclusive benefits of the bailee.
• Bailment made for mutual benefits of both bailor and bailee.

Duties of Bailor

• Disclose the Facts- The bailor must disclose all the facts of the goods delivered to bailee. It was defined under Section 150 of the Indian Contract Act of 1872.
• To Bear all the Expenses- The bailor must pay the ordinary expenses to bailee. If there are any extra expenses, he is bound to pay the extraordinary expenses.
• To Indemnify the Bailee- The duty to indemnify the bailee refers to the responsibility of the bailor to compensate the bailee for any loss, damage, or liability incurred during the period of bailment. It is an essential aspect of a bailment relationship, where the bailor entrusts their property to the bailee for a specific purpose.
• Compensation for Premature Termination- It is the duty of the bailor to compensate the bailee if the bailor has terminated the bailment; in case of incurring any loss, then it is the duty of the bailor to compensate.
• To Take Back the Goods- The bailor must take back the goods from the bailee when the specific purpose has been fulfilled.

Duties of Bailee

• Duty to take care of goods- Bailee must take care of the goods until he returns the goods to the bailor. It means bailee has to take reasonable care of the bailed property. This means the bailee has to protect the bailed property from damage, theft, and any harm that may occur during the period of bailment.
• Duty to use the property for the agreed purpose- The bailee must use the bailed property only for its entrusted purpose. Without the consent of the bailor, if he deviates, it would lead to the liability of the bailee.
• Duty to not mix the property- The bailee is responsible for not mixing the bailor's goods with the other goods. If the goods are mixed, he will be held liable if the goods are unable to separate. If the goods can be separated, the bailee will bear the expenses to separate the mixed goods.
• Duty to return the property- If the purpose of the bailment is fulfilled upon the agreed period, the bailee must return the property to the bailor.
• Duty to render Accounts- When the bailor approaches the bailee for information regarding the status of the property bailed and the condition of the property, the bailee must provide accurate reports of all transactions connected to the bailment and the bailee is required to maintain correct records.

Rights of Bailee

• Right to Possession- One of bailee's rights is to have possession of the goods that are subject to the matter of the ailment. But the right to possession is limited. The Bailee has to use the goods only for a specific purpose, not for any other purpose, without the consent of the Bailor.
• Right to Lien- The bailee has the right to lien, which means the bailee can take back the possession of the goods bailed by the bailor until the charges are paid in respect of the goods. This right would be applicable when there is a legal contract between the parties, i.e., a contract of bailment.
• Right to Recover Compensation-If the bailor does not disclose any facts, then any expenses incurred by the bailee, the bailee has the right to compensate for the damages he incurred.

Rights of the Bailor

• Right to terminate the contract- The bailor has the right to terminate the contract before the purpose of the bailment has been completed. But the bailor has to compensate the bailee for any loss incurred due to termination of bailment.
• Right to take the goods back- The bailor has the right to take back the goods after the purpose of the bailment has been completed in a specified time if mentioned.
• Right to Sue- The bailor has a right to sue the bailee in case of breach of contract. If the bailee fails to fulfill the contract terms, then the bailor can sue for the breach of contract.

Case Law

• Kavita Trehan v. Balsara Hygiene Product Ltd. (1992):
  • In this case, the Supreme Court decided that one of the very requirements of bailment is the delivery of goods to the bailee, where there is no change of possession, there is no bailment.
• Jagdish Chandra Trikha v. Punjab National Bank, (1998):
  • This case is related to a parcel which was carrying some gold jewellery. The jewellery was well sealed and packed. When the parcel reached the destination some part of the jewellery was missing. In this case, the Delhi High Court held that the position of bank is of bailee.
• Annamalai Timber Trust Ltd. v. Thrippunithura Dewas, (1954):
  • The Kerala High Court held that where there is no obligation to return identical subject matter is an altered manner there is no bailment.