United World School of Law, Karnavati University

Contract Law-II

Semester 3; Section B

Roll No. 11

Topic- Duties of Bailor and Bailee: Judicial Interpretation

Submitted By: Dev Vora

Submitted to: Nishta Agrawal

(Faculty: Contract Law II)

Date of Submission: 13/10/2019

1
 Declaration

The text reported in the project is the outcome of my efforts and no part of this project
assignment has been copied in any unauthorized manner and no part of it has been incorporated
without due acknowledgement.

Name: Dev Vora

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 Contents
Table of Cases ............................................................................................................................................... 4
Table of Statues............................................................................................................................................. 5
Introduction ................................................................................................................................................... 6
Research Methodology ................................................................................................................................. 7
 Objective ........................................................................................................................................... 7
 Research Questions ........................................................................................................................... 7
 Scope and Limitations....................................................................................................................... 7
Main Body .................................................................................................................................................... 8
 What is Bailment? ............................................................................................................................... 8
 Duties of Bailor: ................................................................................................................................ 10
 Duties of Bailee:................................................................................................................................. 11
Conclusion .................................................................................................................................................. 14
Bibliography ............................................................................................................................................... 15
 Websites .............................................................................................................................................. 15
 Cases ................................................................................................................................................... 15
 Statues ................................................................................................................................................. 15

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 Table of Cases

 Ultzen Vs. Nicols, (1894) 1 QB 92.

 Kaliaperumal Pillai Vs. Visalakshmi, AIR 1938 Mad 32.
 Jagdish Chandra Trikha Vs. Punjab National Bank, AIR 1966 AP 163.
 Ram Gulam Vs. Govt. of UP, AIR 1950 All 206.
 Lasalgaon Merchants Coop Bank Ltd. Vs Prabhudas Hathibhai, AIR 1966 Bom 134.
 State of Gujarat Vs. Memon Mahomed Haji Hasam, AIR 1967 SC 1885.
 Shanker Lal Vs. Bhura Lal, AIR 1951 Ajmer 24.
 Hyman and Wife Vs. Nye & Sons, (1881) 6 QBD 685.
 Reed Vs. Dean, (1949) 1 KB 188.
 Blount Vs. War Office, (1953) 1 WLR 736.
 Gopal singh Vs Punjab National Bank, AIR 1976 Del 115.
 Chittagong Port Authority Vs. Mohd. Ishqque, (1983) 35 DLR (AD) 364
 Alias Vs. E.M. Paul, AIR 2004 Ker 214.
 Shaw & Co Vs. Sons, (1917) 1 KB 799.
 Juggilal Kamlapat Oil Mills Vs. Union of India, (1976) 1 SCC 893
 Standard Chartered Bank Vs custodian, AIR 2000 SC 1488.

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 Table of Statues

 The Indian Contract Act, 1872.

 Indian Evidence Act,1872

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 Introduction

Bailment is an activity where a person gives some goods to another person. Only possession of
the object changes, ownership remains with the owner himself. Such a contract is made on the
condition that the object has to be returned to the giver on his condition. The contract of the
owner also arises when a person, not being the owner of the object, pass on any object to another
person for keeping. the person who passes on the goods is called bailor. The person who receives
the goods is called bailee. For example, a car, the scooter has given for service. 1

When any object is received by the bailee, he is under obligation to take care of those goods as a
reasonable man would take. If any damage is done to the goods, then the bailee is help
responsible.

According to this definition provided under section 148 of the Indian contract act,1872 there are
3 essential elements of bailment:-

1. Delivery of Goods- It is the most important characteristic of bailment. There should be a

transfer of goods from one person to another. But it has to be distinguished from mere
custody. It means that only possession of the object can be transferred, not the ownership.
It also means that a person merely having possession doesn't become the owner. One who
has custody without possession is not a bailee.
2. Delivery upon contract- for any transfer to be valid, there must be a valid contract too.
The contract of bailment can be expressed or implied.
3. Conditional delivery- these delivery fo goods is not permanent. It should be returned or
disposed of as per the instructions are given by the bailor.2

There are two types of a bailment- gratuitous and non-gratuitous bailment. In gratuitous
agreement, any reward is not expected from the bailee. In non-gratuitous agreement, a reward is
expected, it may be monetary in nature, service, etc. 3

1
‘Bailment’ < http://www.businessdictionary.com/definition/bailment.html> accessed on 1st November 2019.
2
Mayank Shekhar,‘Bailment- Concept and meaning’(13 April 2019)<https://www.legalbites.in/bailment-concept-
meaning/> accessed on 2nd November 2019.
3
‘Concept of Bailment: An Overview’(1 July 2018)<https://lawyersgyan.com/blog/concept-of-bailment-an-
overview/> accessed on 2nd November 2019.

