Bailment:

The word 'Bailment' is comes from French word 'baillier' which means to deliver. Section 148 of the Indian contract act deals with bailment. Bailment is the delivery of goods by one person to another for some purpose, upon 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 the goods is called 'Bailor'. The person to whom they are delivered is called 'Bailee'.

Example: Where 'P' delivers his car for repair to 'Q', 'P' is the bailor and 'Q' is the bailee.

Essential Elements of Contract of Bailment:

1. Contract: Bailment is based upon a contract. The contract may be express or implied. No consideration is necessary to create a valid contract of bailment.
2. Delivery of goods: It involves the delivery of goods from one person to another for some purposes. Bailment is only for moveable goods and never for immovable goods or money. The delivery of the possession of goods is of the following types:
    
   • Actual Delivery: When goods are physically handed over to the bailee by the bailor. Example: delivery of a bike for repair to workshop
   • Constructive Delivery: Where delivery is made by doing anything that has the effect of putting goods in the possession of the bailee or of any person sanctioned to hold them on his behalf. Example: Delivery of the key of a bike to a workshop dealer for repair of the bike.
      
3. Purpose: The goods are delivered for some purpose. The purpose may be express or implied.
4. Possession: In bailment, possession of goods changes. Change of possession can happen by physical delivery or by any action which has the effect of placing the goods in the possession of bailee. The change of possession does not lead to change of ownership. In bailment, bailor continues to be the owner of goods as there is no change of ownership.

Where a person is in custody without possession he does not became a bailee. Example, servants of a master who are in custody of goods of the master do not become bailees.

Types Of Bailment:

• Gratuitous bailment:
   is the bailment of goods without any charges. The bailee is not required to pay any charges for the bailment.
• Non gratuitous bailment:
  is a bailment for some reward. The bailee is required to pay some charges to the bailor.

Duties Of Bailor:

• It is the duty of the bailor to reveal the known defects in the goods. If the bailor fails to disclose such defects and as a result, if the bailee suffers from any loss. The bailor should pay off the bailee for such loss. In case of gratuitous Bailment If the bailor fails to disclose such defect then the bailor is liable to indemnify bailee for such loss. In case of non gratuitous bailment. If the bailee suffers any loss Due to any defect in the goods, the bailor is liable to indemnify Bailee for such loss whether he knows those defect or not.
   
• The bailor must repay to the bailee all the essential expenses which the bailee has already incurred for the purpose of bailment in the case of gratuitous bailment. But in case of non gratuitous bailment, the bailor is liable to reimburse the extra-ordinary expenses incurred by the bailee.

  Example: Mr. A delivers a dog to Mr. B. B incurred Rs 100 as feeding expenses and Rs 200 as medical expenses when the dog become sick. State the legal position (a) if nothing was charged by either party. (b) If Mr. Z charged Rs 500 from X. Solution: (a) It is a case of gratuitous bailment where Z (the bailor) must repay Mr. Z delivered a Dog to Mr. X incurred Rs 100 as feeding expenses 300 to Mr. X (the bailee) because the bailor is bound to bear all expenses incurred by the bailee for the purpose of bailment. (b) It is the case of non gratuitous bailment where Mr. P (the bailor) must repay Rs 200 to Q (the bailee) because the bailor is Bound to bear all extraordinary expenses (and not ordinary expenses) incurred by the bailee for the purpose of bailment.
   

• If the loss caused to the bailee due to early termination is more than the benefit obtained by the bailee, it is the duty of the bailor to compensate the bailee for such an extra loss.
   
• If the bailor does not have any title to deliver the goods to the bailee, he would be liable to indemnify to the bailee for any loss which the bailee has paid to the original owner. Example: Q asks his friend P to give him cycle for one hour. P instead of his own cycle gives R's cycle to Q. While Q was riding, the main owner of the cycle catches Q and surrenders him to police custody. Q is entitled to recover from P all costs, which Q had to pay in getting out of this situation
   
• If the bailor wrongfully refuse to receive back the goods, he shall be liable to pay necessary expenses incurred by the bailee for keeping this goods safely. Example: - Mr. Q lent a dog to Mr. P for ten days. On the expiry of ten days, Mr. Q refused to receive back the dog but after five days, he received back the dog. During these five days, Mr. P incurred Rs 500 as feeding expenses. Mr. Q must repay Rs 500 to Mr. P.
   
• It is the duty of bailor to bear the risk of loss, deterioration and destruction, of the things bailed, provided that bailee has taken reasonable care to protect the goods from loss. Example: Mr. A lent a cat to Mr. B for five days. On fifth day, the cat become sick and was hospitalized but died. Mr. B is not liable to Mr. A for this loss.

