Bailment – Law of Contracts II – Notes

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  • Essentials of Bailment
    • Delivery of Possession
    • Delivery should be upon contract
    • Delivery should be upon some purpose
  • Delivery of Possession – Custody without possession is not bailment. Waiter takes coat at restaurant and then coat is missing. Here possession hence bailment. – Ultzen v. Nicolls
  • Lady kept jewellery in a box at defendant’s place but kept the key of the box with her possession not given no bailment. – Kaliaperumal v. Vishalakshi  Similarly bank lockers also do not fall within the ambit of bailment.
  • Actual possession is physical transfer of goods. Constructive possession is when there is no change in physical delivery but something is done by the bailor so as to put the goods in possession of bailee.
  • Case involving insurance claim, where in case of an accident car had to be delivered to nearest garage for repairs. Later on car caught fire and this delivery was held sufficient to constitute insurance company as bailee and the garage keeper as sub bailee. – N.R. Srinivasa Iyer v. New India Insurance Co.
  • Delivery should be upon contract – Person’s ornament got stolen later on police recover it and it gets stolen from them. Held no bailment as there was no contract. – Ram Gulam v. Govt. of U.P.
  • The above stated view has been changed later on and it has been held that bailment can arise without an enforceable contract. –  State of Gujarat v. Memon Mahomed
  • Delivery should be upon some purpose – Bailment is to be for some purpose and is subject to the condition that when purpose is accomplished goods will be returned to bailor or disposed of as per his mandate. – R. v. Ashwel
  • Plaintiff gave several promissory notes and asked defendant’s servants to consolidate them into one single note. The servants lost the notes and he sued them as bailee. Court held since notes were not to be retuned no bailment. – Secy. of State v. Sheo Singh Rai
  • Similarly deposit with bank is not bailment as not same note and coins are to be returned. – U.O.I. v. K.V. Venugopalan
  • In sale ownership is transferred and buyer is not compelled to return good. In case of soft drink bottle where terms stipulates that  buyer will get money back on return of bottle then it is sale as buyer may not return the bottle.
  • Bailor has duty to tell bailee of any possible condition which put him at risk.  If goods damage then even if he is unaware he is liable however he is not liable for all damages but which could care and skill can guard against.
  • The burden of proof is on bailee to show that he was not negligent.
  • If bailee’s own goods are lost along with that of bailor then its not a valid excuse for showing reasonable care except when bailor knows of bailee’s negligent conduct. – Lakshmidas v. Megh Raj
  • Involuntary bailee is a person who comes into possession of something without his consent. He is not liable for any loss if he has taken reasonable care of goods.
  • Even if a clause in contract absolve bailee from his liability even if he has not taken reasonable care then that clause is valid as per §151 and §152 could only mean to take even higher duty of care and not below.
  • §154  – Provides that bailee must only use goods for purpose allowed to him by the bailor and if he uses them in other way then he is liable absolutely and even act of god won’t be a defence.
  • §155 -157 – Bailee must not mix his goods with that of bailor and if he does so and if the goods are separable then he must separate them and bear the expense of separating them or otherwise compensate the bailor.
  • §161 – If goods are not returned by bailee after completion of bailment then any loss to goods even due to act of god will be incurred by bailee. – Prakash Road Lines v. Oriental Fire and General Insurance Co.
  • §159 – If bailor take back good lend in gratuitous bailment then if bailee suffer any loss due to such pre-pone of bailment then bailor must pay for the same.
  • §162 – Bailment is terminated either by death of bailor or bailee.
  • Bailee is not entitled to keep goods even if bailor is not the true owner of the goods. He is liable to return the goods to bailor and he will not be liable for conversion while doing so.
  • If bailee return good to third person he need to show that third person had better claim over the goods. Seizure of goods from bailee by authority of law is permissible.
  • Finder of good is a bailee having only right to lien.
  • §170 – Particular lien could only be exercised when it improves good such as horse trainer and not merely maintaining good such as keeping and feeding horse a stable.
  • General lien could not be applied to deposit of money as then there is no bailment. It also does not apply to paper, security if they are kept for purpose of security or some other purpose.
  • Money could be considered as good and lien could be used. – Mercantile Bank of India Ltd. v. Rochaldas Gidumal
  • Bank could exercise lien on joint accounts. – Syndicate Bank v. Vijay Kumar
  • If security is deposited for one loan then it could not be used for another loan.
  • Factor or agent could only lien good that come in their possession in capacity of agency and also they could not lien good that come in their possession for specific purpose.
  • Solicitor forfeit their right to lien the moment they discharge themselves by misconduct or decide not to act for client or cannot represent client such as in a case where firm of lawyer got dissolved individual lawyer cannot lien.
  • If bailor wants to sue sub bailee then he is bound to the terms between bailee and sub bailee.

Continue to learn more about the Law of Contracts by clicking here. You can grab notes for other law subjects from here.


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