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There are certain rights and duties by which both, the bailor and bailee are bound. If those rights
and duties are not performed by them and any loss or damage arises from their action, then they
are held responsible. Following are the duties which bound both bailor and bailee:

 Duty of Bailor:
1. Duty to Gratuitous bailor [Section 150].
2. Duty of bailor for reward [Section 150]
 Duty of Bailee:
1. Duty of reasonable care [Section 151].
2. Duty not to make unauthorized use [Section 154].
3. Duty not to mix [Section 155-157].
4. Duty to return [Section 160 and 165[.
5. Duty not to set up Jus Tertii [Section 166-167].
6. Duty to return increase [Section 163].

Research Methodology

 Objective:

The main objective of this project is to explain the duties of bailor and bailee by judicial
interpretation.

 Research Questions:
 What is bailment?
 What are the duties of Bailor?
 What are the duties of Bailee?

 Scope and Limitations:

The project deals with judicial interpretation to explain the duties of bailor and bailee. It also
explains the concept of bailment. But these projects only explains the concept of bailment and
duties of the bailor, bailee. This article doesn't explain what are the rights of bailor and bailee.

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 Main Body

 What is Bailment?

Section 148 of the Indian contract act, 1872 defines bailment. It says- 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 person delivering the goods is called the ‘bailor’.
The person to whom they are delivered is called the ‘bailee’.4

As defined under section 148 of the Indian contract act, Bailment is an activity where a person
gives some goods to another person. For example, a watch was given for repairing to the
shopkeeper. Here the owner of the watch becomes the bailor and shopkeeper becomes the bailee.
Such a contract is made on the condition that the object has to be returned to the giver on his
condition. The contract of bailment also arises when a person, not being the owner of the object,
pass on any object to another person for keeping. the person who passes on the goods is called
bailor. The person who receives the goods is called bailee. For example, car, scooter gave for
service. 5

When any object is received by the bailee, he is under obligation to take care of those goods as a
reasonable man would take. If any damage is done to the goods, then the bailee is help
responsible.

According to this definition, there are 3 essential elements of bailment:-

1. Delivery of Goods- It is the most important characteristic of bailment. There should be a

transfer of goods from one person to another. But it has to be distinguished from mere
custody. It means that only possession of the object can be transferred, not the ownership.
It also means that a person merely having possession doesn't become the owner. One who
has custody without possession is not a bailee.

4
The Indian contract act, 1872.
5
Supra, 1

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 In the case of Ultzen Vs. Nicols6, the plaintiff went to an old restaurant. There his coat
was taken by the waiter. When the plaintiff rose to leave, his coat was missing. Even
though the conduct of the waiter was gratuitous. The restaurant is held liable as a bailee.
In another case of Kaliaperumal Pillai Vs. Visalakshmi7, the madras high court
But in contrast to this, when a bank was given a jewellery box for safe custody, a contract
of bailment arises. The bank would be liable for any loss of content8.
There are two types of delivery: (1) Actual delivery, where the goods are transferred
physically to bailee by bailor and (2) Constructive delivery, where there is no change of
possession but something is done to put possession of goods in the hands of the bailee.
2. Delivery upon contract- this delivery of goods must be done with some purpose and has
to be returned as per the condition of the bailor. For any transfer to be valid, there must
be a valid contract. Without any valid contract, the concept of bailment doesn’t arise.
In the case of Ram Gulam Vs. Govt. of UP9 the plaintiff's ornaments were reported lost.
They were found by the police after recovery. But they have stolen again. As they were
not handed over to the government by a contract, the government never occupied the
position of a bailee. Hence they were not liable. But in the case of Lasalgaon Merchants
Coop Bank Ltd. Vs Prabhudas Hathibhai10 above mention principle was criticized. The
court imposed the obligation of a bailee upon the defendant without the contract of
bailment. The supreme court backed this principle in the case of State of Gujarat Vs.
Memon Mahomed Haji Hasam11 , where the government had seized vehicles exercising
their power under the sea customs act.
3. Conditional delivery- Bailment of goods is made with a certain purpose. When this
purpose is achieved, items are returned to the bailor or disposed of. If the person to whom
goods are delivered is not under any obligation to return those items then their
relationship is not that of a bailor and a bailee. This feature is the distinguishes it from
other transactions.

