Amity Law School,Noida

Amity Law School,Noida

LL.B(H), Semester 2
Law of Contract II
Dr. Amit Dhall

1
 Bailment Amity Law School,Noida

• In Contract, a bailment is the delivery of goods from 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.
• Section 148 of Indian Contract Act 1872 defines ‘Bailment’ as 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 direction of the person
delivering them.

2
 Parties Amity Law School,Noida

• The person who owns and delivers 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.
• Explanation to Section 148 states that if a person already in possession of the goods of
• another person contracts to holds the goods as a bailee, he becomes the bailee even though
the goods may not have been delivered to him by way of bailment in the first place. For
example, a seller of goods becomes a bailee if the goods continue to be in his possession
after sale is complete. Here the original possession of goods was with the seller as the
owner of the said goods and after the sale, his possession is converted into a contract of
bailment. Example: A has a motorcycle that he sells to B who leaves the motorcycle in the
possession of A while he is out of town. Here, A becomes the bailee even though he was
the owner originally.

3
 Definition Amity Law School,Noida

• Halsbury defines Bailment as ‘delivery of personal chattels in trust on a

contract, express or implied, that the trust shall be duly executed and
chattels redelivered in either their original or altered form, as soon as
the time of use, or condition on which they had been bailed has elapsed
or been performed respectively’.
• Justice Blackstone defines Bailment as ‘a delivery of goods in trust,
upon contract, either expressed or implied, that the trust shall be
faithfully executed on the part of the bailee’.
• Bailment can also be described as ‘the delivery of goods to another
person for a particular use’.

4
Amity Law School,Noida

5
 Bailment Amity Law School,Noida

• Section 148 of Indian Contract Act 1872 defines ‘Bailment’ as 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 direction of the person
delivering them.
• Explanation to Section 148 states that if a person already in possession
of the goods of another person contracts to holds the goods as a bailee,
he becomes the bailee even though the goods may not have been
delivered to him by way of bailment in the first place.
• For example, a seller of goods becomes a bailee if the goods continue to
be in his possession after sale is complete. Here the original possession
of goods was with the seller as the owner of the said goods and after the
sale, his possession is converted into a contract of bailment.

6
 Bailment Amity Law School,Noida

• Halsbury defines Bailment as ‘delivery of personal chattels in trust on a

contract, express or implied, that the trust shall be duly executed and
chattels redelivered in either their original or altered form, as soon as the
time of use, or condition on which they had been bailed has elapsed or
been performed respectively’.

• Justice Blackstone defines Bailment as ‘a delivery of goods in trust, upon

contract, either expressed or implied, that the trust shall be faithfully
executed on the part of the bailee’. Bailment can also be described as
‘the delivery of goods to another person for a particular use’.

7
 Essential Characteristics of bailment
Amity Law School,Noida

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 :
a) Actual Delivery: Here, the bailor hands over the physical possession of the goods to the bailee.
b) Constructive Delivery: Constructive delivery is an action that the law treats as the equivalent of actual
delivery. 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.

2) Delivery upon Contract: 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

3) Delivery for a purpose and Return of Goods

a)The delivery of goods must be for some specific task or performance
b) That the goods must be returned to the bailor or be taken care of as per the instructions of the bailor. c)
Return of goods in specie is also essential.

8
 Rights of Bailor
Amity Law School,Noida

1. Rights of taking back the goods bailed:

•The bailor has right to take back the goods bailed as soon as the purpose of bailment is completed. If the
bailee defaults in so returning, the bailor has right to receive compensation.
2. Right in case of unauthorized use of goods:
•The bailor is entitled to terminate the contract of bailment if the bailee makes the unauthorized use of the
goods bailed.
3. Right to goods bailed before stated period:
•The bailor may get back his goods before the time stated in the contract of bailment with the consent of
the bailee.
4. Right to Dissolution of contract:
•The bailor may dissolve the contract if the conditions of bailment are disobeyed by the bailee.
5. Right to Gratuitous goods:
•The bailor has right it terminate the contract of gratuitous bailment at any time even before the specified
time, subject to the limitation that where such a termination of bailment causes loss in excess of benefit,
the bailor must compensate the bailee.
6. Right in share of Profit:
•The bailor has share in the increase or profit gained from the goods bailed if there is provision in the
contract.

