BAILMENT

INTRODUCTION
There are many instances of bailment in our daily lives – when we give our
clothes for laundry, when we use valet parking for our cars. We deliver our
goods to another person or leave them in the power of another person for a
purpose and expect to receive our goods back when the purpose has been
achieved.
For example, a man visits a repair shop for getting his television set fixed. The
television set is left at the shop where the repair man examines it and fixes the
problem. Once fixed, the television set has to be returned to its owner. There
is a contract of bailment between the man and the repair-man.
Bailment is a process where the owner of certain goods places them in the
temporary possession of another person. In simple terms, bailment means that
a person delivers his goods to another person or put them in another’s
possession for a specific purpose and there is an express or implied
understanding between the two people that once the purpose has been
achieved, the goods will be returned to the owner – the person who bailed
them.
DEFINITION OF BAILMENT
The word ‘bailment’ is derived from the French word ‘bailler’ which means ‘to
deliver’. Etymologically, it means any kind of ‘handing over’. In legal sense, it
involves change of possession of goods from one person to another for some
specific purpose.
According to Section 148 of the Indian Contract Act, 1872: “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, 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 the
goods are delivered is called the Bailee”.
Example: A man drops off his clothes for dry cleaning. He is the bailor and the
purpose of bailment is to have the particular set of clothes cleaned. The dry
cleaner is the bailee – he is the temporary custodian of the clothes and is
responsible for keeping them safe and to return them to the bailor once they
have been cleaned.
NATURE OF BAILMENT
Bailment is a type of special contract and thus, all basic requirements of
contract like consent of parties, competency, etc are applicable to any contract
of Bailment. A bailment is usually created by an agreement between the bailor
and bailee. Section 148 specifically talks of bailment via a contract. But a valid
bailment can also arise in absence of express contracts or from invalid or
voidable contracts.
In bailment, neither the property nor the ownership of the goods involved is
transferred at any point. Only the temporary possession of the bailed goods is
transferred and the ownership of such goods remains with the bailor. The
bailor can demand to have the property returned to him at any time.
WHAT MAY BE BAILED?
Only ‘goods’ can be bailed and thus, only movable goods can be the subject
matter of bailment. Current money or legal tender cannot be bailed.
Deposition of money in a bank is not bailment as money is not ‘goods’ and the
same money is not returned to the client. But the coins and notes that are no
longer legal tender and are more or less just objects of curiosity, then they can
be bailed.
ESSENTIAL FEATURES
Section 148 of the Indian Contract Act, 1872 makes it very clear that there are
three essential features of Bailment, namely:
1) Delivery of Possession
2) Delivery upon Contract
3) Delivery for a purpose and Return of Goods

