CONTRACT OF BAILMENT

The word “Bailment” has been derived from the French word “bailer” which
means “to deliver”.

Bailment etymologically means ‘handing over’ or ‘change of possession’.

As per sec on 148 of the ACT, “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 direc ons
of the person delivering them”.

The person delivering the goods is called the “bailor”.

The person to whom they are delivered is called, the “bailee”.

Example: Where ‘X’ delivers his car for repair to ‘Y’, ‘X’ is the bailor and ‘Y’ is the
bailee.

Example: X delivers a piece of cloth to Y, a tailor, to be s tched into a suit. It is

contract for bailment.

Examples of Bailment:-

a. A car owner delivers his car to the service centre for servicing. This is a
contract of Bailment where the car owner is the Bailor and Service centre
is the Bailee.
b. A delivers a piece of cloth to B, a tailor for s tching. This is a contract of
Bailment where A is the Bailor and B is the Bailee.
c. A gives his suit for dry-cleaning to B.
d. A gives his watch for repairing to B.
e. Leaving car in the car parking.
Ultzen v. Nicols(1894)

Facts of Ultzen v Nichols

The plain ff was a regular patron of the defendant’s restaurant. On one of his
visits, a waiter took the plain ff’s coat and hat and put them away for
safekeeping. However, when the plain ff was ready to leave, he discovered that
his coat and hat were missing. The plain ff then sued the defendant, claiming
that a bailment had been created and that the defendant was responsible for
the loss of his items.

Issue

The central issue in Ultzen versus Nichols was whether a bailment had occurred
or whether the situa on merely involved a license arrangement. The defendant
argued that no bailment existed and that he simply provided a place for the
plain ff’s coat and hat without assuming any responsibility for them.

Ultzen v Nichols: Court’s Decision

The court ruled in Ultzen v Nichols that a bailment had indeed taken place. The
reasoning was based on the ac ons of the defendant’s employee, the waiter,
who took possession of the plain ff’s coat and hat and chose where to place
them. This act of taking and storing the items cons tuted a bailment because
the defendant, through his employee, had taken control and responsibility for
the items.

Ultzen v. Nichols Judgement

In Ultzen vs Nichols, because the waiter took possession of the plain ff’s coat
and hat, the defendant (through his employee) became a bailee. Therefore, the
defendant was responsible for returning the items or otherwise compensa ng
the plain ff for their loss. The court emphasised that if the plain ff had hung his
coat himself, it would have been a license arrangement and the plain ff would
not have been able to hold the defendant liable for the missing items.

NATURE OF BAILMENT

Bailment is a type of special contract and thus, all basic requirements of contract
like consent of par es, competency, etc are applicable to any contract of
Bailment. A bailment is usually created by an agreement between the bailor and
bailee. Sec on 148 specifically talks of bailment via a contract. But a valid
bailment can also arise in absence of express contracts or from invalid or
voidable contracts.

In bailment, neither the property nor the ownership of the goods involved is
transferred at any point. Only the temporary possession of the bailed goods is
transferred and the ownership of such goods remains with the bailor. The bailor
can demand to have the property returned to him at any me.

WHAT MAY BE BAILED

Only ‘goods’ can be bailed and thus, only movable goods can be the subject
ma er of bailment. Current money or legal tender cannot be bailed. Deposi on
of money in a bank is not bailment as money is not ‘goods’ and the same money
is not returned to the client.

But the coins and notes that are no longer legal tender and are more or less just
objects of curiosity, then they can be bailed.

Essen als

The essen al elements of a contract of bailment are—

(a) Contract: As men oned above, bailment is a special type of contract. Hence,
all the essen al elements of a valid contract must be present in it. The essen al
elements such as offer, considera on, contractual capacity, inten on, etc. must
be a part of the bailment. Without the presence of these essen al elements ,
the contract cannot be enforceable in a court of law. However, out of these, a
contract of bailment can be valid without considera on. The contract may be
express or implied.

Example:

 Express contract: A person (bailor) gives their laptop for repair at a service
center (bailee) and both par es sign a service agreement.

 Implied contract: You leave your coat with a coat check at a restaurant
without any discussion, and the coat check (bailee) holds your coat for
safekeeping un l you return.

(b) 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 kinds:

i. Actual Delivery: When goods are physically handed over to the Bailee by the
bailor.

