Rights and Duties of Bailee and Bailor in a Contract of Bailment.

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Definition of 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. The person delivering the goods is called the ‘bailor’. The person to whom they are delivered is called the ‘bailee’.”

According to section 148 there are two essentials of bailment;

  1. Delivery of goods- Delivery of possession of goods from one person to another.
  2. Return of goods after the purpose is achieved, or their disposal according to the bailor’s directions.

Section 149 deals with actual and constructive delivery-

Actual delivery – When there is a physical transfer of possession of the goods.

Constructive delivery – when there is no physical transfer of possession, but something is done which has the effect of putting them in possession of the bailee.

For instance, When X goes out of town, he requests his neighbor Z to keep an eye on his car and hands him the keys. Though Z does not actually hold the car in his premises, but the act of handling over of the keys constitute delivery of possession of goods from X to Z hence, creating a relationship of bailor and bailee.

Rights and Duties of Bailee and Bailor in a Contract of Bailment.

(A Bailor’s duty is a bailee’s right and a bailee’s duty is bailor’s right.)

Duties of bailee (Bailor’s right);

A bailee has to observe the following duties:

  1. Duty to take reasonable care of the goods bailed. (Section 151-152)

According to section 151- A bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of same bulk, quality and value as the goods bailed.

This section lays down uniform duty of care for every kind of bailment, whether the same is for reward or gratuitous.

Given below are the cases in which bailee failed to take reasonable care and was held liable;

  1. Union of India v. Udho ram & sons.

Facts- Certain goods were consigned by M/s Radha Ram Sohan Lal from Calcutta to Delhi by rail. Some of the articles out of this consignment, having been stolen during transit, the same were not delivered to the plaintiffs. The plaintiffs brought an action to recover compensation for the same. The trail court found that the wagon in which the goods were loaded was properly rivetted and sealed when the train left Howrah at 1:30 am, but seals and rivets of one of the doors of the wagon were found open when it reached Chandanpur station after 2 hours. The theft took place at an in-between point when the train stopped there for the home signal at 2:05 am for about 15 minutes. It was found that railway protection police were also there in the guard’s van.

Issues before the court –

  1. Whether the railway authorities were liable for the loss of the goods in transit?
  2. Whether the railway authorities were in the position of the bailee and liable to indemnify for the loss caused?

Judgement – It was held that the railway did not take due care. Firstly, they did not prove from record that the railway protection police which escorted the train was sufficient in strength, and secondly, that unlike a prudent man, the railway protection police did not keep an eye on wagons, particularly when the train stopped, to prevent the theft of the goods. Hence, the defendants were held liable.

  1. Ultzen v. Nicholas. 

Facts- The plaintiff went to defendant’s restaurant for the purpose of dining there. When the plaintiff entered the restaurant, a waiter took the plaintiffs coat from him without being requested to do so, and hung it on a hook behind the plaintiff. When the plaintiff wanted to leave, he found that the coat has been lost.

Judgement – It was held that the defendant was the bailee of the coat as the servant had assumed the possession of the same and he was, therefore, liable for its loss which was due to his negligence.

  1. Calcutta credit corporation ltd v. Prince peter of Greece.

 Facts- a car received for repairs by an automobile garage was damaged by fire. The garage was a pucca structure, walled by wooden planks. In garage were put not only vehicles containing petrol but also other combustibles like thinners and paints. The garage was portioned by wooden walls and a part of it was allowed to be used for cooking purpose. There was inadequate arrangement for extinguishing the fire. The room in which plaintiffs’ car was kept could not be opened for 15 minutes after the fire was noticed, as the keys of the rooms were not available.

Judgement – The defendants had not taken due care and they were held liable.

  • In this case the defendant i.e., Bailee cannot be excused by pleading that he had taken similar care of his own goods or his own goods have been lost or damaged along with those of the bailor or that the bailor had the knowledge that his goods were being kept in a negligent manner. The court held that the bailee has to take care as a man of prudence or reasonable care.

Section 152 According this section if the bailee, has taken the amount of care described in section 151 than he cannot be held liable for any loss, destruction or deterioration of the thing bailed, unless there is any special contract.

Given below are the cases in which bailee took reasonable care and was not liable;

  1. Gopal Singh Hira Singh v. Punjab National Bank.

Facts- The plaintiff firm pledged certain goods with the Jahania office of the defendant bank in 1946. After the partition of the country in August, 1947, that area where the branch was situated became part of Pakistan. The plaintiff firm bought an action for the recovery of more than 2 Lakh rupees, being the value of goods pledged and interest thereon, because the bank failed to return the goods pledged to the plaintiff firm, who had migrated to India. To avoid liability, the defendant bank pleaded that the goods pledged had been plundered and destroyed by the rioters in the course of riots which happened to be there at that time.

Judgement – The court found that as the conditions prevailed at that time on the partition of the country, there was insecurity of the life and property of the non-Muslim population under the compulsion of adverse circumstances, there was extraordinary breakdown of law and order machinery, and compulsive migration of mass of these persons from Pakistan to India. That was also true about institutions manned by Hindu staff, as was the defendant bank. It was held that under these circumstances, since the property with the bank had to be left uncared there, the bank could not be considered to be guilty of any negligence. It was observed that “the obligation of the bank to take care of the pledged goods must be seen in the context of the extraordinary situation that developed.”

