Duties of Bailee

CHANAKYA NATIONAL LAW UNIVERSITY

Final draft for fulfilment of project of Transfer of property Act

On

“Duties Of Bailee”

Submitted to: - Dr. Vimal Kumar

Faculty of Contracts - II

Submitted by:-Kartikay Trivedi

Roll no.1532

2nd year B.A.L.L.B. (Hons.)

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 Duties of Bailee

CONTENTS

Contents
ACKNOWLEDGEMENT .......................................................................................................................... 3
RESEARCH METHODOLOGY .............................................................................................................. 4
CHAPTER 1- INTRODUCTION .............................................................................................................. 5
CHAPTER 2- RIGHTS OF BAILEE........................................................................................................ 6
CHAPTER 3- DUTIES OF BAILEE ........................................................................................................ 8
CHAPTER 4- CONCLUSION................................................................................................................. 12
BIBLIOGRAPHY ..................................................................................................................................... 13

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 Duties of Bailee

ACKNOWLEDGEMENT

I would like to thank my faculty [Link] Kumar without the kind and support of whom the
completion of the project would have been a herculean task for me. He took out time from his busy
schedule to help me to complete this project and suggested me from where and how to collect data.

Acknowledges are also due to my friends who gave their valuable and meticulous advice which
was very useful in writing the project.

I would also like to express my gratitude towards the library staff for working long hours to
facilitate us with required material going a long way in quenching our thirst for education.

I would also like to express my gratitude towards my parents and all those unseen hands who
helped me out at every stage of my project.

KARTIKAY TRIVEDI

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 Duties of Bailee

RESEARCH METHODOLOGY

AIMS AND OBJECTIVE

 The researcher will do the research to understand the various duties that a bailee possess
in Law Of Contracts.

Hypothesis

 The researcher thinks that bailee has the duty of care as much as the bailor has when it is
in his possession.

METHOD OF RESEARCH
 The researcher will opt for doctrinal method to work on this project topic.

METHODS OF DATA COLLECTION:

 For the purpose of research work, the researcher has done doctrinal and non-doctrinal
research methods. In doctrinal research method, the researcher has collected information
through library study, books and through surfing the web.

METHOD OF WRITING:
 The method of writing followed in the course of this project is primarily analytical.

Review of literature
 Primary sources
Legislative Authorities

 Secondary Sources
Websites

Books

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 Duties of Bailee

CHAPTER 1- INTRODUCTION

Bailment is a common law term and involves the change of possession, i.e., delivery of goods or
personal property by one person to another, but the ownership remains unchanged. Chapter IX of
the Indian Contract Act, 1872 deals with the sections regarding the Contract of Bailment.

Section 148 to Section 171 lays down the definitions, nature of the contract of bailment as well as
the rights, duties and liabilities of both the bailor and the bailee. Bailment, as per the Indian
Contract Act, puts certain legal obligations on bailee at the time of redelivery or disposing of goods
as directed by the bailor. Different sections of this Chapter IX provide for different duties of bailee
about the goods bailed to him. Duties of Bailee also depend on upon the very object of the contract
of [Link] obligations of bailee on the goods bailed to him depend on the terms and
conditions mentioned in the contract he has entered into. In other words, his duty towards the
goods arises at that time when the purpose for which goods are bailed is completed. Such duties,
if are not taken care of, may make the bailee liable (according to the contract). Also, there are
certain bailment contracts which exempt the bailee from any obligation or liability.

Bailment describes a legal relationship in common law where physical possession of personal
property, or a chattel, is transferred from one person (the "bailor") to another person (the "bailee")
who subsequently has possession of the property. It arises when a person gives property to
someone else for safekeeping, and is a cause of action independent of contract or tort.1

Bailment is distinguished from a contract of sale or a gift of property, as it only involves the
transfer of possession and not its ownership. To create a bailment, the bailee must both intend to
possess, and actually physically possess, the bailable chattel. Bailment is a typical common law
concept although similar concepts exists in civil law.2In addition, unlike a lease or rental, where
ownership remains with the lessor but the lessee is allowed to use the property, the bailee is
generally not entitled to the use of the property while it is in his possession.

A common example of bailment is leaving your car with a valet. Leaving your car in an unattended
parking garage is typically a license rather than a bailment, as the car park's intent to possess your
car cannot be shown. However, bailments arise in many other situations, including terminated
leases of property, warehousing (including store-it-yourself) or in carriage of goods.A bailment for
the mutual benefit of the parties is created when there is an exchange of performances between the
parties (e.g. a bailment for the repair of an item when the owner is paying to have the repair
accomplished).