 DELIVERY OF POSSESSION:- The delivery of possession of goods is

essential for bailment. There must be transfer of possession of the
 bailed goods from bailor to bailee and the goods must be handed over
to the bailee for whatever is the purpose of bailment. Here, possession
means control over goods and an intention to exclude others from
exercising similar control over the same goods. Thus, the bailee must
have actual physical control of the property with the intent to possess it
for a valid bailment. Mere custody of goods is not the same as delivery
of possession. A guest who uses the goods of the host during a party is
not a bailee. Similarly, it was held in Reaves vs. Capper [1838 5 Bing NC
136] that a servant in custody of certain goods by the nature of his job is
not a bailee. Similarly, a servant holding his master’s umbrella is not a
bailee but is a custodian.
Delivery of possession, as required for bailment, can be made in two
ways – Actual or Constructive.
a) Actual Delivery: Here, the bailor hands over the physical possession
of the goods to the bailee.
Example: A’s watch is broken. When he leaves his watch at the
showroom for repair, he has given actual delivery of possession of goods
to the showroom.
b) Constructive Delivery: Constructive delivery is an action that the law
treats as the equivalent of actual delivery. It can be difficult to deliver
intangible
In constructive delivery, the physical possession of the goods may not be
handed over. The possession of the goods may remain with the bailor
with the consent or authorization of the bailee. In constructive delivery,
an action on part of the bailor merely puts the bailee in position of
power with respect to the bailed goods. The bailor gives the bailee the
means of access to taking custody of it, without its actual delivery.
Example: A has rare coins in a locked safe-deposit box. Delivery of a safe
deposit box is not possible. When he hands over the keys to the box to
B, it is taken as constructive delivery for purpose of bailment.
In Bank of Chittor vs. Narsimbulu [AIR 1966 AP 163], a person pledged
cinema projector with the bank but the bank allowed him to keep the
projector so as to keep the cinema hall functional. It was held that there was
constructive delivery because action on part of the bailor had changed the
legal character of the possession of the projector. Even though the actual and
physical possession was with the person, the legal possession was with the
bank, the bailee.
 DELIVERY UPON CONTRACT:- It is necessary that the goods are
delivered to the bailee and returned to the bailor when the purpose is
accomplished upon a contract. This means there should a contract
between the two parties for such transaction of delivery and subsequent
return. If there is no contract, there is no bailment. The contract giving
rise to bailment can be express or implied.
EXCEPTION TO THE DELIVERY UPON CONTRACT:- A finder of goods is
treated as a bailee even if there is no contract of Bailment or delivery of
goods under a contract. A finder of the goods is a person who finds the
goods belonging to some other person and keeps them under his
protection till the actual owner of the goods is found. An involuntary
contract of bailment arises and the finder automatically becomes bailee
even in absence of bailment by the bailor – the owner of the lost goods.
Since the person is in the position of the bailee, he has all the rights and
duties of a bailee.
Under English Law: There can be bailment without a contract. If a
person deposits or delivers the goods under stressful circumstance like
fire flood, riots or if the person who is depositing the goods is incapable
of appreciating the value of the action, it is still regarded as bailment
despite the absence of a contract. Delivery of goods to another under a
mistake of identity of the person is also treated as bailment without a
contract as long as the bailor took reasonable care to ascertain the
identity.
The case of Lasalgoan Merchants Bank vs. Prabhudas Hathibhai is one
the first where the Courts started imposing the obligations of a bailee
even without a contract. In State of Gujarat vs. Memom Mahomed, the
Supreme Court of India accepted this view and stated that “…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 bailment
without an enforceable contract.”
 DELIVERY FOR A PURPOSE & RETURN OF GOODS:- . Delivery of goods in
bailment is not permanent. There has to be a purpose for the bailment
of goods and it is mandatory that once such purpose is accomplishes,
the goods have to be returned to the bailor or be disposed off per his
instructions. If a person is not bound to return the goods to another,
then the relationship between them is not of bailment. If there is an
 agreement to return the equivalent and not the same goods, it is not
bailment.
In Secy of State vs. Sheo Singh Rai [1880 ILR 2 All 756], a man delivered
nine government promissory notes to the Treasury Officer at Meerut for
cancellation and consolidation into a single note of Rupees 48,000 only.
The notes were misappropriated by the servants of the Treasury Officer.
The man sued the State to hold it responsible as a bailee. But the action
failed as there can be no bailment without delivery of goods and a
promise to the return the same. The government was in no way bound
to return the same notes or dispose the surrendered notes in
accordance with the instructions of the man.

PURPOSE OF BAILMENT

Because a bailment is often created without an actual written contract, there

are many situations in which the law recognizes a bailment exists. These
include bailments created:
 For the mutual benefit of both the bailor and bailee – created when
there is to be an exchange of services or performances between the
parties, such as when the bailor leaves his property with the bailee to be
repaired, after which the bailor will be paying for the repairs.
 For the sole benefit of the bailor – created when the owner of a valuable
item, such as a TV, a car, or a piece of jewelry, leaves the item with
someone for safekeeping, with no expectation of compensation being
made to the friend or other party.
 For the sole benefit of the bailee – created when the owner of an item
loans the property to another person, with no expectation of receiving
payment or compensation, but expecting that the item will be returned
to the owner.

DUTIES OF A BAILOR

As Spiderman said, “With great power comes great responsibility;” the same
goes for the bailor as well. He/she has a sense of responsibility and a duty to
discharge certain things whilst the act of Bailment. Some of the duties which
are discharged by the Bailor are:
  DISCLOSURE OF FAULTS:- The Bailor is bound by the law to disclose the
defects of the goods bailed, to the bailee. If, in case, any future damage
arises, because of the non – disclosure, it becomes the liability of the
Bailor to bear the expenses.Even if the good in transit is for hire, it is the
Bailor who is responsible for the damages. His awareness or non –
awareness of the fault in the good is no excuse.

