2. Bailment And Pledge Flashcards
Essential elements of a contract of bailment
Essential elements of a contract of bailment: Section 148 of the Indian Contract Act, it defines the term ‘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 essential elements of the contract of the bailment are
- Delivery of goods-The essence of bailment is delivery of goods by one person to another.
- Bailment is a contract - In bailment, the delivery of goods is upon a contract that when the purpose is accomplished, the goods shall be returned to the bailor.
- Return of goods in specific: The goods are delivered for some purpose and it is agreed that the specific goods shall be returned.
- Ownership of goods- In a bailment, it is only the possession of goods which is transferred and the bailor continues to be the owner of the goods.
- Property must be movable-Bailment is only for movable goods and never for immovable goods or money.
Delivery to bailee
According to Section 149 of the Indian Contract Act. the delivery to the bailee may be made by doing anything which has the effect of putting the goods in the possession of the intended bailee or of any person authorised to hold them on his behalf. Thus, delivery is necessary to constitute bailment.
What is bailment
Bailment is defined as an act whereby goods are delivered by the person to another for some purpose on a contract that the goods shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them.
Ballor- the person who delivers the goods Bailee- the person to whom the goods are delivered.
Bailor’s duties
(i) Bailor has to disclose all the facts/faults about bailed goods to bailee.
(ii) Under gratuitous bailment, Bailor has to reimburse expenses incurred by Ballee, if any.
(iii) Bailor has to compensate the loss on bailed goods to Bailee, if any.
(iv) Bailor has to accept the goods after purpose is accomplished.
Bailor’s rights
(i) To enforce bailee’s duties such as right to claim damages, compensation, if any.
(ii) To terminate the contract of bailment.
(iii) To demand back goods.
(iv) To claim increase or profit from goods bailed.
Categories of bailment on the basis of reward
On the basis of reward, bailment can be classified into two types
a. Gratuitous Bailmene: The word gratuitous means free of charge. So, a gratuitous bailment is one when the provider of service does it gratuitously ie, free of charge. Such bailment would be either for the exclusive benefits of bailor or bailee.
b. Non-Gratuitous Bailment: Non gratuitous bailment means where both the parties get some benefit i.e. bailment for the benefit of both bailor & bailee
Goods with default
in Section 150. The section provides that 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; and if he does not make such disclosure, he is responsible for damage arising to the bailee directly from such faults.
Bailee is bound to take care
Sec 151 of the Indian contract Act,1872 states that in all the cases of Bailment, the Bailee is bound to take as much care of the goods Bailed to him as a man of ordinary prudence would, under similar circumstances takes care of his own goods of the same bulk, quality and value as the goods Bailed.
In the absence of any special contract
according to section 152 of the Indian Contract Act, 1872, the ballee, in the absence of any specia contract, is not responsible for the loss, destruction or deterioration of the thing bailed, if he had taken reasonable care as required under section 151
Voidable contract
As per Section 153, a contract of bailment is voidable at the option of the bailor, if the bailee does not use the goods according to the terms and conditions of bailment.
Goods used not according to conditions
According to section 154 of the Indian Contract Act, 1872, 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.
Without bailor’s consent mixes the goods
According to section 156 of the Contract Act, 1872, If the bailee, without the consent of the bailor, mixes the goods bailed with his own goods and the goods can be separated or divided, the property in the goods remains in the parties respectively; but the bailee is bound to bear the expense of separation or division and any damage arising from the mixture
Mixes without consent & unseperable
According to section 157 of the Contract Act, 1872, if the bailee, without the consent of the bailor. mixes the goods of the bailor with his own goods, in such a manner that it is impossible to separate the goods bailed from the other goods and deliver them back, the bailor is entitled to be compensated by the bailee for the loss of the goods.
Gratuitous bailment
According to section 158 of the Contract Act, 1872,
a. In case of Gratuitous bailment:
Where, by the conditions of the bailment, the goods are to be kept or to be carried, ar to have work done upon them by the bailee for the bailor, and the bailee is to receive no remuneration (gratuitous bailment), the bailor shall repay to the bailee the necessary expanse incurred by him and any extraordinary expenses incurred by him for the purpose of the bailment,
b. In case of non-gratuitous bailmentthe bailor is liable to pay the extraordinary expenses incurred by the bailee.
In this case, since it is non-gratuitous bailment and these are the extraordinary expenses and it is the bailor’s duty to bear such expenses. the usual and ordinary expenses for petrol, toll tax etce are to be borne by the bailee itself.