Example: A person hands over a diamond necklace to a jeweler for cleaning. The
jeweler takes physical possession of the necklace.

ii. Construc ve Delivery: Where delivery is made by doing anything that has the
effect of pu ng goods in the possession of the Bailee or of any person
authorized to hold them on his behalf.

Eg: Delivery of the key of a car to a workshop dealer for repair of the car.
(c) Purpose: There must be a specific purpose for which the goods are
transferred from the bailor to the bailee. The purpose may be express or implied.

Example: A car owner (bailor) gives his car to a valet parking service (bailee) with
the purpose of parking the car. The valet is obligated to park and return the car.

(d) Possession: In bailment, possession of goods changes. Change of possession

can happen by physical delivery or by any ac on 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 con nues 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.

For example, servants of a master who are in custody of goods of the master do
not become bailees.

Similarly, deposi ng ornaments in a bank locker is not bailment, because

ornaments are kept in a locker whose key are s ll with the owner and not with
the bank. The ornaments are in possession of the owner though kept in a locker
at the bank.

Example: A gives his coat to B, a dry cleaner, for cleaning. Although B possesses
the coat, A con nues to be its owner.

(e) Bailee is obliged to return the goods physically to the bailor: The goods
should be returned in the same form as given or may be altered as per bailor’s
direc on. It should be noted that exchange of goods should not be allowed. The
Bailee cannot deliver some other goods, even not those of higher value. Deposit
of money in a bank is not bailment since the money returned by the bank would
not be iden cal currency notes.
Example: A gives his laptop to B for repair. B must return the same laptop a er
repairing it.

Case Law: Morvi Mercan le Bank Ltd. v. Union of India (1965) – The court ruled
that the goods must be returned in the same form or as altered in accordance
with the contract. The bailee cannot subs tute them with other goods.

Lily White v. R. Munuswami (AIR 1966 Mad 13).( Common Case for essen al)

Facts:

In this case, the plain ff (Lily White) handed over her silk saree to the
defendant's laundry for cleaning. The saree was either lost or damaged while in
the defendant's custody. The plain ff sued the laundry for compensa on,
claiming negligence in handling the saree.

Judgment:

The Madras High Court held that there was a valid contract of bailment between
the plain ff and the defendant. Since the saree was given for the specific
purpose of cleaning, the defendant (the bailee) was responsible for taking
reasonable care of the goods while in his possession. The court found the
laundry guilty of negligence and awarded damages to the plain ff, as the bailee
had failed in his duty to return the goods in the same condi on or as per the
bailor's direc on.

Essen als Covered in the Case:

1. Contract: The bailment arose from an implied contract when the saree
was handed over for cleaning.

2. Delivery of Goods: There was actual delivery of the saree to the laundry.

3. Purpose: The saree was delivered to be cleaned, a specific purpose.

 4. Possession: The laundry took possession of the saree but did not own it.

5. Obliga on to Return: The laundry was responsible for returning the saree
in good condi on a er cleaning but failed to do so, leading to liability.

Important Notes

1. If the Owner Maintains Control Over the Goods, There is No Bailment:

 Bailment involves a transfer of possession, not ownership. If the owner

retains control over the goods, it means that the goods have not been
handed over to the bailee for custody or safekeeping. Since possession is
key to bailment, if the owner keeps control, no bailment occurs.

 Example: If you store your own items in a bank locker, you maintain
control (with the locker key) and possession has not been handed over to
the bank. Thus, no bailment exists.

2. Hiring of a Locker in a Bank is Not Bailment:

 When you rent a locker in a bank, the bank provides you with space to
store your valuables, but possession and control of the valuables remain
with you because you have the key to access the locker. The bank does not
take possession of the goods, and since possession is a key aspect of
bailment, the hiring of lockers is not considered a bailment.

 Example: You store jewelry in a bank locker, but the bank has no access to
or control over the jewelry, meaning there is no bailment rela onship
between you and the bank.

3. There Can Be Bailment Without a Contract:

  Bailment can occur without an express contract if there is an implied
bailment or if goods are entrusted for safekeeping or under circumstances
that create an implied duty of care.

 Example: If someone leaves their bag with you for safekeeping during an
emergency, this can be considered a bailment even without a formal
agreement. The bailee (you) has an obliga on to take care of the goods
un l they are returned to the bailor.

4. In Bailment, Only Possession Passes, Not Ownership:

 In a bailment contract, the ownership of the goods remains with the bailor
(the person who delivers the goods), and only possession is transferred to
the bailee (the person receiving the goods). If the ownership of goods is
transferred for monetary considera on, it becomes a sale, not a bailment.