6
(1894) 1 QB 92.
7
AIR 1938 Mad 32.
8
Jagdish Chandra Trikha Vs. Punjab National Bank, AIR 1966 AP 163.
9
AIR 1950 All 206.
10
AIR 1966 Bom 134.
11
AIR 1967 SC 1885

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 A deposi6t of money with the banks is not bailment, as he is not liable to return the same
notes12. Also when an agent collects money is not liable for the same reasons discussed
above13. his delivery fo goods are not permanent. It should be returned or disposed of as
per the instructions are given by the bailor.14

There are two types of a bailment- gratuitous and non-gratuitous bailment. In gratuitous
agreement, any reward is not expected from the bailee. In non-gratuitous agreement, a reward is
expected; it may or may not be monetary15

 Duties of Bailor:

Bailors are of two kinds; (1) gratuitous bailor and (2)bailor for a reward. A gratuitous bailor is
someone who lends his articles or goods without any charge. Those who charge something for
their articles or goods are called bailor for a reward.

Duties of a bailor are as follows:

1. Duty of gratuitous bailor: Section 150 of the Indian contract defines one of the duties of
a bailor. It says- “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.
If the goods are bailed for hire, the bailor is responsible for such damage, whether he was
or was not aware of such faults in the goods bailed”16
for example, when a person lends his cycle to his friend, knowing that it's brakes have
failed and does not disclose this fact. The liability of a bailor arises under these 2
conditions; (1) he should have knowledge of the defect and the bailee should not be
aware. (2) the defect in the goods must be such as exposes the bailee to extraordinary
risks or materially interferes in the use of the goods.
2. Duty of bailor for reward: the duty of bailor for consideration is much greater. As the
goods transferred are his and profit earned from them is his. Therefore he must see if the

12
Avtar Singh, Business Law (first edition published in 1973) 167
13
Shanker Lal Vs. Bhura Lal, AIR 1951 Ajmer 24.
14
Supra,2
15
. Supra,3.
16
Supra,4.

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 goods have been delivered or not. Also whether they are safe or not. If the bailor is not
aware of any defect then section 150 clearly states that- "if the goods are bailed for hire,
the bailor is responsible for such damage, whether he was or was not aware of such faults
in the goods bailed” 17. Using this principle, the court in Hyman and Wife Vs. Nye &
Sons18 held the defendant liable for his negligence which resulted in the injury suffered
by the plaintiff. Similarly in Reed Vs. Dean19 , where the plaintiff hired a motor launch. It
caught fire and the plaintiff was unable to extinguish the fire, as the equipment were out
of order. The court held that there was an implied consent that the launch was fit for use.
Hence defendants were held liable.

 Duties of Bailee:

Duties of a bailee in respect to goods are as follows:

1. Duty of reasonable care: According to section 151, Care to be taken by bailee, it says
that – “In all cases of bailment the bailee is bound to take as much care of the goffs bailed
to him as a man of ordinary prudence would, under similar circumstances, tale of his
goods of the same bulk, quality and values as the goods bailed”.20 This section lays down
a uniform standard of care for "all cases of bailment".
This means that the bailee is responsible to take care of goods as a reasonable would take
of his goods of the same value, quality.21 Thus if the bailee takes due care of the goods,
then he is not liable for deterioration of goods.
English law divides bailee into two categories only; (1) Gratuitous bailee and (2) Bailee
for a reward. A gratuitous bailee is only liable for any loss or damage to the goods only in
case of gross negligence by him. But the present trend is towards a simples negligence.
This was backed in the case of Blount Vs. War Office22 , where the plaintiff's house was
requisitioned by the war office. He was allowed to store a few articles in the storeroom.
But the troops stationed there, without proper control, broke in the storeroom and stole
some goods. The war office was held liable.
17
Supra,4.
18
(1881) 6 QBD 685.
19
(1949) 1 KB 188.
20
Supra,4.
21
‘Duties of Bailor and Bailee’,<https://www.toppr.com/guides/business-laws-cs/indian-contract-act-1872/duties-
of-bailee-and-bailor/> accessed on 2nd November 2019.
22
(1953) 1 WLR 736.

