Bailment; rights and duties of the bailor and of the bailee

Bailment. Section 148 of the Indian Contract Act, 1872 states that a bailment means “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”. Whoever hands over the goods is the bailor, and whoever receives them is the bailee. The definition gives the essentials of a bailment:

• a contract between the two;
• delivery of possession of goods, which may be made by any act that puts the goods in the possession of the intended bailee or of someone authorised to hold them for him (s. 149);
• a purpose for which the goods are handed over; and
• return of the goods, or their disposal as the bailor directs, once that purpose is accomplished.

A person who already holds another's goods becomes a bailee, and the owner a bailor, if he contracts to hold them as bailee, even though they were not first delivered by way of bailment (Explanation to s. 148). Example: a student who leaves her laptop with a service centre to have the screen replaced is the bailor; the service centre is the bailee.

Duties of the bailor

1. To disclose known faults (s. 150). He must tell the bailee of faults in the goods that he knows of and that either materially interfere with their use or expose the bailee to extraordinary risks. If he does not, he is responsible for damage that arises to the bailee directly from those faults. Where the goods are let for hire, he is responsible for such damage whether or not he knew of the fault.
2. To repay expenses in a gratuitous bailment (s. 158). In a gratuitous bailment, where the bailee is paid nothing for his part, the bailor must repay him the necessary expenses, and any extraordinary expenses, that he incurs for the purpose of the bailment.
3. To indemnify the bailee on the early recall of a free loan (s. 159). If he lent the goods free of charge and ends the bailment before the agreed period is over, he must make good the bailee's loss so far as it exceeds the benefit the bailee has had.
4. To answer for a defect in his title (s. 164). He must indemnify the bailee for any loss caused because the bailor was not entitled to make the bailment, to receive the goods back, or to give directions about them.
5. To take the goods back when the bailee returns them after the period has ended or the purpose has been accomplished. If he refuses delivery offered at the proper time, the bailee can claim the necessary expenses of keeping the goods safe.

Duties of the bailee

1. To take reasonable care (s. 151). He must look after the goods as carefully as a person of ordinary prudence, in similar circumstances, would look after his own goods of like bulk, quality and value. Having taken that care, he is not responsible for their loss, destruction or deterioration, unless a special contract says otherwise (s. 152).
2. Not to use the goods against the terms. Any act of his with regard to the goods that is inconsistent with the conditions of the bailment makes the contract voidable at the bailor's option (s. 153), and he must compensate the bailor for damage caused by unauthorised use. Example: a car hired for driving within Pune is taken on a hill rally.
3. Not to mix the bailor's goods with his own without the bailor's consent; damage caused by unauthorised mixing must be made good.
4. To return the goods, or deliver them as the bailor directs, once the purpose of the bailment is accomplished.
5. To hand over any increase or profit that accrues from the goods, as where sheep left with a herdsman for grazing give birth to lambs.

Rights of the bailor

1. To terminate the bailment (s. 153) if the bailee does any act with regard to the goods that is inconsistent with the conditions of the bailment.
2. To demand the goods back (s. 159). Where the goods were lent free of charge, he may call for their return at any time, even before the fixed period ends or the purpose is achieved, but he must compensate the bailee whose loss from the early return exceeds the benefit he actually had from the goods.
3. To sue the bailee to enforce all of the bailee's duties and liabilities.
4. To claim compensation for damage to the goods caused by their unauthorised use or unauthorised mixing.
5. To sue a wrongdoer (ss. 180–181), as set out under the bailee's last right below.

Rights of the bailee

1. To deliver to any one of joint bailors (s. 165). If several joint owners bailed the goods, he may return them to, or as directed by, any one of them, unless there is a contract to the contrary.
2. To be indemnified, and protected, where the bailor's title fails. He can recover from the bailor any loss caused by the bailor's lack of right to bail the goods (s. 164); and if the bailor had no title and the bailee, in good faith, returns the goods to him or as he directs, the bailee is not answerable to the true owner for that delivery (s. 166).
3. To compensation for undisclosed faults (s. 150), and to repayment of necessary expenses in a gratuitous bailment (s. 158).
4. To have the title decided by the court (s. 167). Where a person other than the bailor claims the goods, the court may be asked to stop their delivery to the bailor and to decide the title, so that the goods reach the right owner.
5. Particular lien (s. 170). Where, in line with the purpose of the bailment, he has done work on the goods involving labour or skill, he may keep them until he is paid due remuneration for that work, unless there is a contract to the contrary. Example: a mechanic who has rebuilt a scooter's engine may hold the scooter until his bill is paid; he may not if he agreed to give the owner a month's credit.
6. To sue a wrongdoer (s. 180). Where an outsider wrongfully takes away the bailee's possession or use of the goods, or damages them, the bailee has the same remedies as the owner would have had without any bailment, and a suit against the outsider may be brought by the bailor or by the bailee. Whatever is recovered in such a suit is divided between bailor and bailee according to their respective interests (s. 181).