 Example: If you give your car to a mechanic for repairs, the mechanic has
possession of the car (a bailment), but you remain the owner. If you sell
the car to someone, ownership is transferred, and it becomes a sale.

5. Deposi ng Money in a Bank Account Does Not Create Bailment:

 When money is deposited in a bank account, the bank does not become
a bailee. Instead, the rela onship between the bank and the depositor is
that of a creditor and debtor. The bank does not have to return the same
currency notes you deposited but can return an equivalent amount when
requested. This differs from bailment, where the specific goods must be
returned.

 Example: If you deposit $500 in your bank account, the bank does not hold
those exact bills for you. It owes you $500, but it will give you a different
set of bills when you withdraw the money.
Kinds

On the basis of reward, bailment can be classified into two types:

 Gratuitous Bailment: The word gratuitous means free of charge. So a

gratuitous bailment is one when the provider of service does it gratuitously i.e.
free of charge such bailment would be either for the exclusive benefits of bailor
or bailee. In this type, there is no requirement to pay any charges by the bailee
for the bailment.

Illustra on:

 A lends his bicycle to B for a day, free of charge. A is the bailor and B is the
bailee. This is a gratuitous bailment because no payment or benefit is
involved.

 Non-Gratuitous Bailment: A non-gratuitous bailment is when some form of

considera on (payment or reward) is involved, either to the bailor or the bailee.
It’s a contractual agreement where both par es expect some benefit or value. It
is required to pay some charges to the bailor by the bailee.

Illustra on:

 A gives his car to B for repair. B will charge A for the repair services. Here,
A is the bailor, and B is the bailee. Since B is being paid for his service, this
is a non-gratuitous bailment.

In a gratuitous bailment, the du es and liabili es of the bailor and bailee are
less stringent compared to non-gratuitous bailments, where stricter care and
liability apply because considera on is involved.

Du es of bailor
The du es of bailor are spelt out in a number of Sec ons [Sec on 150, 158, 159,
164 These are enumerated hereunder:

1. Bailor’s duty to disclose faults in goods bailed [Sec on 150]: [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.]
a. Duty to Disclose Faults in Gratuitous Bailment: In a gratuitous bailment,
the bailor is not en tled to receive any considera on for lending the
goods. Despite this, the bailor is legally obligated to disclose any known
faults in the goods which is material and that might affect their use or
expose the bailee to extraordinary risk. However, in a gratuitous bailment,
the bailor is liable only for those defects that he actually knows about, not
for hidden. If the bailor is aware of a defect and does not disclose it, and
the bailee suffers harm because of that defect, the bailor is liable for the
damage or loss.
Example: A lends his motorcycle to B for a day. A knows that the brakes of
the motorcycle are faulty but does not inform B. While using the
motorcycle, B meets with an accident because the brakes failed. In this
case, A is liable for the damage caused to B as he failed to disclose the
known defect.
Case Law: Blakemore v. Bristol and Exeter Railway Co. (1858): In this case,
the bailor lent a horse without disclosing that it was not fit for riding. The
bailee was injured as a result, and the court held that the bailor was liable
for the injury caused due to non-disclosure of the known defect in the
horse.
b. Duty to Disclose Faults in Non-Gratuitous Bailment (For Hire): In a non-
gratuitous bailment, the bailor receives considera on or payment for
lending the goods, and the standard of care is higher. The bailor is liable
for both known and unknown defects that could be discovered through
reasonable diligence. Therefore, even if the defect is hidden and the bailor
did not know about it, he can s ll be held liable. In a non-gratuitous
bailment, because the bailor is being compensated, the duty of care is
more stringent. The bailor is responsible not only for disclosing known
defects but also for ensuring that the goods are reasonably safe for the
purpose for which they are bailed. If the goods have any defects that make
them unsuitable for use or dangerous, the bailor is expected to either fix
the defects or inform the bailee about them.
Example: A rents his car to B for a week. A is unaware that the steering
system is malfunc oning due to a manufacturing defect. B meets with an
accident because of the faulty steering. In this case, even though A did not
know about the defect, he is s ll liable for B's loss, as A is expected to have
ensured that the car was safe before ren ng it out.
Case Law: Hyman v. Nye & Sons (1881): The bailor hired out a horse for
riding but did not disclose that the horse was lame. The bailee was injured
when the horse caused an accident. The court held that the bailor was
liable because he failed to disclose a known defect in a non-gratuitous
bailment.
2. Duty to pay necessary expenses [Sec on 158]: In a gratuitous bailment,
the bailor must bear necessary and any extraordinary expenses incurred
by the bailee in the preserva on or maintenance of the goods bailed. In a
non-gratuitous bailment (for hire or considera on), the bailee typically
 bears the ordinary expenses related to the use of the bailed goods, unless
otherwise agreed. Extraordinary expenses may s ll fall on the bailor.
Case Law:
Sheik Mahamad Ravuther v. Shaik Mahamad Lalmiya (1930): In this case,
the court held that if a gratuitous bailee incurs extraordinary expenses to
maintain or preserve the goods, the bailor must reimburse those
expenses.
Illustra on: If A lends his car to B for free and during the use, B has to pay
for repairs due to a defect, A must reimburse B for those repair expenses.
Example:
A rents his car to B for a week for a fee. During this period, B is responsible
for fueling the car (ordinary expense), but if a mechanical issue occurs
requiring major repairs, A (the bailor) may have to bear those
extraordinary repair costs.
3. Duty to indemnify the Bailee for premature termina on [Sec on 159]:
Sec on 159 states that if a bailor lends goods gratuitously (without
considera on) and terminates the bailment before the agreed period or
purpose is fulfilled, the bailor must compensate the bailee for any loss or
damage suffered due to the premature termina on. This compensa on is
for any loss the bailee suffers beyond the benefit he has already received
from using the goods.
Example: A lends his computer to B for 6 months for free. A er 2 months,
A decides to take the computer back, termina ng the bailment
prematurely. If B has spent money installing so ware for a project, which
now cannot be completed due to the termina on, A must compensate B
for this loss.
 4. Bailor’s responsibility to bailee [Sec on 164]: The bailor is responsible to
the bailee for the following:
a. Indemnifica on for Defec ve Title: The bailor must indemnify
(compensate) the bailee if the bailee suffers any loss due to the
bailor’s defec ve tle over the goods. This means that if the bailor
was not en tled to make the bailment, or did not have the right to
take the goods back or give direc ons about them, and the bailee
incurs loss because of this, the bailor is responsible for that loss.
Example: A bails a car to B, but A is not the true owner, and the real
owner sues B for possession. A must compensate B for any losses
suffered due to this defec ve tle.
b. Duty to Receive Goods: It is the bailor's duty to take back the goods
once the purpose of the bailment is fulfilled or the period of
bailment expires. If the bailor refuses to accept the goods at the
proper me, the bailee can claim compensa on for any necessary
expenses incurred in storing or keeping the goods safe.
Example: A bails a machine to B for a project. Once the project is
completed, B offers to return the machine, but A refuses to take it
back. B can claim compensa on from A for any expenses incurred
in storing the machine.

Du es of Bailee

1. Duty to Take Reasonable Care (Sec on 151): 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, take of his own goods of the same
bulk, quality and value as the goods bailed.
 Example: If A leaves his valuable watch with B for repairs, B must ensure
that it is safely stored and protected, just as he would do for his own
goods.
Case Laws: Coggs v. Bernard
Facts:
The case involved the bailee, Bernard, who was entrusted with the task of
transpor ng casks of brandy belonging to Coggs. Bernard agreed to carry
the casks but failed to exercise due care. As a result, the casks were
damaged during the transporta on.
Judgment:
The court held that Bernard, the bailee, was liable for the damage to the
casks. The judgment established that a bailee must exercise reasonable
care and diligence when handling goods. It emphasized that even if the
bailee is not paid for their services (i.e., in a gratuitous bailment), they are
s ll required to take reasonable care of the goods.
Excep on: Bailee when not liable for loss, etc., of thing bailed [Sec on
152]: The bailee, in the absence of any special contract, is not responsible
for the loss, destruc on or deteriora on of the thing bailed, if he has taken
the amount of care of it described in sec on 151.
A deposited his goods in B’s godown. On account of unprecedented
floods, a part of the goods were damaged. It was held that, B is not liable
for the loss (Shan Lal V. Takechand).
2. Liability of bailee making unauthorized use of goods bailed (Sec on 153
& 154): As per Sec on 154, if the bailee uses the goods bailed in a manner
which is inconsistent with the terms of the contract, he shall be liable for
any loss even though he is not guilty of negligence and even if the damage
is the result of an accident.
 Example: A lends a horse to B for his own riding only. B allows C, a member
of his family, to ride the horse. C rides with care, but the horse accidentally
falls and is injured. B is liable to make compensa on to A for the injury
done to the horse.
As per Sec on 153, a contract of bailment is voidable at the op on of the
bailor, if the bailee does any act with regard to the goods bailed,
inconsistent with the condi ons of the bailment.
Example: A lets to B, for hire, a horse for his own riding. B drives the horse
in his carriage. This is, at the op on of A, a termina on of the bailment.
3. Duty not to mix the goods (Sec on 155, 156 and 157): Bailee is not
en tled to mix up the goods bailed with his own goods except with the
consent of the bailor.
a. Effect of mixture, with bailor’s consent, of his goods with bailee’s
(Sec on 155): A bailee is allowed to mix the goods bailed with his own
goods only if the bailor consents. When mixing occurs with consent, both
the bailor and the bailee acquire an interest in the mixed goods
propor onate to their respec ve contribu ons. For example, if A gives B
10 kg of rice to store and B mixes it with his own 50 kg of rice with A's
consent, both A and B have a propor onal share in the total 60 kg of rice.