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 In India, section 151 prescribes a uniform standard of care in all cases of bailment. If a
bailee's care falls below this standard then he is held liable. Contrary to this, section 152,
which says- “the bailee in absence of any special contract, Is not responsible for the loss,
destruction or deterioration of the thing bailed, if he has taken the amount of care of it
described in section 151”, provides for situation when a bailee is not liable. In Gopal
Singh Vs Punjab National Bank 23 , where on account of the partition of India and
Pakistan, a bank had to flee to India. The bank was not held liable. It was said that- no
cast-iron standard can be laid down for the measure of care due from a bailee and the
nature and amount of care must vary with the posture of each case.
The burden of proof is on bailee to show that he had taken reasonable care and precaution
that must be taken as per section 151. If he can produce evidence before the court of his
innocence, then he will not be held liable. This principle was established when a port
authority was held liable in the absence of proof that they took as much care of the goods
landed at their port as satisfied the requirement of Section 151.24
2. Duty not to make unauthorized use: Section 154, Liability of bailee making
unauthorized use of goods bailed, states that “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”25. This means that if a bailee uses the goods for any unauthorized purpose, then
he will be liable for any damage sustained to the goods. Even the act of god or inevitable
act cannot be claimed as a defence.
This principle is further backed in the case of Alias Vs. E.M. Paul26, where a vehicle was
delivered to a workshop for repair. The owner of the workshop allowed an unlicensed
employee to drive the car. While driving the car, he caused an accident and the victim
died. The bailee was held liable as the owner of the vehicle.
3. Duty not to mix: This principle is defined collectively from section 155 to 157. The
bailee must keep the goods of bailor separate. If they are mixed with the consent of
bailor, then both of them have equal proportion over the mixture. But in cases where the

23
AIR 1976 Del 115.
24
Chittagong Port Authority Vs. Mohd. Ishqque, (1983) 35 DLR (AD) 364.

25
Supra,4.
26
AIR 2004 Ker 214.

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 mixture is not done with the consent of the bailor, then if goods can be separated, all
expenses must be incurred by the bailee. If the goods are not separable, the bailee must
compensate for the bailor.
4. Duty to Return: when the purpose of bailment of goods is accomplished, then bailee
must return those goods to the bailor. this has to be done without any demand. But if the
bailee keeps the goods, then he is responsible for all the loss and damage sustained by the
bailor. this principle is defined under section 161, which states that- "If by the fault of the
bailee, the goods are not returned, delivered or tendered at the proper time, he is
responsible to the bailor for any loss, destruction or deterioration of the goods from that
time." 27 . For example, in Shaw & Co Vs. Sons 28 the defendant, a bookbinder was
supposed to return books to the plaintiff. He failed to do so and in a fire, those books
were destroyed. The court held that he was responsible for the loss incurred by the
plaintiff.
But section 159, restoration of goods lent gratuitously, states that if goods are bailed
gratuitously, but the bailor needs them back, even though he has bailed them for a
specific time. This bounds the bailee to return the goods, but in the process, he may incur
some loss, damage. This damage is to be indemnified by the bailor.29 In certain cases
like death, the gratuitous bailment is terminated.30
5. Duty not to set up jus tertii: This means that the bailee has no right to say the bailed
items belong to any third person other than bailor. Section 117 of the Indian evidence act
states that a bailee is stopped from denying the right of bailor to bail the goods and
receive them back.31 In cases where there is a person with a better claim on goods than
the bailor, the bailee must return those goods to bailor only. He won't be liable for
conversion by the owner. In a case where oil was transported via train, the railways were
held liable when a food inspector seized the oil and destroyed. For the simple reason that
bailor had claimed his goods back.32
6. Duty to return increases: section 163 says that- "in the absence of any contract to the
contrary, the bailee is bound to deliver to the bailor, according to his directions, any

27
Supra,4
28
(1917) 1 KB 799.
29
Avtar Singh, Business Law (first edition published in 1973) 173.
30
Supra,29.
31
Indian Evidence Act,1872
32
Juggilal Kamlapat Oil Mills Vs. Union of India, (1976) 1 SCC 893.

