Every person has experience of bailment in their life that is why we need to understand the essentials of bailment given in the Indian contract act. In our daily needs, the time comes when we give our personal property or take personal property from another person for some gain or any other reason. In simple terms, a bailment is a legal relationship between two parties who can contract where the physical possession of the personal property of one person is transferred to another person who gets the possession of that property but not the owner of that property for some purpose. When the purpose of the bailment is fulfilled the person gives back the possession of the property to the owner or account for it. Now, let’s discuss the definition of bailment, types of bailment and Essential elements of bailment.
In this article, we will define bailment and its essentials, what is a bailment, the essentials of bailment, various kinds of bailment, and the rights and duties of bailor and bailee in bailment.
What is Bailment?
Bailment is a legal relationship between the bailor and bailee in which the bailor delivers the possession of his goods to the bailee for a specific purpose and when the purpose is completed, the bailor takes his goods back from the bailee or can instruct the bailee to dispose of the goods according to his directions.
There must be free consent for bailment from both sides. The Bailee must have the intention of physical possession. Section 148 in The Indian Contract Act, of 1872 deals with bailment.
Who is Bailor?
The person who is giving possession of his personal property to another person is called a Bailor in the bailment.
Who is Bailee?
The person who is taking possession of the property and gives back the property after the fulfilment of the purpose of bailment is called Bailee.
Under the bailment, normally, the Bailor has no right to use the property when it is under the possession of Bailee. But the Bailee has the superior right on that property.
Essentials of Bailment in Indian Contract Act
There are various Essentials of bailment in the Indian Contract Act which must be there. Let’s discuss the essential elements of a contract of bailment:-
Contract
The main essential of bailment is a Contract. The bailment is always based upon the contract. there must be a contract between Bailor and Bailee. Though, the contract can be “Expressed” or “implied.” There are different types of contracts and the contract of bailment must follow the essential elements of a valid contract.
A contract that does not follow the essentials of the contract is known as a void contract.
Example 1: A gives his car to B for repair, here A is the Bailor and B is the Bailee and the purpose of the bailment is expressed by the A that he wants to repair the car by B.
Delivery of possession
The actual possession or control over the property must be delivered by the bailor to the bailee to create the bailment. This is essential for bailment. If the possession is not given there is no [bailment]. The possession can be actual or constructive.
Essentials of bailment in the Indian Contract Act
Example: The Ram was holding the property on behalf of Shyam, and agrees to hold the same on behalf of Mohan, there is a constructive transfer of the possession.
Purpose
There should be the purpose of the bailment or giving personal property to another person. The goods should be transferred by the Bailor to the Bailee for some purpose.
Example: A gives his car to X to repair that car. Here the repairing of the car is the purpose of bailment.
Return or dispose of goods
The goods transferred by the Bailor to the Bailee are transferred on the condition that they will be returned to the Bailor after the fulfilment of the purpose of the bailment. However, the goods can be returned to the Bailor in their original form or altered form as the contract may be.
Easement-Meaning & Essentials of Easement
All the said points are the essentials of bailment in the Indian Contract Act. All the elements of bailment which are also known as essentials of bailment in the Indian Contract Act must be fulfilled to be a legal bailment.
The hiring of locker- Not bailment
in the famous case of Atul Mehra Vs Bank of Maharashtra, The high court held that mere hiring of a locker in the bank does not come under section 148 of the contract act. The reason is that the bank can’t check the quality, quantity and value of the personal goods which has been kept in the bank locker. The hiring of a locker in the bank comes under bank transactions only.
Types of bailment
There are mainly 4 types of bailment under the act, which are as follows:
A bailment for the benefit of Bailor and Bailee
The bailment whereby contracting the bailment, both the person ie Bailor and Bailee get benefits comes under this types of bailment.
Example: the best example for this is when a Bailor parks his car in the paid parking of Bailee. The Bailor will get the benefit of parking his car and the Bailee will get the money for parking.
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Only for the benefit of Bailor
Where the bailment gives benefit to the Bailor only is covered under this type of bailment.
Example: Free parking of the car of Bailor in the free parking lot of Bailee.
Only for the benefit of Bailee
A bailment that gives the benefit to the Bailee only comes under this type of bailment. There will be no profit to the Bailor.
For example, the best example of this is to read the books in the common library; here you are Bailee and the owner of the library is Bailor. You can read the book free of cost and gain knowledge for yourself, you will get benefits whereas the Bailor will get nothing.
Gratuitous Bailment
a bailment in which none of the parties is taking benefit is called gratuitous bailment. selection 150 of the Indian Contract Act deals with this.
For example, A lends a dog to his friend’s house.
According to section 150 of the act, the bailor must expose the defect in the goods even if he is doing bailment without reward. If the loss is incurred by the bailee due to the defective goods, then the bailor will be liable even if he was not aware of the defect.
For example, A lends the dog to his friend’s house, A knows that his dog can injure his friend but he does not tell him about this. The dog injured his friend. A is liable to pay the loss.
These 4 are the main types of bailment.
