BUSINESS LAW

VIPIN KUMAR
ASTT PROF.
DBS-G
BAILMENT & PLEDGE
SECTION 148-181
BAILMEMT
Sec 148- Contract to delivery of goods bailment.
Sec 149- Delivery of goods.
Sec 150- Disclose the faults of the goods
Sec 151- Reasonable care of the goods bailed.
Sec 152- Bailee not responsible for the loss.
Sec 153- Rights to terminate the bailment.
Sec 154- Not to make unauthorized use of goods bailed.
Sec 155- Mix goods bailed with his non goods.
Sec 156- Make damages for the goods bailed if not
concerned.
Sec 157- Make compensation for goods bailed.
Cont…
Sec 159- Indemnify the bailee.
Sec 160- To return the goods bailed.
Sec 161- Default of bailee for goods.
Sec 162- Termination of lien.
Sec 163- Claim increases in value or profits.
Sec 164- Responsibility for any loss due to effect in title.
Sec 165-
Sec 166-
Sec 167- Right to sue.
Sec 168-
Sec 169- The finder of goods.
Sec 170- Particular lien.
Cont…
Sec 171- general lien.
Sec 172- Pledge.
Sec 173- Right of retainer
Sec 174- Right to retainer for subsequent advances.
Sec 175- Right to extraordinary expenses.
Sec 176- Right in case of default by owner.
Sec 177- Power to pay expenses.
Sec 178- Pledge by mercantile agent.
Sec179- Pledge by person having limited interest.
BAILMENT
“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”

Delivery of goods by one person to another for some

specific purpose is known as Bailment.
 CLASSIFICATION OF BAILMENT
ON THE BASIS OF BENEFITS
i. Those for the exclusive benefits of bailor.
Eg: A wants to send his horse to his B. He requests C to
do this job. C agrees. Here bailment is for the exclusive
benefits of the bailor A
ii. Those for the exclusive benefits of the bailee.
Eg: C wants to go to A’s uncle B. He requests A to lend
him his horse. A does so. Here bailment is for the
exclusive benefit of the bailee C.
iii. Those for the mutual benefits of both.
Eg: A wants to send his horse to his uncle B. C has also a
work with B. A lends C his horse. The bailment is for the
mutual benefit of both bailor A and bailee C.
Cont…
ON THE BASIS OF REWARD
i. Gratuitous bailment
Where neither the bailor nor the bailee gets any thing
bailment is termed as gratuitous. Eg: A lends book to his
friend B.
ii. Non- gratuitous bailment
Where either the bailor or bailee gets remuneration, the
bailment is termed as non-gratuitous. Eg: A gives his
watch to a watch maker for repairs. The bailment is non-
gratuitous.
ESSENTIALS OF BAILMENT
CONTRACT
A bailment is usually created by agreement between the bailor and
bailee.
Eg: A gives his car to B, the owner of a service station

THE DELIVERY OF GOODS

The possession of goods must be delivered by the bailor to the bailee.
a) Actual- Where the goods are physically handed over.
b) Constructive- Where the goods bailed are not changed to possession.

 NO TRANSFER OF OWNERSHIP
Possession is transferred from one person to another, but ownership of
the goods remains with the bailor.
Cont…
DELIVERY OF GOODS FOR SOME PURPOSE
The delivery of goods must be for some purpose.
Eg: The goods deposited in a railway cloak room implies the delivery of
goods to the cloak room, is safe custody.

RETURN OF SPECIFIC GOODS

The goods delivered to bailee only with condition that some goods will
be returned back to the bailor after accomplishment of the purpose for
which the goods were bailed.(original/altered)
Eg: Delivery of a piece of cloth to the tailor to be stitched into a coat.

MOVABLE GOODS
The goods bailed should be in nature of movable properties.
Immovable property goods cannot make bailment.
Eg: Land, building.
People Associated to Bailment
BAILOR: The person delivering the goods.

BAILEE: The person to whom the goods are delivered.

EXAMPLES
Depositing the luggage in the cloak room
Delivering a piece of cloth to the tailor to be stitched into a
suit
Lending book to a friend for examination
RIGHTS AND DUTIES OF BAILOR & BAILEE
RIGHTS OF BAILOR
1. Right of Termination- Bailor has a right to terminate the contract of
bailment if the bailee does any inconsistent act with regard to the goods
bailed i.e. uses the goods in a manner inconsistent with the conditions of
bailment.
Eg: A lets B for hire a horse for his own riding. B uses the horse in his
carriage. A can terminate the contract of bailment.