Demand goods back
According to section 159 of the Contract Act. 1872, When the goods are lent gratuitously, the bailor can demand back the goods at any time even before the expiry of the time fixed or the achievement of the object. The bailor must compensate the bailee for the loss or damage suffered by the bailee that is in excess of the benefit received, where he had lent the goods gratuitously and decides to terminated the bailment before the expiry of the period of bailment.
Expired Contract
section 160 and 161 of the Indian Contract Act, 1872. Accordingly, it is the duty of the bailee to return or deliver the goods bailed according to the bailor’s directions, 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.
According to Section 161, if, by the default of the bailee, the goods are not returned, delivered or rendered at the proper time, he is responsible to the bailor for any loss, destruction or deterioration of the goods from that time, notwithstanding the exercise of reasonable care on his part.
Delivery according to directions
section 163 of the Indian Contract Act, 1872, 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.
Termination of contract of bailment
A contract of bailment shall terminate in the following circumstances:
- On expiry of stipulated period: If the goods were given for a stipulated period, the contract of bailment shall terminate after the expiry of such period.
- On fulfilment of the purpose: If the goods were delivered for a specific purpose, a bailment shall terminate on the fulfilment of that purpose.
- By Notice:
(a) Where the bailee acts in a manner which is inconsistent with the terms of the bailment, the bailor can always terminate the contract of bailment by giving a notice to the bailee.
(b) A gratuitous bailment can be terminated by the bailor at any time by giving a notice to the bailee. However, the termination should not cause loss to the bailee in excess of the benefit derived by him. In case the loss exceeds of the benefit derived by the bailee, the bailor must compensate the bailee for such a loss (Sec. 159).
- By death: A gratuitous bailment terminates upon the death of either the bailor or the bailee.
- Destruction of the subject matter: A bailment is terminated if the subject matter of the bailment is destroyed or there is a change is in the nature of goods which makes it impossible to be used for the purpose of bailment.
Finder of lost goods
As per the provisions of section 168 and 169 of the Indian Contract Act, 1872,
(1) The finder of goods has no right to sue the owner for compensation for trouble and expense voluntarily incurred by him to preserve the goods and to find out the owner. But ‘finder of lost goods’ can ask for reimbursement for expenditure incurred for preserving the goods and also for searching the true owner. If the real owner refuses to pay compensation, the ‘finder’ cannot sue but retain the goods so found.
Further, where the real owner has announced any reward, the finder is entitled to receive the reward. The right to collect the reward is a primary and a superior right even more than the right
to seek reimbursement of expenditure.
(ii) The finder though has no right to sell the goods found in the normal course; he may sell the goods if the real owner cannot be found with reasonable efforts or if the owner refuses to pay the lawful charges subject to the following conditions:
(a) when the article is in danger of perishing and losing the greater part of the value or
(b) when the lawful charges of the finder amounts to two-third or more of the value of the article found.
General lien
Sec 171 of the Indian Contract Act, 1872 confer on bailee the right of general lien.
General lien alludes to the right to keep possession of goods belonging to other against general balance of account
A general lies is not automatic but is recognized through on agreement. It is exercised by the bailee only by name
It can be exercised against goods even without involvement of labour skill
Only such persons as are specified under sec 171. Eg. Bankers, factors, wharfingers, policy brokers etc. are entitled to general lien
Particular lien
Section 170 of the Indian Contract Act, 1872 confers on the bailee, the right of particular lien.
Particular lien implies a right of the bailee to retain specific goods bailed for non-payment of amount
It is automatic
It comes into play only when some labour or skill is involved has been expended on the goods, resulting in an increase in value of goods
Bailee, finder of goods, pledgee, unpaid seller, agent, partner etc. are entitled to particular lien
Right of lien
According to section 170 of the Indian Contract Act, 1872, Where the Bailee has, in accordance with the purpose of the bailment, rendered any service involving the exercise of labour or skill in respect of the goods bailed, he has in the absence of a contract to the contrary, a right to retain such goods until, he receives due remuneration for the services he has rendered in respect of them.
To exercise the right of lion, Bailee must have the possession of the goods. Such a right to retain the goods bailed is the right of particular tien. He however does not have the right to sue
General lien of bankers
According to section 171 of the Indian Contract Act, 1872, bankers, factors. wharfingers, attorneys of a High Court and policy brokers may, in the absence of a contract to the contrary, retain, as a security for a general balance of account any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to the effect
Pledge
Section 172 of the Indian Contract Acts defines a pledge as the bailment of goods as security for payment of debt or performance of a promise. When goods have been pledged, the bailor is called in this case the pawner and the bailee, the pawnee. In the case of pledge no transfer of any interest in property takes place; but a special right to property is carved out in favour of the pledge, ie. he has right to dispose of the property in certain circumstances.