b. Effect of mixture without bailor’s consent, when the goods can be

separated (Sec on 156): If the bailee mixes the bailor’s goods with his
own without the bailor’s consent and the goods can s ll be separated, the
property rights in the goods remain with the respec ve owners. In this
case, the bailee is responsible for the cost of separa on and any damage
resul ng from the mixture. Example: A bails 100 bales of co on marked
with a par cular mark to B. B, without A’s consent, mixes the 100 bales
 with other bales of his own, bearing a different mark; A is en tled to have
his 100 bales returned, and B is 17 Department of Commerce, Gargi
College bound to bear all the expenses incurred in the separa on of the
bales, and any other incidental damage.

c. Effect of mixture, without bailor’s consent, when the goods cannot be

separated (Sec on 157): When the bailee mixes the bailor’s goods with
his own without consent in a way that makes separa on impossible, the
bailee is liable to compensate the bailor for the loss of the goods. This
compensa on is necessary as the bailor cannot recover their specific
goods. For example, if B mixes A’s batch of paint with his own and the
mixture cannot be separated, B must compensate A for the value of the
paint.

4. Return of goods bailed, on expira on of me or accomplishment of

purpose (Sec on 160): The bailee has a clear duty to return or deliver the
bailed goods to the bailor according to the bailor's instruc ons. It’s the
duty of the bailee to return the goods, without wai ng for demand from
bailor, if the me is specified in the contract has expired or when the
purpose specified in the contract is accomplished. If, by the default of the
bailee, the goods are not returned, delivered or tendered at the proper
me, he is responsible to the bailor for any loss, destruc on or
deteriora on of the goods from that me. [Sec on 161]
Example – X delivered books to Y to be bound. Y promised to return the
books within a reasonable me. X pressed for the return of the book. But
Y, failed to deliver them back even a er the expiry of reasonable me.
 Subsequently the books were burnt in an accidental fire at the premises
of Y. In this case Y was held liable for the loss.
Case Law: Central Warehousing Corpora on v. Central Bank of India
Facts of the Case:
 Central Warehousing Corpora on (CWC) was in possession of certain
goods that had been pledged with the Central Bank of India by a borrower
as security for a loan.
 The goods were kept in a warehouse managed by the CWC, with the
warehouse receipts being held by the Central Bank of India as part of the
pledge agreement.
 A er the loan became due and the borrower failed to repay, the Central
Bank requested the return of the goods stored in the warehouse.
Legal Issue:
The core issue was whether the Central Warehousing Corpora on
(Bailee) was under a legal obliga on to return the bailed goods to the
Central Bank of India (Bailor) once the purpose for which the goods were
bailed (i.e., loan repayment) was either fulfilled or defaulted upon.
Ruling:
The Andhra Pradesh High Court ruled that:
1. Under the Indian Contract Act (specifically Sec ons 148-171 which deal
with bailment), the bailee (in this case, CWC) is obliged to return the
goods to the bailor (Central Bank) either:
o Upon the expira on of the agreed period of bailment, or
o Upon the accomplishment of the purpose for which the goods
were bailed (i.e., repayment or realiza on of the loan secured by
the goods).
 2. In this case, since the loan had not been repaid, the Central Bank had the
right to take possession of the pledged goods and sell them to recover
the amount due. As the pledgee (Central Bank) held the legal tle to the
goods, the CWC (bailee) was legally bound to return the goods to the bank
upon demand.