2. Right to demand return of goods any time in case of gratuitous

bailment- The bailor can demand back the goods bailed at any time he
chooses inspite of the fact that he had lent him for a fixed period or for a
specified purpose. But, if the bailee suffers any loss exceeding the benefit
derived by him by the use of such goods because premature return of goods,
bailor has to identify the bailee.

3. Enforcement of right- The duties of the bailee are the rights of the bailor
and he can sue bailee for their enforcement
DUTIES OF BAILOR
1. DUTY TO DISCLOSE KNOWN DEFECTS
It makes a distinction between a gratuitous bailer and a bailer for
reward as regards the deg of case and responsibility to be exercised
by them in regard to the goods bailed.
A gratuitous bailor is bound to disclose to the bailee all those
defects of which he is aware and which expose the bailee to extra
ordinary risks. In such a case the bailer is responsible for damages
arising to the bailee from such defects. But a gratuitous bailer will
not be liable for defects which are not within his knowledge.
Eg: A lends a horse which he knows to be vicious to B. He does not
disclose the fact that the horse is vicious. The horse runs away. B is
thrown and injured. A is responsible to B for damages sustained.
Cont…
2. DUTY TO BEAR EXTRAORDINARY EXPENSES
Where the bailment is gratuitous and the bailee is to receive no
remuneration the bailer shall pay the bailee all the necessary
expenses incurred for the purposes of bailment.
But where the bailment is non-gratuitous, the bailer has to pay
only extra ordinary expenses incurred by the bailee. All ordinary
and reasonable expenses are to be borne by the bailee himself.
Thus where a bailee incurs medical expenses for a sick horse or
expenses for the recovery of the stolen horse, it is the duty of the
bailer to reimburse the bailee.

3. DUTY TO INDEMNIFY BAILEE

A bailor is responsible to the bailee for any loss due to his
imperfect title in the goods bailed. As such the bailee has a right
to be indemnified by the bailor when the latter’s title is defective.
Cont…
4. TO BEAR RISKS FOR LOSS etc
Bailor is to bear the risk of loss, destruction or
deterioration of the thing bailed if the bailee has taken as
much care as a man of ordinary prudence would, under
similar circumstanced take of his own goods of the same
bulk, quality and value as the goods bailed
RIGHTS OF BAILEE
1. RIGHT TO INTERPLEAD
If a person other than the bailee claims the goods bailed,
bailee may apply to the court to stop the delivery of the
goods to the bailor and to decide the title of the goods. The
bailee can demand compensation for the loss.

2. RIGHT AGAINST THIRD PERSON

If a third person wrongfully deprived the bailee of the use
of possession of the goods bailed or causes them any
injury, the bailee is entitled to use such remedies as the
owner might have used in a like case if no bailment has
been made. Bailee can thus brings a suit against a third
person for such deprivation or injury.
Cont…
3. RIGHT OF PARTICULAR OWERSHIP FOR PAYMENT
FOR SERVICES
a) The bailee has in accordance with the purpose of bailment.
b) The bailee has rendered any service involving the exercise of
labour or skill.
c) The bailee in respect of the goods, he shall have, in the
absence of a contract to the contrary, right to retain such
goods until he receives due remuneration for the services he
has rendered in respect of them.
However, the bailee has only a right to retain the article and
not to sell it. The services must have entirely been performed
within the time agreed or reasonable time and remuneration
must have become due. The right of particular ownership
shall be available only against the property in respect of
which skill and labour have been used.
Cont…
Eg: A gives a cloth to B, a tailor, to make it into a coat, A does not pay. B can
retain the coat until A pays it.

4. RIGHT OF GENERAL OWNERSHIP

Bankers, factors, wharfingers, attorneys of high court and policy brokers
will be entitled to retain as a security for a general balances of account any
goods bailed to them in the absence of a contract to the contrary. By
agreement other types of bailee may also be given this right of general
ownership.