A bailor receives the sole benefit from a bailment when a bailee acts gratuitously (e.g. the owner
leaves the precious item such as a car or a piece of jewelry in the safekeeping of a trusted friend
while the owner is traveling abroad without any agreement to compensate the friend).A bailment is
created for the sole benefit of the bailee when a bailor acts gratuitously (e.g., the loan of a book to a
patron, the bailee, from a library, the bailor)

1
[Link] Retrieved 5-10-2017
2
[Link]. Retrieved 5-10-2017
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 Duties of Bailee

CHAPTER 2- RIGHTS OF BAILEE

1. Rights to interplead (Sec. 165). If a person, other than the bailor, 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
to the goods.

2. Rights against third person (Sec. 180). If a third person wrongfully deprives the bailee of
the use or 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 bring a suit against a third person for such deprivation or injury.

3. Right of particular lien for payment for services (Sec. 170). Where the bailee has (a) in
accordance with the purpose of bailment, (b) rendered any service involving the exercise of labour
of skill, (c) in respect of the goods, he shall have (d) 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. Bailee has, however, only a right to retain the article and not to sell it. The service
must have entirely been formed within the time agreed or a reasonable time and the remuneration
must have become due. 3

This right of particular lien shall be available only against the property in respect of which skill
and labour has been used.

Examples

(i) A delivers a rough diamond to jeweller, to be cut and polished, which is accordingly done. B
is entitled to retain the stone till he is paid for the services he has rendered.

(ii) A gives cloth to B, a tailor, to make into a coat. B promises A to deliver the coat as soon as it
is finished, to give A three month’s credit for the price. B is not entitled to retain the coat until he
is paid.

3
[Link] Retrieved 5-10-2017

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4. Right of general lien (Sec. 171). Bankers, factors, wharfingers, attorneys of a High Court and
policy brokers will be entitled to retain, as a security for a general balance of amount, any goods
bailed to them in the absence of a contract to the contrary. By agreement other types of bailees
excepting the above given five may also be given five may also be given this right of general lien.

5. Right to indemnity (Sec. 166). Bailee is entitled to be indemnified by the bailor for any loss
arising to him by reasons that the bailor was not entitled to make the bailment or to receive back
the goods or to give a directions respecting them. If the bailor has not title to the goods, and the
bailee in good faith, delivers them back to, or 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.

6. Right to claim compensation in case of faulty goods (Sec. 150): A bailee is entitled to
receive compensation from the bailor or any loss caused to him due to the failure of the bailor 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 extraordinary expenses (Sec. 158) : A bailee is expected to take reasonable
care of the gods bailed. In case he is required to incur any extraordinary expenses, he can hold the
bailor liable for such expenses.4

8. Right of delivery of goods to any one of the several joint bailor of goods. Delivery of goods
to any one of the several joint bailors of goods will amount to delivery of goods to all of them in
the absence of any contract to the contrary.

4
ibid

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 Duties of Bailee

CHAPTER 3- DUTIES OF BAILEE

[Link] to take reasonable care5:

Section 151 of the Contract Act provides that the bailee is under obligation to take care of the
goods bailed to him as an ordinarily prudent man in his place would have taken under the similar
situation. This means that the duty laid down by this section is general and uniform in nature. This
section does not provide for any exceptional situations; rather it covers all the contracts of
bailment. In Giblin v. McMullen 6, the court pointed out that “a gratuitous bailee is bound to take
the same care of property entrusted to him as a reasonable, prudent and careful man may fairly be
expected to take his property of the similar description.” 7 Therefore, the bailee is bound to take
reasonable care whether the bailment is gratuitous or non-gratuitous. Additionally, the obligation
of a bailee includes not only the duty to take all reasonable precautions to obviate the risks but also
the duty of taking all proper measures for the protection of the goods when such risks had already
occurred. 8

The parties under the contract of bailment may insert any special provision increasing the
responsibility of the bailee in respect of care to be taken against the goods bailed, but they cannot
decrease the standard of care. Section 152, in this regard clearly states that one has to fulfill the
requirement of reasonable care mentioned in Section 151 even if the contract has any special
provision. The standard of duty cannot be reduced, as it would be unfair if bailee is not held liable
for his negligence of not taking standard care. Even where he has contracted himself out of liability
due to his negligence, the bailee has still to show that he took as much care of the pledged goods
as an ordinarily prudent man as required by Section 151.9

In Sheik Mohamed v. the British Indian Steam Navigation Co. Ltd.10 The case, it was pointed out
that a bailee’s liability cannot be reduced by any provision which is under the limit provided in
Section 151; also it was held that any such contract which results in complete exclusion of bailee
from liability in case of his negligent act is not valid.