5. Bailor en tled to increase or profit from goods bailed (Sec on 163): In

the absence of any contract to the contrary, the bailee is bound to deliver
to the bailor, or according to his direc ons, any increase or profit which
may have accrued from the goods bailed. Example: A leaves a cow in the
custody of B. The cow gives birth a calf. B is bound to deliver the calf as
well as the cow to A.
6. Not to setup Adverse Title: Bailee must not set up a tle adverse to that
of the bailor. He must hold the goods on behalf of and for the bailor. He
cannot deny the tle of the bailor.

Rights of Bailor

1. Termina on of bailment by bailee’s act inconsistent with condi ons

(Sec on 153): If the bailee does any act inconsistent with the terms and
condi ons of the contract of bailment, then the bailment becomes
voidable at the op on of the bailor.
Example: If A gives his car to B for repairs, but B uses the car for personal
purposes without A's consent, A can terminate the bailment.
Case Law: In Coldman v. Hill (1919), the court held that if the bailee
misuses the goods in any manner contrary to the terms of the bailment,
the bailor can void the contract.
2. Restora on of goods lent gratuitously (Sec on 159): When a loan of
goods is made gratuitously (without any charge), the lender can demand
the return of the goods at any me, even if they were lent for a specified
me or purpose. However, in the faith, if the borrower has acted in a way
that returning the goods earlier would cause them a loss greater than the
benefit they received from the loan, the lender must compensate the
borrower for the excess loss. The loss should be paid only in case of
considerable loss.
Example: A lends a car to B for free for one month. If A demands the
return of the car a er just one week, but B has already incurred expenses
based on the expecta on of using the car for the full month, A must
compensate B for any loss that exceeds the benefit B has gained from the
car during the week of use.
3. Right to Sue the Bailee: The bailor can sue the bailee if the bailee misuses
the bailed goods. The bailor can claim compensation for any loss, damage,
unauthorized use, unauthorized mixing, or can demand profits made from
the goods.
Example: If A gives B a machine to use for specific purposes, but B rents
it out to others without permission, A can sue B for unauthorized use and
claim profits.
Case Law: In Chandrakant v. Kallappa (1939), the court held that the
bailor can claim compensation for any unauthorized use or damage
caused to the goods by the bailee.
4. Suit by Bailor or Bailee Against Wrong-Doer (Sec on 180): This sec on
grants both the bailor and bailee the right to sue a third party who
wrongfully deprives the bailee of possession of the bailed goods or causes
injury to them. The bailee has the same legal standing to bring ac on
 against the wrong-doer as the bailor (the owner of the goods) would have
had if no bailment existed.
Example: A (bailor) gives his car to B (bailee) for safekeeping. If a third
party, C, wrongfully damages the car while it is in B's possession, both A
and B have the right to sue C for the damage.
Appor onment of Relief or Compensa on (Sec on 181): When
compensa on or relief is obtained from a lawsuit against a third party for
damage or loss caused to the bailed goods, it must be divided between
the bailor and bailee according to their respec ve interests in the goods.
This ensures fairness based on the financial or ownership stakes each
party has in the bailed property.
Example: Con nuing from the previous example, if C pays damages of
₹50,000 for the damage caused to the car, and B had spent ₹10,000 on
maintaining the car during bailment, B would be en tled to that ₹10,000,
and the remaining ₹40,000 would go to A as the owner of the car.
This protects the legal and financial interests of both par es and ensures
fair distribu on of compensa on according to their respec ve stakes.
Case Law: In Morris v. C.W. Mar n & Sons Ltd. (1966), the court ruled that
the bailor has a right to sue third par es who cause harm to bailed goods,
even if the goods were under the possession of the bailee.

