BAILMENT

Definition- S. 148 "Bailment", "bailor" and "bailee" defined.—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".

Essential features.
1. Delivery of Possession
The first essential feature of bailment is the "delivery of possession" by one person to
another. This must be distinguished from mere custody, where the person may have physical
control over the goods but not possession. For instance, a servant or a guest using the host's
goods does not become a bailee.
Ultzen v Nicols, (1894) 1 QB 92: A waiter who took a customer's coat and hung it was
considered a bailee because the possession was delivered to the restaurant through the waiter.
Delivery to Bailee How Made (Section 149)
Section 149 of the Indian Contract Act, 1872 explains that the delivery to the bailee can be
either:
Actual Delivery: Physical possession of goods is handed over to the bailee. Morvi
Mercantile Bank Ltd v Union of India, AIR 1965 SC 1954: Delivery of a railway receipt
amounts to delivery of the goods.

Constructive Delivery: There is no change in physical possession, but an act is done that
puts the goods in the possession of the bailee. Bank of Chittoor v Narasimbulu, AIR 1966
AP 163: Constructive delivery of cinema projector machinery was held to be sufficient for
bailment.

2. Delivery Should be Upon Contract

The delivery of goods must be made for a specific purpose and under a contract that
mandates the goods be returned after the purpose is fulfilled. If goods are held without any
contractual agreement, the relationship does not constitute bailment.
Ram Gulam v Govt of U.P., AIR 1950 All 206: The court held that there was no bailment as
the goods (ornaments) were not handed over to the Government under any contract.
Non-Contractual Bailments
Under English law, bailment can exist without a contract. Indian law recognizes similar non-
contractual bailments, especially where goods are seized by authorities.
State of Gujarat v Memon Mahomed Haji Hasan, AIR 1967 SC 1885: The Supreme
Court affirmed the principle of bailment without a contract in cases involving seized goods.
3. Delivery Should be for Some Purpose
Bailment involves delivery for a particular purpose, and upon accomplishing the purpose, the
goods should either be returned to the bailor or dealt with as per the bailor’s instructions.
Secretary of State v. Sheo Singh Rai, (1875-80) 2 All 756: The Treasury Officer's custody of
promissory notes for consolidation into a single note was not a bailment as there was no
promise to return the specific notes.

DUTY OF BAILOR
Duty of Bailor
The duties of a bailor are laid out under Section 150 of the Indian Contract Act, 1872. Bailors
can be classified into two categories:
1. Gratuitous Bailor
2. Bailor for Reward
1. Gratuitous Bailor
A gratuitous bailor is one who lends goods or articles without any charge. The duty of a
gratuitous bailor is less stringent compared to that of a bailor for reward. The primary duty of
a gratuitous bailor is to disclose known faults in the goods bailed.
Section 150: Bailor's Duty to Disclose Faults in Goods Bailed
 The bailor is bound to disclose to the bailee faults in the goods bailed, of which the
bailor is aware, and which materially interfere with the use of them, or expose the
bailee to extraordinary risks.
 If the bailor does not make such disclosure, he is responsible for damage arising to the
bailee directly from such faults.
Blakemore v. Bristol and Exeter Rly Co (1858) 8 El & Bl 1035, 1051: 120 ER 385: The
bailor is responsible if he conceals known defects that expose the bailee to extraordinary
risks.
2. Bailor for Reward
A bailor for reward is one who makes a profit from the bailment. The duty of a bailor for
reward is more extensive because he is making a profit and, therefore, has a duty to ensure
the safety of the goods.
Duties of Bailor for Reward:
1. The bailor must ensure that the goods are reasonably safe for the purpose of the
bailment.
2. The bailor cannot defend himself by claiming ignorance of the defect.
 3. The bailor has to examine the goods and remove any defects that reasonable
examination would have disclosed.
Hyman & Wife v. Nye & Sons (1881) LR 6 QBD 685: The plaintiffs hired a carriage, a pair
of horses, and a driver from the defendants. During the journey, a bolt in the underpart of the
carriage broke, causing the carriage to overturn and injure the plaintiffs. The court held the
defendant liable, stating that the duty of a person who lets out carriages is to supply a carriage
as fit for the purpose as care and skill can render it.