Rights and Duties of Bailor and Bailee under the Contract Act
As we discussed above, Bailment is a legal relationship between both parties and it should follow the essentials of bailment. Now, we are going to discuss the Rights of the bailor and bailee and the duties of the bailor and bailee. In the contract of bailment, the good’s ownership remains with the bailor and only the possession is transferred to the Bailee. The delivery of goods may be actual or constructive. For example, if A gives his house keys to B, it amounts to the delivery of goods in the house. Here A and B are bailor and bailee.
Rights of Bailor and Bailee under Bailment
There are various rights of bailor and bailee given under the Indian Contract Act. During the contract of bailment, the rights of the bailor and bailee perform a major role. They both can enjoy their legal rights.
Rights of Bailor
Right to claim compensation against unauthorized use
It comes under the right of the bailor to claim compensation from the bailee if he uses the bailed goods without any authorization. The bailor can sue him to get compensation.
Right to get compensation
If there is any loss or damages occurred to the bailed goods, due to the negligence of the bailee, the bailor has the right to get compensation for that loss.
Rights of bailor to get an increase or profit
It is the right of the bailor to get an increase or profit made by bailed goods to the bailee. The bailor can sue the bailee if he refuses to give the same.
Right to demand the return of goods
It is the right of the bailor to demand the return of bailed goods in good condition after the achievement of the purpose or after the expiry of the bailment period.
Right to terminate the contract
The bailor can terminate the contract if he finds that the bailee has failed to perform his duty and he shall be competent to recover the losses that occurred due to Bailee.
Rights of bailee
Right to compensation
It is the right of Bailee to get compensation for the loss or damage done to him by the act of bailor.
Right to terminate the contract
The bailee can also use his right to terminate the contract if he finds that the contract is not fulfilling the terms and conditions decided by the parties while making the contract.
Right to get expenses
The bailor is bound to pay the expenses incurred by the bailee for the contract.
Right of lien
A lien is a legal right against the assets that are used as collateral to satisfy the debt and it also comes under the Rights of Unpaid Seller. If the bailor refuses to repay the expenses incurred by the bailee for the contract, it is the right of the bailee to retain the goods and securities in his possession until the bailor pays the expenses.
Duties of Bailor and Bailee
So now, let’s discuss the Duties of Bailor and Bailee under Bailment.
Duties of Bailor
Duty to disclose all faults
The bailor must disclose all the faults and defects which are known to him. If the bailor fails to do so, he will be responsible for the losses caused by goods to the bailee.
To pay extraordinary expenses
The bailor must pay the expenses incurred by the bailee for the contract.
To accept goods after expiry
The bailor must accept the good after the expiry of time or after the purpose accomplished for which those goods were given. If he refuses to take the goods without any proper reasonable ground, he will be responsible for any loss to the goods.
Indemnify the bailee
The bailor has to indemnify the bailee for the loss incurred due to the defective title of bailed goods.
Types of Indemnity under the Indian Contract Act
Duties of Bailee
Take care of goods
According to The Contract Act, section 151, the bailee must take the proper care of goods that are given to him. He has to take care of the goods as an ordinary person takes care of his goods. He will be liable for any loss accorded due to a breach of his duty. Though, he will not be liable for the loss due to the act of God.
Not to do unofficial use of goods
Section 153 clearly says that the bailor can void the contract if he finds that the bailee has used the bailed goods unofficially.
For example. The A bought a horse for his riding. He gave his horse to B to take care of. B drives the horse. Now, it depends on the option of A for the termination of bailment.
Keep goods separate from others
The bailee must keep the goods separate from their goods. But, if in a case, the bailee mixed the good then,
- Now the bailor has an interest in it.
- The bailor can ask him to separate the goods and the bailee will be liable for the expenses of separation of goods.
- If the goods are not being separated, the bailee shall be liable to compensate the bailor for the loss of goods.
Duty of not to set any adverse title
The bailor gives his goods to the bailee for a specific period. The bailee has to give it back. So, he cannot have the right to ownership of the goods.
Returns of goods
The bailee must return the goods after the completion of the contract or the expiration of the period. In case, if the bailee fails to return the goods, he will be liable for the loss that occurred to the bailor.
For example, A asks B to return his goods bailed to him. But B has sold it to another person and now, he is not able to return it. Here, B has to compensate A.
Duty to return the profit
The Bailee must also return the profit that occurred due to goods.
For example, A gives his hen to B for custody. The hens give eggs during the custody. Now he must deliver the hen along with eggs.
Read about What are the Different Types of Contracts in Business Law?
Termination of bailment
There are various situations when the [bailment] can be ended which are:
- On the expiry of the term of bailment: where it is already specified that the bailment will be for a specific period, the [bailment] will be considered ended on that date.
- On the fulfilment of the object: the bailment will be considered ended when the object of the [bailment] has been fulfilled.
- Destruction of goods: if the goods which were used in the [bailment] were destroyed due to any reason, the contract of bailment will be terminated.
- On the death of Bailor or Bailee: on the death of either of the parties, the [bailment]will be terminated.
- On the inconsistent act: if either of the parties fails to comply with the terms of the [bailment], the [bailment]will be terminated.
- By notice: the bailment can be terminated by notice.