Rights of Bailee

1. Repayment, by bailor, of necessary expenses (Sec on 158): If a bailment

is gratuitous (without payment), and the bailee incurs necessary expenses
while performing the required tasks, the bailor must repay these
expenses. This right applies in cases where the bailee is not receiving any
remunera on for keeping, carrying, or working on the goods.
 Example: A gives his car to B for safekeeping without charging any fee. If
B incurs expenses for maintaining the car, such as repairs or oil changes, A
is required to repay B for these necessary expenses.
Case Law: In South Australia Ins. Co. v. Randell (1869), the court held that
the bailee was en tled to claim necessary expenses incurred for the goods
bailed.
2. Bailor’s responsibility to bailee (Sec on 164): The bailee has the right to
recover compensa on from the bailor, if the bailor has no tle to the
goods and as a consequence, the bailee suffers some loss. If the bailor
bails goods without having the proper legal tle or authority, and the
bailee suffers any loss (e.g., from legal claims made by a third party or
because the bailor could not receive the goods back), the bailor must
compensate the bailee. This ensures the bailee is protected against losses
arising from the bailor’s defec ve tle or legal posi on.
Example: If A bails a stolen car to B without telling B that it's stolen, and
the true owner recovers the car from B, A must compensate B for any
losses B incurs, such as expenses for safeguarding the car.
3. Right of Lien (S. 170 and S. 171): It is also known as right to retain which
is applicable in non-gratuitous bailment. If the bailee renders services
involving skill or labor on the bailed goods and the bailor owes the bailee
remunera on, the bailee has the right to retain the goods un l his due
remunera on for services in respect of the goods bailed or the amount
due is paid. This lien is called a "par cular lien," meaning it applies only to
the specific goods on which the service was rendered.
Example: A gives his watch to B for repairs. A er comple ng the repairs,
B has the right to retain the watch un l A pays for the repair services.
 Case Law: In Hammonds v. Barclay (1802), the court upheld that a bailee
has a right to retain the goods on which they have worked un l payment
is made.
4. Suit by bailor or bailee against wrong-doer (Section 180): The bailee
can sue any third party who wrongfully deprives them of the use or
possession of the bailed goods, or who causes any damage to them. The
bailee has the same right to sue the third party as the owner (bailor)
would have. Either the bailor or the bailee can file a lawsuit for damages
against the third party.

Example: A bails his car to B for repair. If C wrongfully takes the car from
B and causes damage to it, B has the right to sue C for the damage, just
as A would.

Case Law: In Morris v. C.W. Martin & Sons Ltd. (1966), the court held
that a bailee has the right to sue third parties for damage caused to
bailed goods, reinforcing the bailee's right to protect the goods in their
possession.

TERMINATION OF CONTRACT

1. Premature Termina on (Sec on 159)

If the bailment is gratuitous (without payment), the bailor can terminate
the bailment at any me, even before the purpose is achieved or the
specific period expires. However, if the premature return of goods causes
more loss to the bailee than the benefit derived from the bailment, the
bailor must compensate the bailee for the excess loss.
Example: A lends a car to B for two months for free. If A demands the
return of the car a er one month, B must return it, but if B incurs losses
due to this premature return (e.g., cancella on of travel plans), A must
compensate B for those losses.

2. Expiry of the Period

If the bailment is for a specific period, it automa cally terminates when
that period expires. Once the me agreed upon has lapsed, the bailee
must return the goods to the bailor.
Example: A gives his bicycle to B for one week. A er one week, the
contract of bailment ends, and B must return the bicycle to A.

3. Achievement of the Purpose

When bailment is made for a specific purpose, it terminates when that
purpose is achieved. Once the purpose is fulfilled, the bailee is obligated
to return the goods to the bailor.
Example: A gives his laptop to B for repair. As soon as B repairs the laptop,
the bailment ends, and B must return the laptop to A.

4. Inconsistent Use of Goods (Sec ons 153 & 154)

If the bailee uses the goods in a manner inconsistent with the terms of the
bailment contract, the bailment can be terminated at the op on of the
bailor. This occurs when the bailee uses the goods for a purpose not
authorized by the bailor or violates the condi ons of the bailment.

Sec on 153: The bailor can terminate the bailment if the bailee acts
inconsistently with the terms of the contract.
Sec on 154: The bailee is responsible for any damages arising from the
unauthorized use of the goods.
Example: A gives his car to B to use only for commu ng to work. If B takes
the car on a road trip without A's permission, A can terminate the
bailment and demand the return of the car.
Case Law:
 In Phelps v. London and North Western Railway Co. (1866), it was held that
the bailee must follow the terms of the bailment contract, and any
devia on or unauthorized use can lead to termina on of the bailment.

5. Destruc on of Subject Ma er
If the subject ma er of the bailment is destroyed or becomes unusable
due to some natural calamity, accident, or other reason, the bailment is
automa cally terminated. Since the goods no longer exist, the contract of
bailment cannot con nue.
Example: A gives his horse to B for safekeeping. If the horse dies or is lost
due to an accident, the contract of bailment terminates immediately, as
the subject ma er no longer exists.