5. RIGHT TO INDEMNIFY
Bailee is entitled to be indemnified by the bailor for any loss arising to him
by reason that the bailor was not entitled to make the bailment or to receive
back the goods or to give directions respecting them. If the bailor has no
title of the goods and the bail in good faith delivers them back to, according
to the directions of the bailor, the bailee shall not be responsible to the
owner in respect of such delivery. Bailee can also claim all the necessary
expenses incurred by him for the purpose of gratuitous bailment.
Cont…
6. RIGHT TO CLAIM COMPENSATION IN CAUSE OF FAULTY GOODS
A bailee is entitled to receive compensation from the bailor for any loss caused to
him due to the failure of the bailer to disclose any faults in the goods known to
him. If the bailment is for hire, the bailor will be liable to compensate even
though he was not aware of the existence of such faults.

7. RIGHT TO CLAIM NECESSARY EXPESES

Where the bailee is not to receive any remuneration for the work to be done by
him as per terms of the bailment, he is entitled to recover from the bailer all
necessary expenses incurred by him for the purpose of bailment. But, if the
bailment is non-gratuitous, bailee can recover only extra-ordinary expenses
incurred with respect to goods bailed. He is to bear all ordinary and reasonable
expenses.

8. RIGHT TO RETURN THE GOODS TO ANY OF THR JOINT BAILERS

Where there are several joint bailers, the bailee may return the goods to any of
joint bailors in the absence of any contract to the contrary. It will amount the
delivery of good to all of them.
 DUTIES OF THE BAILEE
1. DUTY OF REASONABLE CARE
A bailee is under a duty to take as much care of the goods
entrusted to him as a man of ordinary prudence would take of his
own goods of similar bulk quality and value. This duty of bailee
starts as soon as ‘bailee’ accepts delivery or receives property. The
standard of care required of a bailee is that of an average prudent
man, where the bailee had taken the same care of the property
entrusted to him as of his own goods. Bailee is not held
responsible for any loss, destruction or for any act of god.

Eg: A Pawnee kept the pawned ornaments in a godrej safe. The

key of which (safe) was kept in a locked cash box in the same
room which was also locked. The ornaments were lost by theft by
using the key from the cash box. (It was held that the Pawnee had
not taken much care of the pawned ornaments as a man of
ordinary prudence would take of his own goods)
Cont…
2. DUTY NOT TO MAKE UNAUTHORISED USE OF
GOODS
A bailee is un a duty not to use the goods in a manner
which is not so authorized by the bailor. An unauthorized
use of the goods is a breach of the ailment contract and
makes the bailee liable for damages. Such a liabilities is
absolute in nature and the bailee would be liable even if
the damage is the result of an accident.

3. DUTY NOT TO MIX BAILER’S GOODS WITH HIS

OWN GOODS
A bailee is under a duty not to mix bailer’s goods with his
own goods without the consent of the bailer.
Cont…
4. DUTY NOT TO STE UP ANY ADVERSE TITLE AGAINST THE
BAILOR
A bailee is not authorized to set up an adverse title of the goods
bailed. The bailee is stopped from challenging the right of the bailer
to receive the goods back. Even if there is a person who has a better
title to the goods than that of the bailor, the bailee may safely return
the goods to the bailor and he will not be liable to the owner for
conversion.

5. DUTY TO RETURN ANY ACCRETION TO THE GOODS

A bailee is bound to deliver to the bailee any increase of profits
accuring from the goods bailed. Here the bailor is entitled to the
profits accuring from the goods bailed unless there is a contract to
the contrary.
Eg: 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.
Cont..
6. DUTY TO RETURN THE GOODS
It imposes a duty on the bailee to return or deliver the
goods bailed. He must return the goods to the bailor or
any of the bailor (in case of joint bailer’s) as soon as the
purpose for which they were has been expired.
Eg: A delivered some books to B to be bounded. He
presses for their return, but B neglected to return them,
although more than a reasonable time has elapsed. A fire
suddenly broke out on B’s premises and the book
although he was not negligent, because of his failure to
return the books within a reasonable time.
 TERMINATION OF BAILMENT
ON THE EXPIRY OF STIPULATED PERIOD
If the goods were given for a stipulated period, the contract
of bailment shall terminate after the expiry of such period.
ON FULFILMENT OF THE PURPOSE
If the goods were delivered for a spice purpose, bailment
shall terminate on the fulfillment of that purpose.
BY NOTICE
a) Where the bailee acts in a manner which is inconsistent
with the terms of the bailment, the bailor can always
terminate the contract of bailment by giving a notice to
the bailee.
b) A gratuitous bailment can be terminated by the bailor at
any time by giving a notice to the bailee.
BY DEATH
A gratuitous bailment, terminates upon the death of
either the bailor or the bailee.