 BEARING THE EXTRA-ORDINARY EXPENSES:- The usual and the ordinary

expenses of the good are to be borne by the Bailee. But, if the need
arises, to meet with some expenses which are ‘Extra-ordinary’ then, it is
the duty of the Bailor to pay for it.

 INDEMNIFICATION:- The Bailee will not suffer, under any circumstances,

because of the dispute of title of the Bailor’s good. If the bailee suffers,
then it is the duty of the Bailor to indemnify or compensate the Bailee.

 TO CLAIM THE BAILED GOODS BACK:- The Bailor has the duty to take
back his goods after the expiry of the time or the fulfilment of the
purpose for which the good was bailed. In case the Bailor fails to claim
back the good, it is his responsibility to compensate the Bailee for the
expenses incurred because of the Bailor’s delay.

DUTIES OF A BAILEE

 REASONABLE CARE:- The Bailee is supposed to take care of the goods as

they were to be his own. He must take reasonable care of the goods as
an ordinary and prudent man of sound mind.

 UNAUTHORISED USE OF GOODS:- If there be any unauthorized usage of

the bailed good and there be any damage arising out of the
unauthorized usage then the Bailee is liable to compensate the Bailor for
the same.

 DUTY OF NOT MIXING THE GOODS:- The Bailee has the responsibility
keep his own goods and the Bailor’s good separate. He should not mix
the two without any prior permission of the Bailor. But if any act of
ignorance regarding the separation be done and the result of which be
 the in-separation of the Bailor’s good, then the Bailee must compensate
the Bailor for the loss incurred.

 RETURN THE GOODS:- The Bailee must return or deliver the good upon
the fulfilment of the purpose. If the Bailee retains the goods even after
the lapse of the slated time period then the Bailee is liable for any
damages done.

 DISPUTE AS TO WHO IS THE OWNER:- If the Bailee has received the good
from the Bailor then he must return the good to the Bailor only. It does
not matter if there a third person who claims the good to be his. The
Bailee has accepted the good to be Bailor’s during bailment. The Bailee
has no right to not re-deliver the good to the Bailor on grounds that the
Bailor is not the real owner.

TYPES OF BAILMENT
There are 5 types of bailment:-

1) GRATUITOUS BAILMENT:- A Bailment made without any Consideration

for the benefit of the bailor or for the benefit of the bailee is called
Gratuitous Bailment. In simple words A bailment with no consideration
is Gratuitous bailment.
2) NON-GRATUITOUS BAILMENT:- Non Gratuitous is a bailment for reward.
It is for the benefit of both the bailor and bailee.
3) BAILMENT FOR THE BENEFIT OF BAILOR:- In this case the bailor delivers
his goods to a bailee for a safe custody without any benefit/ reward. It is
called " the bailment for the benefit of the bailor".
4) BAILMENT FOR THE EXCLUSIVE BENEFIT OF THE BAILEE:- In this case
Bailor delivers his goods to a bailee without any benefit for his use , it is
called "the bailment for the exclusive benefit of the bailee"
5) BAILMENT FOR THE BENEFIT OF BAILOR & BAILEE:- In this case goods are
delivered for consideration, both the bailor and bailee get benefit and
hence it is called the bailment for the benefit of the bailor and bailee.

RIGHTS OF A BAILOR

The following are the rights of a bailor:-

  RIGHT TO ENFORCE:- If the bailee neglects in any one of his duties, the
bailor has a right to enforce them by filing a suit against the bailee.
 RIGHT TO AVOID THE CONTRACT:- If the bailee does any act, which is
inconsistent with the terms of the bailment as regards the goods bailed,
the bailor can terminate the bailment.
Example: A lets a car to B for his private use only. But B used it as taxi. A
can terminate the bailment.
 RIGHT TO RETURN THE GOODS GRATUITOUSLY:- When the goods are
lent gratuitously, the bailor can demand back the goods at any time even
before the expiry of the time fixed or the achievement of the object.
Example: A, while going out of station delivered his ornaments to B for
safe custody for one month. But A returned to station after one week.
He may demand the return of his ornaments even though the time of
one month has not expired. However, due to the premature return of
the goods, if the bailee suffers any loss, which is more than the benefit
actually obtained by him from the use of the goods bailed, the bailor has
to compensate the bailee.