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 increase or profit which may have accrued from the goods bailed"33. It simply means that
any profit or increase from the items bailed, during the time of bailment, must be given to
bailor by the bailee. In the case of Standard Chartered Bank Vs custodian34, where shares
and securities were pledged with a bank and the bank received bonus shares and
dividends and interest in respect thereof, it was held that the bank could not be compelled
to handover such increment unless the pledge securities were redeemed.

Conclusion

According to section 148, a bailment is the delivery of goods by one person to another. In this
contract, only possession is transferred, not the ownership. For example, when A gives his car to
B for repairing, The person who transfers the goods to another person is called bailor. the
person who receives the goods is called bailee. These goods can be transferred for a specific
amount of time or to perform a specific event. After goods' purpose is fulfilled, the bailee must
return goods to the bailor.

This contract of bailment arises when there is the delivery of possession, the formation of a
contract and condition delivery. Before delivery, bailor must check goods for any defect or
damage. He must check whether his goods are delivered or not. As they are his goods and in case
of no gratuitous bailment, he earns some benefit.

Similarly, there are some duties to which a bailee must adhere. Any bailee must take care of
bailed goods as if any reasonable man would take. In the case where goods are damaged by the
bailee, then he must compensate the bailor, but in cases where the goods harm bailee, the bailor
is to compensate the bailee. While taking care of goods, any expense arising to maintain goods
are recoverable by the bailee. Bailee must not make unauthorized use of goods. Also, any profit
arising from bailed goods must be given to the bailee. When the goods are being returned to the
owner, then the original bailor becomes bailee and original bailee now becomes bailor. if the
new bailee tries to take away the goods from the bailor then he will be responsible for damage or
loss, even though he is the owner of goods in question. This is because in bailment possession
and possessor of goods is more important.

33
Supra,4
34
AIR 2000 SC 1488.

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 Bibliography

 Websites

 http://www.businessdictionary.com/definition/bailment.html
 https://www.legalbites.in/bailment-concept-meaning/
 https://lawyersgyan.com/blog/concept-of-bailment-an-overview/
 https://www.toppr.com/guides/business-laws-cs/indian-contract-act-1872/duties-of-
bailee-and-bailor/
 Cases
 Ultzen Vs. Nicols, (1894) 1 QB 92.
 Kaliaperumal Pillai Vs. Visalakshmi, AIR 1938 Mad 32.
 Jagdish Chandra Trikha Vs. Punjab National Bank, AIR 1966 AP 163.
 Ram Gulam Vs. Govt. of UP, AIR 1950 All 206.
 Lasalgaon Merchants Coop Bank Ltd. Vs Prabhudas Hathibhai, AIR 1966 Bom 134.
 State of Gujarat Vs. Memon Mahomed Haji Hasam, AIR 1967 SC 1885.
 Shanker Lal Vs. Bhura Lal, AIR 1951 Ajmer 24.
 Hyman and Wife Vs. Nye & Sons, (1881) 6 QBD 685.
 Reed Vs. Dean, (1949) 1 KB 188.
 Blount Vs. War Office, (1953) 1 WLR 736.
 Gopal singh Vs Punjab National Bank, AIR 1976 Del 115.
 Chittagong Port Authority Vs. Mohd. Ishqque, (1983) 35 DLR (AD) 364
 Alias Vs. E.M. Paul, AIR 2004 Ker 214.
 Shaw & Co Vs. Sons, (1917) 1 KB 799.
 Juggilal Kamlapat Oil Mills Vs. Union of India, (1976) 1 SCC 893
 Standard Chartered Bank Vs custodian, AIR 2000 SC 1488.
 Statues
 The Indian Contract Act, 1872.
 Indian Evidence Act,1872

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