DUTIES OF BAILEE
1. Duty of Reasonable Care [Sections 151-152]
Section 151: Care to be Taken by Bailee
Southcot v. Bennet (1601) Cro Eliz 815: 78 ER 1041: The case established early principles
of absolute liability for bailees.
Section 152: Bailee When Not Liable for Loss, etc., of Thing Bailed
Standard of Care, No Fixed Standard
Shanti Lal v. Tara Chand Madah Gopal, AIR 1933 All 158: This case emphasized that the
care expected depends on the circumstances, such as the availability of facilities for safe
custody.
2. Duty Not to Make Unauthorized Use of Goods [Section 154]
Section 154: Liability of Bailee Making Unauthorized Use of Goods Bailed
Alias v EM. Patil, AIR 2004 Ker 214.: A vehicle was given to a workshop for repair. An
unlicensed employee drove the vehicle and caused an accident resulting in death. The bailee
was held absolutely liable for unauthorized use, irrespective of the occurrence being an act of
God or inevitable accident.
Section 153: Termination of Bailment by Bailee’s Act Inconsistent with Conditions
Magma Fincorp Ltd. v. Rajesh Kumar Tiwari
3. Duty of Bailee Not to Mix Goods [Sections 155-157]
Section 155: Effect of Mixture with Bailor's Consent
Vistra ITCL (India) Ltd. v. Dinkar Venkatasubramanian, (2023) 7 SCC 324
Section 156: Effect of Mixture Without Bailor's Consent When Goods Can Be
Separated
Karamtara Engineering (P) Ltd. v. Excel Metal Processors (P) Ltd., 2018 SCC OnLine Bom
Section 157: Effect of Mixture Without Bailor's Consent When Goods Cannot Be
Separated
 4. Duty of Bailee to Return Goods [Sections 160-161]
Duty to Return Goods [Section 160]
Section 160: Return of Goods Bailed on Expiration of Time or Accomplishment of Purpose
UCO Bank v. Hem Chandra Sarkar, (1990) 3 SCC 389
Section 161: Bailee's Responsibility When Goods Are Not Duly Returned
Shaw & Co. v. Symmons & Sons

5. Duty not to set up "jus tertii"

S. 166. Bailee not responsible on re-delivery to bailor without title
Rogers Sons & Co v Lambert & Co- In the case, the bailee, following the bailor's
directions, returned the goods despite a third party's claim of ownership. The court ruled that
under Section 166, the bailee is protected if they act in good faith. The third party must obtain
a court order to stop the bailee from delivering the goods to the bailor.
Certainly. Here’s a detailed explanation of Section 167 and the related case law:
Section 167: Right of Third Person Claiming Goods Bailed
Juggilal Kamlapat Oil Mills v. Union of India, (1976) 1 SCC 893; AIR 1976 SC 227: In
this case, oil consigned by the appellant was seized by a food inspector in Calcutta, who
found it adulterated and had it destroyed under a High Court order. The Supreme Court held
that the Railways (the bailee) were not liable for the destruction of the oil as the goods were
taken away by an authority of law, and thus the bailee was excused from returning the goods
to the bailor.
6. Duty to return increase [S. 163]
S. 163. Bailor entitled to increase or profit from goods bailed.
Standard Chartered Bank v Custodian- In this case, shares and securities were pledged
with a bank. The bank received bonus shares, dividends, and interest on these securities. The
court held that the bank was not obligated to hand over the increments unless the pledged
securities were redeemed.
FINDER OF GOODS
Section 168: Right of Finder of Goods
1. Provision: The finder of goods does not have the right to sue the owner for
compensation for trouble and expense incurred voluntarily to preserve the goods and
to locate the owner. However, the finder may retain the goods until such
compensation is received. If the owner has offered a specific reward for the return of
the goods, the finder may sue for that reward and retain the goods until it is received.
Haack v. Clark, (1615) 2 Bulstr 306: This case also illustrates that a finder is not entitled to
claim compensation for voluntarily incurred expenses and must deliver the goods without a
lien for such expenses.
Section 169: When Finder of Thing Commonly on Sale May Sell It
1. Provision: When a thing that is commonly sold is found, and the owner cannot be
located with reasonable diligence, or if the owner refuses to pay the lawful charges of
the finder, the finder may sell the goods in the following cases:
o (1) If the thing is in danger of perishing or losing a substantial part of its value.
o (2) If the lawful charges of the finder amount to two-thirds of the value of the
thing found.
Nicholson v. Chapman, (1793) 2 Hy B1 254: This case provides an example where the
finder’s right to sell goods was exercised under circumstances where the owner was not
found or refused to pay the lawful charges.
RIGHTS OF BAILEE
1. Right to Compensation [Section 164]
Surya Investment Co v. State Trading Corporation of India (P) Ltd, AIR 1987 Cal 46:
This case illustrates the principle that the bailor is liable for any loss suffered by the bailee
due to the bailor's lack of entitlement to make the bailment or give directions.
2. Right to Expenses or Remuneration [Section 158]
Forbes Forbes Campbell & Co Ltd v. Port of Bombay, AIR 2006 Bom 162: This case
reinforces that the bailor is responsible for paying necessary expenses or charges related to
the bailment.
3. Right of lien
Section 170: Bailee's Particular Lien
Section 171: General Lien of Bankers, Factors, Wharfingers, Attorneys, and
Policy Brokers
4. Right to Sue
Section 180: Suit by Bailor or Bailee Against Wrongdoer
o Karnataka Electricity Board v. Halappa, (1987) 1 TAG 451: This case
involved a suit by a bailee against a carrier for loss or damage to the goods,
demonstrating the bailee's right to sue as per Section 180.
o Purshottam Das Banarsi Das v. Union of India, AIR 1967 All 549: This
case confirmed that a bailee can sue a third party who damages the goods,
even though the goods were pledged to another party.
Section 181: Apportionment of Relief or Compensation Obtained by Such Suits
o Morvi Mercantile Bank Ltd v. Union of India, AIR 1965 SC 1954: This
case held that a pledgee (a type of bailee) could recover the amount for the
loss of goods, which was to be apportioned as per the interests of the pledger
and the pledgee.