RIGHTS OF BAILEE

As a matter of fact, all the duties of the bailor are the rights of the bailee. In
addition to that, the bailee has the following other rights also.

 RIGHT TO DELIVER THE GOODS TO ANY ONE OF THE JOINT BAILORS:- s a

matter of fact, all the duties of the bailor are the rights of the bailee. In
addition to that, the bailee has the following other rights also.
Example: A, B and C are the joint owners of a harvesting combine. They
delivered it on hire to D for one month. After the expiry of one month, D
may return the “combine” to any one of the joint owners namely, A, B or
C.

 RIGHT TO DELIVER THE GOODS TO BAILOR WITHOUT TITLE:- If the bailor

has no title to the goods, and the bailee in good faith delivers them back
to or according to directions of the bailor, the bailee is not responsible
to the owner in respect of such delivery.
 RIGHT TO APPLY TO COURT TO DECIDE THE TITLE TO THE GOODS:-
 If the goods bailed are claimed by the person other than the bailor, the
bailee may apply to the court to stop its delivery and to decide the title
to the goods. Example: A, a dealer in T.V. delivered a T.V. to B for using
in summer vacation. Subsequently, C claimed that the T.V. belonged to
him as it was delivered only for repairs, to A and thus, B should deliver it
to him. In this case, B may apply to the Court to decide the question of
ownership of the T.V. so that he may deliver it to the right owner.
 RIGHT OF LIEN:- The bailee has a right to exercise lien i.e., to refuse to
return the goods to the bailor until his lawful charges are paid to him.

LANDMARK CASE
ATUL MEHERA VS BANK OF MAHARASHTRA

It is one of the landmark cases in India because it lays down the principle that
hiring lockers at banks does not constitute a contract of bailment.
Atul Mehra (i.e. the appellant) in the present appeal had hired locker No. 75 on
15th January 1986 at Bank of Maharashtra (i.e. the respondent). The strong
room in which the locker was located was broken in and the contents thereof
were stolen by miscreants. It was stated in the FIR that all other 43 lockers in
the strong room were also broken in and contents thereof stolen. All the 44
locker holders made representation to the bank by a registered
acknowledgment duly pointing out the gross negligence and misconduct of the
respondent in maintaining the lockers. The issues raised were:-
Whether the plaintiffs have suffered loss due to misconduct and negligence by
the defendant? Whether the plaintiffs are entitled to recover any amount. If
so, to what amount? Whether the defendant-Bank has no contractual liability
to make good loss incurred by the plaintiffs?
There were various arguments put forward by the respondent and the
appellant. Finally, the Bench, comprising of Justice S.S. Nijjar, held that
exclusive possession of the goods is sine qua non for bailment. Therefore,
mere hiring of a locker would not be sufficient to constitute a contract of
bailment as provided under Section 148 of the Indian Contract Act, 1872. He
has added that the question of reasonable care and quantum of damages
would arise only after it has been shown that actual exclusive possession of the
property was given by the bailee to the bailor, i.e. the bank. Since the bank was
not aware of the contents of the locker, hence it was impossible to know the
quantity, quality or the value of the jewellery that was allegedly kept in the
locker at the time when the robbery occurred. The bank was held liable for
negligence because the robbery was committed by the manager within the
bank itself. The judge has asserted that the plaintiffs have miserably failed to
prove the entrustment of the jewellery which was allegedly kept in the locker.
There is no proof of any kind to show the value of the jewellery which was kept
in the locker. No expert witness has been produced to show that the jewellery
mentioned in the plaint would be worth the amount claimed.
The appeal was decided in favour of the Respondent.
Even I think that the court has been right in giving this decision in favour of the
respondents because holding the bank responsible for the loss of any goods
kept in the locker by their customers would give rise to uncountable amount of
liability as it may be found difficult to prove that there was no exclusive
possession of the contents of the locker. Such uncountable liability would also
discourage banks to give such a facility which is currently utilized by countless
number of people around the globe.

Therefore, from the above discussion it can be seen that bailment is a contract
whereby a delivery of possession is given of specific goods to another for some
purpose with the direction that the goods shall be return or dispose off on
fulfillment of the purpose. Bailment is different from licence and sale.