  1. Atul Mehra v. Bank of Maharashtra.

Facts- Atul Mehra had hired locker No. 75 on 15th January 1986 at Bank of Maharashtra. He had deposited jewellery in the said locker the value of which he claimed as Rs 4,26,160. The strong room in which the locker was located was broken in and the contents thereof were stolen by miscreants. On 9th January 1989 an FIR for the same was filed. It was stated in the FIR that all other 43 lockers in the strong room were also broken in and contents thereof stolen.

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Judgement – The court 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. Further, the court said 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. In this case, it was held that there was no exclusive possession to the bank hence no compensation was allowed to the plaintiff.

  • If the bailee has taken due care and the damage to the goods is because of the circumstances beyond his control, he will not be liable for the loss.
  1. Sundar Lal v. Ram Swarup.

 Facts- A wooden shop was hired under a written agreement that the shop will be returned in the same condition, and the hirer will be liable to any loss or damage to it. The shop was burnt by the mob during the communal riots in the city.

Judgement- It was held that since the destruction of the shop was due to no negligence on the part of the hirer, he was not liable for the loss.

  1. Duty not to make unauthorized use of the goods bailed. (section 153-154).

When the goods have been bailed for a particular purpose, the bailee is supposed to use them only for that purpose and none else. If he makes unauthorized use of the goods bailed, there are two remedies available to the bailor:

(i) The bailor may terminate the bailment;

According to section 153 If the bailee make unauthorize use of goods or uses the goods which is inconsistent with the conditions of bailment, then the bailor has the option to terminate the bailment and claim back the goods.

Illustration- A lets to B, for hire, a car for his own use. B lends the car to C for commercial purpose. A can terminate the bailment.

(ii) The bailor may recover compensation for the loss caused due to unauthorized use of goods;

According to section 154, If the bailee makes such use of goods which is contrary to the conditions of bailment, and there happens any damage to the goods due to such unauthorize use, the bailee is liable to compensate bailor for such loss.

Illustration- A hires a car from B for travelling to Delhi but instead went to Mumbai. The car met with an accident. A is liable to compensate B for loss.

  1. Duty not to mix bailor’s goods with his own goods. (section 155-157).

Section 155- Mentions that Bailee, with the consent of the bailor, can mix bailor’s goods with his own goods and in such case, both shall have an interest in proportion to their respective shares, in the mixture produced.

If the bailee without bailor’s consent mixes bailor’s goods with his own goods, there arises two possibilities.

Section 156– When the goods can be separated;

When the mix goods ca be separated, both remain the owners in accordance with there respective shares. The bailee has to bear the expenses of separation of goods and also for any damage arising from the mixture.

Section 157– When the goods cannot be separated;

If the nature of the goods is such that the bailor’s goods cannot be separated from those of bailee’s, then it is deemed to be the loss of goods and bailor can recover compensation for the same.

  1. Duty to return the goods upon the accomplishment of the purpose. (Section 160-161).

Section 160– According to this section “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 were bailed has expired, or the purpose for which they were bailed has been accomplished.”

Section 161– “If by the fault of the bailee, the goods are not returned, delivered or tendered at the proper time, he is responsible to the bailor for any loss, destruction or deterioration of the goods from that time.”

If the bailee is not in the position to return the goods bailed to him, for instance, when they are lost due to the fault of his servants or anybody, then it is bailee’s responsibility for such loss.

  1. Duty to return the bailor the increase or profit on the goods bailed. (Section 163) 

According to this section “In the absence of any contract to the contrary, 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.”

For example- A leaves a cat in the custody of B to be taken care of. The cat gives birth to 5 kittens. B is bound to deliver the kittens as well as the cat to A.

Rights of Bailee (Bailor’s duty)

The bailee of the goods has the following rights;

  1. Right to recover necessary expenses incurred on bailment. (section 158)

Section 158– Some numeration has to be paid to the bailee for services he renders in respect of them, he has a right to recover the same, or to exercise the right of lien in respect of such goods until he receives the necessary payment.

For instance, A leaves his horse with his neighbor, B, for safe custody foe one week. B is entitled to recover the expenses incurred by him in feeding the horse.

  1. Right to recover compensation from the bailor. (section 164) 

“The bailor is responsible to the 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.”

  1. Right of lien on the goods bailed. (section 170-171)

Lien is the right of the bailee under which the bailee can retain the goods of the bailor, and refuse to deliver them back, until the due remuneration or amount due is paid.

The Act recognizes two kinds of lien;

  1. i) Particular lien; and
  2. ii) General lien.

The right of ‘particular lien’ entitles the bailee to retain those very goods for the service regarding which the remuneration is due. The ‘general lien’ entitles the bailee to retain the goods of the bailor for a general balance of account.

Reference

        .        DR. RK BANGIA, INDIAN CONTRACT ACT, (15TH Ed, ALA, 2009)

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