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BAILMENT AND ITS ESSENTIALS

Updated: Nov 11, 2020

By

B. Sandeep Harish, III year B.A.,LL.B.


Introduction

The contract of bailment and a pledge are special classes of contracts. The Indian Contract Act, 1872 deals with the general principles of bailment whereas the Acts like the Carriers Act, 1865, the Railways Act, 1890, the Carriage of Goods by Sea Act, 1925. The Carriage of Goods by Sea Act, 1925 and the Carriage of Goods by Air Act deal with special types of bailment.


Definitions

Section 145 of the Indian Contract Act defines bailment.

Bailment means, to deliver the goods from one person to another for some purpose. The purpose was specific in the contract of bailment. When the purpose is over, the goods should be returned to the person who delivered it or it is disposed of according to the directions of the person who delivered the goods. The delivery may be actual or constructive. If the bailor puts the goods in the custody of the bailee, it is the actual delivery. If a person who has sold goods to another but continues to have the goods, he holds the goods as a bailee of the purchaser. This is a case of constructive delivery.

The person who has delivered the goods is called a bailor. The person to whom the goods are delivered is called bailee. The transaction is called bailment. The bailor and bailee have certain ‘rights’ and ‘duties’ under the act. Thus, a bailment is the delivery of goods for a specific purpose is under a contract on the condition that the goods shall be returned to the bailor or disposed of according to the directions of the bailor after the purpose is accomplished.

In bailment, only the possession of the goods is given to the bailee and the ownership continues to remain with the bailor.

Bheru Lal Shankar Lal Rajora vs. State of Rajasthan[i], the relation between a bank and a depositor of money is that of a borrower and the lender and not of a bailor and a bailee. Similarly, an agent who possesses money on behalf of the principal is not a bailee of the money.

Essentials of bailment

  • Agreement on some purpose

  • Delivery of goods

  • Actual and constructive delivery

  • Return of goods

  • Movable goods

  • The passing of possession and not a transfer of ownership

  • Consideration

Agreement on some purpose

Bailment is created by the form of an agreement between the bailor and the bailee. Due to the agreement, there is the delivery of goods from the bailor to the bailee for some purpose. When the purpose is completed or achieved, the goods are to be returned. A finder of lost goods is an implied bailee.

Delivery of goods

The delivery of goods by one person to another is necessary. Mere custody of goods does not create a relationship for the bailor and bailee. E.g., a servant has mere custody of the goods. This is not a bailment. Kaliaperumal Pillai vs. Visalakshmi Achi[ii], a lady wanted to melt her gold jewellery and make a new one out of it. She employed a goldsmith for this purpose, and every evening she got back the unfinished jewellery and kept it in a box in the goldsmith’s place, but took custody of the key of the box. One night, the gold jewellery was stolen away. As the goldsmith had redelivered the jewellery bailed with him, it was not a bailment and he was not liable.

Actual and constructive delivery

Delivery of goods, which involves a change of possession, can be actual and constructive. Actual delivery involves the literal handing over of physical possession of the goods by one person to another. In some cases, the delivery may be constructive or symbolic. For example, handing over keys of a car are symbolic deliveries.

Return of the goods

As soon as the purpose is achieved, the goods shall be returned or disposed of according to the directions of the bailor. If there is no return of the goods, there is no bailment. But the bailed goods may be returned in an altered form. Example when a piece of cloth is stitched into a shirt.


Movable goods

Bailment is concerned only with movable property, other than money and actionable claims


The passing of possession and not a transfer of ownership

Only the possession of goods passes from the bailor to the bailee, and not the ownership of property. If the property is transferred for a money consideration, it becomes a sale.


Consideration

The consideration is money payment either by the bailor or bailee.

Example, hiring cycles, cars or giving vehicles for repair, etc. the detriment suffered by the bailor. Parting with the possession of goods is sufficient consideration for a contract of bailment.


Conclusion

In the Indian Contract Act of bailment is the delivery of goods for some purpose. The purpose was fulfilled. The goods must be returned. The bailment must follow the above essentials conditions. These conditions are fulfilled and it is known as a bailment.

[i] [2009] INSC 1422

[ii] AIR 1938 Mad 32