9
 Right of Bailee
Amity Law School,Noida

1. Right to recover damages:

•A bailee has right to recover damages from the bailor if he suffers any loss due to defects of the goods bailed.
2. Right to receive compensation:
•A bailee is entitled to receive compensation from the bailor for any loss resulting from the defect in the bailor’s title.
3. Right of Legal Action:
•A bailee may take necessary legal action against the person who wrongfully deprives him of the use of goods bailed or does
them any injury (Sect. 180) Right to recover Bailment Expenses:​
•Bailee is entitled to be reimbursed for all legitimate expenses incurred for any purpose of bailment.​
•5. Right of Lien:​
•Where the bailee has rendered any service for the purpose of bailment, he has right to retain such goods bailed until he
receives due remuneration for his services in absence of contract to the contrary. (Sect. 170)​
•6. Right of Indemnity:​
•The bailee has right to receive the amount of indemnity from bailor for any loss which he 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. (Sect. 164)​

10
 Duties and Liabilities of Bailor
Amity Law School,Noida

1. To disclose Facts:
•The important duty of the bailor is to disclose the faults in the goods bailed in so for as they are known to
him; and if he fails to do that he will be liable to pay such damages to the bailee as may have resulted
directly from the faults. (Sect. 150)
Illustration
•X hires a carriage of Y. The carriage is unsafe, though Y is not aware of it, and X is injured. Y is
responsible to X for the injury.
2. Payment of Extraordinary Expenses:
•Section 158 provides that all the necessary expenses incurred by the bailee in connection with the
bailment, must be paid by the bailor.
3. To Indemnity Bailee:
•The bailor is bound to pay the bailee for any loss which the bailee may sustain by reason that the bailor
was not entitled to make the bailment. (Sect. 164)
4. Warning to the Bailee:
•When the things are is danger i.e explosive goods, the bailor must give extraordinary warning to the
bailee.

11
 Duties and Responsibilities of Bailee
Amity Law School,Noida

1. To take care of goods bailed:

•The bailee is bound to take as much care of the goods entrusted to him as a man of ordinary prudence.
(Sect. 151)
2. To avoid the inconsistent act:
•A contract of bailment 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 the bailment (Sect. 153)
3. The authorize use of goods:
•If the bailee makes any unauthorized use of the goods bailed, he is liable to make compensation to the
bailor for any damage arising to the goods from or during such use of them. (Sect. 154)
4. Not to mix bailor’s goods:
•The bailee is bound to keep the goods of the bailor separate from his own where the mixture without the
consent of the bailor is inseparable, the bailor is entitled to be compensated by the bailee for the loss of the
goods. (Sect. 155, 156, 157)
5. To return the goods:
•It is the duty of the bailee to return, or deliver the goods bailed according to the bailor’s directions. (Sect.
160)

12
 Duties and Responsibilities of Bailee
Amity Law School,Noida

6. Responsibility in case of default:

•If the goods are not returned, delivered or tendered due to default of the bailee, he
is responsible to the bailor for any loss of the goods from that time. (Sect. 161)
7. To return any profit from the goods:
•The bailee is bound to deliver to the bailor, or according to his directions, any
increase or profit which may have accrued from the goods bailed. (Sect. 163)
8. Not to set up adverse title:
•The bailee has no right to deny the bailor’s title or set up against the bailor his own
title or the right of a third party.

13
 PLEDGE Amity Law School,Noida

• It is a kind of bailment defined in section 172 of

the Indian Contract Act. It implies bailment of
goods as security for payment of a debt or
performance of a promise.
• Illustration – Y took a loan from the bank against
the security of his house property papers. Here, Y
is a pawnor, the bank is a Pawnee and documents
are the pledged goods.

14
 Parties To The Contract Amity Law School,Noida

• Pawnor – The bailor, in this case, is the

Pawnor.

• Pawnee – The bailee, in this case, is the

Pawnee.

15
 Essential Elements Of PledgeAmity Law School,Noida

• Delivery of goods – The goods should be delivered from

pawnor to Pawnee. ( there is a change in possession of
goods)
• Purpose of delivery is always security for payment of a
debt – The goods should be bailed as security against the
payment of debts or performance of a promise.
• Illustration – Like in the above case Y (Pawnor) delivered
his valuable documents to the Bank (Pawnee) as security
against the debts (purpose).
• Property pledged should be movable.

16
 Rights Of Pawnee Amity Law School,Noida

• Right to retain– Pawnee has the right to retain the goods for the
interest of the debt and all the expenses incurred by him on the goods
pledged.
• Right to expenses – Pawnee has the right to receive any extraordinary
expense incurred by him on the maintenance and protection of the
goods pledged. (section 175)
• Right to sue or sell – In case when the pawnor makes default in the
payment, then the pawnee has the right to:
• Institute a suit against the pawnor and retain the goods pledged as
collateral security.
• Sell the goods on giving a notice of sale to the pawnor.

17
 CASE LAW Amity Law School,Noida

• Sunderlal saraf vs. Subas Chand

Jain[ AIR 2006 MP 35], it was held that “It
is not essential that the notice under this
section should state the date, time or place of
the planned sale. The only thing needed is,
sending a reasonable notice of sale.

18