Bailment is a kind of activity in which the property of one person temporarily goes into the possession of another. The ownership of the property remains with the giver, while only the possession goes to another. Several situations in day to day life such as giving a vehicle for repair, or parking a scooter in a parking lot, giving a cloth to a tailor for stitching, are examples of bailment. Section 148 of Indian Contract Act 1872, defines bailment as follows:-
Section 148 - 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 and the person to whom they are delivered is called the bailee.
Explanation - If a person is already in possession of the goods of another contracts to hold them as a baliee, he thereby becomes the bailee and the bailor becomes the bailor of such goods although they may not have been delivered by way of bailment.
1. Duty to take reasonable care:-A bailee is bound to take reasonable care of the goods bailed to him. He is required to take as much care of the goods bailed to him as a man of ordinary prudence could take of his goods. Sec. 151 of Indian Contract Act provides-"In all cases of bailment the bailee is bound to take as much care of goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality and value as the goods bailed. For example:
Silver was entrusted to a goldsmith for making ornaments. He kept it locked in an almirah and employed watchman for the night. Despite all these precautions the silver was stolen. It was held by the court that the goldsmith had taken reasonable care of the goods and therefore. he was not liable for the loss.
Bailee not an insurer.- The bailee is bound to take reasonable care of the goods. However, the position or liability of the bailee is not that of an insurer. If inspite of his care the goods are lost or destroyed by accident or by an act of God or by the enemy of the state the bailee would not be liable for the loss.
It is to be noted here that any loss incurred by acts of God like fire, floods, lightening are regarded to be beyond the control of human beings.
Similarly, breaking of war is also beyond the control of a general person, In such circumstances, a bailee cannot be held liable for destruction of goods bailed to him.
Consequence of failure to take proper care-Where the bailee fails to take proper care of the thing bailed and such failure results into damage, loss or destruction of the thing bailed, the bailee would be liable to compensate the loss caused by the lack of proper care to the thing bailed. If the bailee has taken the amount of care expected of him under Section 15 I of the Indian Contract Act, he will not be liable for the loss, destruction, or deterioration of the thing bailed. But where there is a special contract fixing the responsibility of the bailee for such loss, destruction or deterioration of the thing bailed he may be held liable for the same (Section 152 of the Contract Act).
In The New India Assurance Co. Ltd. v. The Delhi Development Authority, A. 1. R. 1991 Del. 198, vehicle was parked in the parking centre and a receipt was issued for its safe keeping. It was held that it amounted to bailment. Loss of vehicle, and the authenticity as bailee failed to show reasonable care, bailee was liable for loss.
In N. R. S. lyer v. New India Assurance Co. Ltd., Madras, AIR 1983 SC 899, the vehicle was taken to the repairer by the insurer after an accident. This was done on behalf of the insurer who entered into negotiations with the repairer about repairing charges. It was held that the insurer would be the bailee and the repairer would be the sub-bailee in such a case.
A car was in the custody of the repairer and it was destroyed by fire, which occurred in the repairer's workshop where some inflammable material was also kept.
It was held that the bailee and sub-bailee did not take reasonable care of the goods. Therefore, the bailee is liable for the loss suffered by the plaintiff (the bailor).
2. Not to make an unauthorised use of the goods:- Where the bailee makes an unauthorised use, his responsibility for the goods becomes that of an insurer. Here, he becomes responsible for any loss or damage resulting from the unauthorised use, even if the loss was not due to his negligence. Section 154 of the Indian Contract Act provides :-
"If the bailee makes any use of the goods bailed, which is not according to the conditions of the bailment, he is liable to make compensation to the bailor for any damage arising to the goods from or during such use of them."
(a) Jewellery was pledged with a money-lender as security for a loan. The lender gave this jewellery to his wife for putting it on at a social gathering. While returning from this function his wife was attacked by a gang of dacoits, who relieved her of all her jewellery. It was held by the court that the money-lender. was liable to make good the loss.
(b) A hired a motor car for going to Bristol. The hirer (took the car to Scarborough. On the way a lorry collided with his car, which was smashed. The accident was entirely due to the negligence of the lorry driver. It was held by the court that the defendant had made unauthorised use of the car. His responsibility for its safety had been increased to that of an insurer and he was liable to make good the loss.
(c) A hires a horse to B for carriage work. B's wife rode the horse with the result that both horse and wife were injured. Here B vide Section 154 is liable to pay compensation for injuries sustained by the horse for its unauthorised use and B or B's wife have no right against A :
(i) If, however, the loss or destruction was due to some inherent defects in the goods themselves, and would have occurred in any case, this will not be regarded a loss resulting from the unauthorised use of the goods and the bailee shall not be liable for the loss.
(ii) Where the bailee make unauthoriscd use to the goods the bailor has the right to terminate the contract of bailment forthwith.
3. Not to mix the goods with his own goods.- Where the goods of the bailor and bailee becomes mixed such mixing may be (i) with the consent of the bailor; or (ii) it may be the result of an accident, mistake or inadvertence. or (iii) it may be wilful or intentional. (Sections 115-157).
Effects of such mixing:-
(i) Where the bailee, with the consent of the bailor, mixes the goods bailed the bailor and the bailee shall have interest in the proportion of their respective shares, In the mixture thus produced.
(ii) Where goods are mixed by accident, inadvertence or by the act of God, and the mixture is composed of similar kind and quality, it belongs to the bailor and the bailee as "tenants-in-common”: any attendant cost of separating them is to be borne by the bailee. (Lupton v. White).
(iii) Where goods are wilfully and intentionally mixed and the bailor does not give his consent to such mixing, if they can be separated, the bailee is liable to bear expenses of division. But. if they are impossible to be separated, the bailor is entitled to be compensated by the bailee for the loss of goods.
4. Not to set up a title:-The bailee cannot set up a title to the goods adverse to the title of the bailor. Section 117 of the Evidence Act. provides "nor shall any bailee or licensee be permitted to deny that his bailor or licensor had. at the time when the bailment or license commenced. authority to make such bailment or grant such license.
Section 166 of the Contract Act provides-If the bailor has no title to the goods and the bailee. in good faith delivers them back to. or according to the directions of the bailor. the bailee is not responsible to the owner in respect of such delivery.
5. To return the goods:-After the purpose or the period of bailment is over, and if the bailment is gratuitous the thing bailed may be' asked to be returned any time (Section 160. Indian Contract Act). If he does not return. he will be liable for the loss. (Section 161. Indian Contract Act).
6. Duty to return increase:-In the absence of any contract to the contrary. the bailee is bound to deliver to the bailor or according to his direction any increase or profit which may have accrued from the goods bailed. (Section 163 Indian Contract Act).
A leaves 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.
In Standard Chartered Balik v. Custodian. AIR 2000 SC 1488. the Supreme Court observed what Section 163 of the Contract Act really means is that accretions in respect of the goods bailed cannot be a property of the bailee but must be returned when the goods themselves bailed are returned. A necessary corollary to this would be that as the pledge extends to such accretions then when the goods are returned these accretions must also be given back.
Courtesy:- Legal Point Foundation