In certain situations the standard of care of care is increased the i.e., special degree of care is
required to be fulfilled. In Pitt Son and Badgery Ltd v Proulefco SA 11, a wool broker sold wool
but retained it in his store. The store was wooden, old and surrounded by a fence with gaps large
enough for a person to enter. The wool was destroyed in the fire caused by an intruder who entered
through the gaps, and set light to the store from outside. It was held that the broker, as a bailee,
was responsible for the loss; he was in breach of duty because the fence was insufficiently secure
to keep out intruders.

5
Section 151, Indian Contract Act 1872.
6
Giblin v. McMullen, (1703) 2 Ld Raym 909.
7
ibid
8
Lakhichand Ramchand v. G.I.P. Rly. Co., (1912) 14 Bom. LR 165.
9
Central Bank of India v. Grains and Gunny Agencies, AIR 1989 MP 28
10
Sheikh Mohamed v. The British Indian Steam Navigation Co. Ltd., (1908) 32 Mad. 95
11
Indian Airline Corpn. v. Madhuri Chowdhury, AIR 1965 Cal 252.

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Example (i): A delivered to B certain gold ornaments for safe custody. B kept the ornaments in a
locked safe and kept the key in the case box in the same room. The room was on the ground and
was locked from outside, and therefore, was easily accessible to burglars. The ornaments were
stolen. It was held that the bailee did not take reasonable care, and therefore, was liable for the loss
(Rampal V. Gauri Shanker, 1952).

(ii) A deposited his goods in B’s godown. On account of unprecedented floods, a part of the goods
were damaged. Held, B is not liable for the loss (Shanti Lal V. Takechand).

A bailee is liable to compensate the bailor for any damages done to the thing bailed by the
negligence of his servants acting in the course of the employment.

[Link] not to make any unauthorized use:

In a contract of bailment, the bailor transfers the goods to the bailee for some purpose, and the
bailee is responsible for using the goods bailed according to the purpose of bailment. Section 154
of Indian Contract Act imposes liability on bailee if goods are not used authoritatively. Using
goods beyond the conditions of a contract would make the bailee liable to bailor if due to such
unauthorized act the bailor has suffered any loss or if goods are damaged. This implies that the
bailee is not entitled to use the goods for personal benefits (unless the bailment for his use) by
doing an unauthorized act. Even if the goods bailed are for his personal use, he is not authorized
to let the goods be used by another person. Nevertheless, if the situation requires, the bailee may
use these goods for preservation.12 But in the other circumstances, he is required to have express
or implied consent of the bailor to use the goods against the conditions of bailment contract.

[Link] not to mix or part with the goods:

The bailee has to take certainly reasonable care while dealing with the goods of the bailor. One
such responsibility includes his duty not to mix the bailor’s goods with his own or part of the
goods. According to Section 155, if the bailee has mixed the goods with his goods and while doing
so he had the prior consent of the bailor, then the bailor will have interest over the goods in
proportion to the goods he has bailed. But this section specifically states that the bailee had the
consent of bailor.

Section 156 and 157 speaks about the conditions wherein the bailor’s consent was not there while
mixing the goods. In those situations wherein the goods are separable, the law imposes liability on
the bailee for any loss or damage that the bailor might suffer due to such mixing. But if it is not
possible to separate the goods, the bailor is entitled to claim reimbursement for the loss of goods.

12
Fothergill v. Monarch Airlines Ltd [1980] 2 All ER 696, p 702

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[Link] to return goods:

One of the essentials of a contract of bailment is that once the purpose for which goods are bailed
is accomplished, the bailee has to return the goods back to the bailor or dispose of as per the
direction of the bailor. Section 159 states that the bailor may ask for the return of loan at any point
of time if the loan is provided gratuitously to him. And the bailee is under obligation to return so.
However, he can claim compensation if he has suffered any loss from such act of bailor.