6. By Death of Either Bailor or Bailee

A bailment contract is terminated by the death of either the bailor or
bailee if the contract was personal in nature and dependent on the life of
the party. This applies especially to gratuitous bailments or situa ons
where the personal rela onship is key to the contract.
Example: A lends his piano to B for personal use. If either A or B dies, the
bailment contract terminates.

Difference between Contract of Bailment and Contract of Pledge

Basis Contract of Bailment Contract of Pledge

A Bailment is the delivery of The bailment of goods

Meaning
goods by one person to as security for
Basis Contract of Bailment Contract of Pledge

another for some purpose, payment of a debt or

upon a contract that they performance of a
shall, when the purpose is promise is called a
accomplished, be returned or Pledge. The Bailor in
otherwise disposed of this is called the
according to the direc ons of Pawnor and the Bailee
the person delivering them. is called Pawnee.

The bailee is required to

return the property in the Securing the payment
same condi on and the of a debt is the aim of
Purpose
purpose is typically for a pledge; ie., security
safekeeping, storage, or a against a debt.
specific use of the property.

Un l the obliga on is
se led, the pawnee is
If there is a bailment, the
permi ed to keep the
amount of compensa on is
pledged goods. The
Compensa on o en nego ated separately.
pawnee may sell the
It’s possible that the bailee
pledged property to
won’t get paid for their labor.
recover the loan if the
debtor defaults.
Basis Contract of Bailment Contract of Pledge

A er the debt is paid

Unless otherwise agreed back, the pawnor
upon, the bailee is usually receives their goods
Return of Property expected to return the item in back. The pawnee
the same condi on as it was may sell the property
received. to pay off the loan if it
is not paid back.

Unless the pawnor

The property may be used by
specifically grants it or
the bailee for the specified
it’s required for the
purpose but, any usage that
Use of Property property’s safety, the
goes beyond the parameters
pawnee is not en tled
of the agreement may need
to use the pledged
the bailor’s consent.
assets.

Once the obliga on is

The bailment may end by repaid, the
mutual consent, the commitment is
Termina on accomplishment of the cancelled. The
goal, or the passage of the pawnee may sell the
agreed me frame. pledged property and
end the pledge if the
Basis Contract of Bailment Contract of Pledge

debtor is unable to
make payments.

In the event of the

pawnor’s default, the
Bailment’s obliga ons and
pawnee’s rights and
Third-Party Rights rights only apply to the bailor
interests may be
and the bailee.
claimed against other
par es.

Iden fica on Of Contract of Bailment in Day To Day Life

1. Handing over the keys: – we frequently pass on the keys of numerous

gadgets to specific people. For instance, while we skip on our house keys
or the keys of a locker at our residence to any neighbour, t induces the
se lement of bailment among the events, making one the bailor and the
other the bailee. Even the act of turning in the keys of a bicycle or a
motorcycle can set off the connec on of bailment.

2. Parking lots: – parking masses may be both paid and unpaid. If the parking
plenty is unpaid, then it will be a gratuitous bailment for the bailor. In that
 case, the owner will become the bailor and the proprietor of the parking
zone turns into the Bailee. However, if the car parking zone provider is
paid, then it turns into at the same me beneficial bailment for the events.
The bailor gives a en on to economic phrases which make the bailee
liable to shield the item of bailment.

3. Repair or service: – bailment for restore offerings can amplify a plethora

of goods from cars to machines. All the products that are difficult to
regular wear and tear are challengedd to bailment on behalf of the bailor
for repairing.

4. Lending items for use: – a contract of bailment which is beneficial only to

the Bailee is also of the nature of gratuitous bailment. In this case, the
bailment is beneficial to the Bailee. E.g. when a friend lends another friend
a bike to be used for some me or a girl lends another girl her jewellery
to be worn for some me.

5. Keeping of footwear: – in temples and gurudwara, there are frequently

hooked-up rooms for maintaining the footwear earlier than ge ng into
the premises. Most of such rooms provide services free of value. Such
services are meant for permi ng the safekeeping of the footwear of the
human beings who have come to go to the temple. This is a case in which
the bailment is useful solely to the bailor because the Bailee does now not
get hold of whatever in return of the goods bailed or for preserving the
secure custody of the goods.

6. Warehouse facili es: – warehousing facili es are included for agricultural

products for usage in the offseason. The farmers keep their food grains
within the warehouses. These saved meals-grains can be used later at the
me when grains cannot be grown. The warehousing facility is beneficial
solely for the bailor because the bailor gets more benefit from the system
of warehousing than every person else.