Rights Of A Bailor:

1. If the bailee has not taken reasonable care the bailor has a right to claim damages for the loss, destruction of the goods bailed.
2. If the bailee uses the goods in an unapproved manner, the bailor can dismiss the contract of bailment before the completion of the bailment. A contract of bailment is known as a voidable contract in such an event the bailee cannot sue the bailor for a breach of contract.
3. If the bailee does not use the goods bailed according to the terms and conditions of the bailment contract, the bailor has a right to claim compensation from bailee for any damages arising to the goods from or during such use of them.
4. If the bailee, without the consent of the bailor mixes bailors goods with his own goods and the goods can be separated, the bailor has a right to claim his goods after separation.
5. If the bailee without the consent of the bailor mixes bailors goods with his own goods and the goods cannot be separated, the bailor has a right to claim compensation from bailee for the loss of the goods.
6. The bailor has a right to demand return of goods after the completion of the purpose or after the expiry of period of bailment.
7. If the bailee does not return or deliver the goods according to the bailor's directions, after the accomplishment of purpose or after the expiry of period of bailment, the bailor has a right to claim compensation for any loss, destruction and deterioration of goods from that time.
8. In the absence of contract to the contrary, the bailor has a right to demand any increase or profit which may have occurred from the goods bailed. Example:- Mr. A leaves a cow in the custody of Mr. B to be taken care of. The cow has a calf then Mr. B is bound to deliver the calf as well as the cow to Mr. A.

Duties of Bailee:

• The bailee should take reasonable care of the goods which are in his possession. The degree of care required by the bailee is similar to that of a man of ordinary prudence would take of his own goods under the similar circumstances. If he has taken such care, he is not liable, even if the goods are lost or damaged. He is also not liable for the destruction or the loss of goods due to an act of god.
• The bailee should not use the goods for an unauthorized purpose. He can use the goods as per the terms and condition of the bailment. If the bailee makes any unauthorized use of goods he shall be liable for any loss on any unauthorized use of goods. The bailor may terminate the contract of bailment. In other words the contract of bailment becomes voidable.
• 1. If the bailee, with the consent of the bailor, mixes the goods of the bailor with his own goods, the bailor and the bailee shall have an interest, in proportion to their respective shares, in the mixture thus produced.
  2. If the bailee, without the consent of the bailor, mixes the goods of the bailor 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 damages arising from the mixture.
  3. 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, it was held that the bailor was entitled to refuse to take delivery and claim compensation for loss or damage.
• The Bailee must return the goods without waiting for demand from bailor:
  • The time specified in the contract has expired or the purpose specified in the contract is completed.
  • If the goods are not returned, then:
    • The goods shall be at risk of the bailee.
    • The bailee shall be liable for any loss or damage, even if such loss is caused without any negligence of the bailee or due to an act of god or other unavoidable reasons.
• In the absence of any contract to the contrary, the bailee is bound to return any extra profit occurred from goods bailed.
• The bailee must not do any act which is inconsistent with the title of the bailor. He must not set up his own title or a third party's title on the goods bailed to him.

Rights of bailee

Right to claim damages

When the bailor transfers the possession of his goods to the bailee, he has to reveal the defect in goods while transferring them to the bailee. If the bailor fails to disclose the defect to the bailee and if bailee suffered an injury then the bailee has the right to claim damages from the bailor.

Example
If Y bails his bike to Z without disclosing the information that the brakes of the bike are not working well. Z met with an accident. Here Z has a right to claim damages from Y.

J.N. Reed v Dean G. Parrack (1949) 1 KB 188

In this case, the plaintiff enjoying his holidays hire a motor launcher to enjoy the riverside from the defendant. The motor launcher was not fit to use and caught fire, the plaintiff suffered an injury. Here the defendant was held liable.

Right to claim Reimbursement

Section 158 of the Indian Contract Act states that, if the bailee incurred any expenses to keep the goods of the bailor safe and protected, the bailee has a right to demand refund/ reimbursement from the bailor.

Example
If X bails his cow to Y for some time. Y suffers some expenses like food, shelter etc., to keep the horse safe. Here Y has a right to get reimbursed for all the expenses from X, which he suffered to keep the cow safe.

Right to particular lien
Section 170 of Indian Contract Act states that, when bailor fails to pay lawful payment to the bailee for his services, the bailee has a right to lien the goods until the time he receives his payment.

Example
P bails a piece of cloth to Q, a tailor, to make a coat for him. Q as per the conditions makes a coat, but P fails to pay Q for his service, here B has a right to lien/retain P's coat.

Right of bailor and bailee against the wrongdoer

Section 180 of Indian Contract Act states that, when the goods of the bailor are in the possession of the bailee and any third person wrongfully deprive the bailee of using the goods, then the bailee has a right it uses remedies as the bailor might have used.

Example:
If X bails his mobile to Y for repairs. C forcefully takes the possession of mobile from Y. here Y is entitled to the remedies as similar to that of X.