Section 160 provides that if the time of bailment has expired or the purpose is fulfilled, then the
bailee is bound to deliver the goods as per the directions of the bailor without demanded by bailor,
i.e., he has to be cautious about the delivery of the goods. There is an implied contract in a bailment
to return the articles in a reasonable time after the purpose is served even if no time is stipulated
for return.13 The bailee is under a duty to return the goods bailed on the expiration of the period of
bailment unless he can show good cause for not returning them.14 Where an article is hired for use
or a purpose but such article is unfit for such use or purpose, this is treated as a breach of warranty,
and the bailee is not bound to return it to the bailor because the purpose cannot be accomplished.
In such a case, the bailee may give notice to the bailor who is then bound to take it back.15

Section 165 says that in the cases involving more than one owner of the goods bailed, the bailee is
under obligation to return it to any one of the owner or as per directions were given to him.

[Link] use goods according the conditions of bailment (Sec. 154):

Bailee must use the goods according to the conditions of the contract of bailment or the directions
of the bailor. He shall be held liable for compensation to the bailor if any damage is caused to the
goods because of his unauthorised use. Bailee must not do any act with regard to the goods bailed
which is inconsistent with the terms of the bailment, otherwise the contract shall become voidable
at the option of the bailor and bailee shall be held liable to compensate and damages caused to the
goods.

Example: A lends his horse to B for his own riding only. B allows C, a member of his family, to
ride the horse. C, rides with care but the horse accidently falls and is injured. What remedy has A
against B ?

A can claim damages from B for the injury caused to the horse from an unauthorised use. B in this
case has failed to use the horse according to the conditions of bailment, and therefore, he shall be
liable to pay compensation to the bailor for the damages caused to the horse because of his
unauthorised use.

13
Chaturgun v. Shahzady AIR 1930 Oudh 395
14
Pollock and Mulla Indian Contract and Specific Relief Acts, Ed. 13th 2006, Section 160
15
Isufalli v. Ibrahim, 23 Bom LR 403

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[Link] not set up an adverse title:

Bailee must not set up a title adverse to that of the bailor. He must hold the goods on behalf of and
for the bailor. He cannot deny the title of the bailor.

 Obligations of Bailee if the Goods are not Returned

Section 161 clarifies the responsibility of bailee if he has failed to deliver the goods after the expiry
of time or completion of purpose. The bailee is not liable if the delay in delivering the goods or
disposal of goods is due to default of others. Unexplained failure to return the thing bailed is
presumed to be by the bailee’s default; 16 and it would be presumed as his negligence. A bailee
who refuses to give delivery, except upon some unjust or unreasonable condition, is by
default.17Moreover, if the bailee fails to return or dispose of the good, then the bailee, at his risk,
keeps the goods with him and if after that any loss or damage happens, the bailee would be held
liable for the same.

 Duty to deliver increase or profit accrued from bailment:

Section 163 of ICA states that “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.” This section provides that if there is any gain with regards to the
goods bailed, then such gain must be handed over to bailor along with the goods and bailee is not
entitled to keep it with him. But the bailor cannot claim profit or increase before the completion
of the purpose of bailment or before the expiry of time of bailment contract.

16
Kush Kanta Barkakati v. Chandra Kanta Kakati AIR 1924 Cal 1056
17
GIP Rly v. Firm of Manikchand Premji, AIR 1931 Nag 29

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CHAPTER 4- CONCLUSION

The bailee has to perform according to the obligations laid down in the contract of bailment and
as per the law of the land. He is being inconsistent or negligent while performing his obligation or
duty would make him liable under various provisions of law. In each contract of law, he has a
certain uniform or fixed obligations to comply with, and he cannot part with those basic obligations
even if a contract does not provide for any such obligations. These obligations are the essence of
bailment contract. The obligations might differ depending on the facts but there are certain duties
which are implied, and reasonable care is to be taken by the bailee. The bailee’s responsibility
towards the goods bailed can be increased by way of providing provisions in that regard but it
cannot be lowered down, i.e., he cannot repudiate his responsibility.

Various duties of bailee viz:

Bailee should take reasonable care on goods.
Bailee should not use the goods for an unauthorized purpose.
Bailee should not setup adverse title.
Bailee should return the goods after fulfillment of purpose.
Bailee should return not only delivered goods, but also additions.
Bailee should not mix up the goods with his own goods or others goods. If bailee has mixed the
goods and the goods are of sufferable nature, bailee has to face the cost of separation. If the goods
are of insufferable nature, bailee has to compensate bailer.

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BIBLIOGRAPHY

 Websites

1. [Link]
2. [Link].
3. [Link]

 Books

1. Pollock and Mulla Indian Contract and Specific Relief Acts, Ed. 13th 2006
2. Contract and Specific Relief Act, Ed 11th 2013

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