January 25, 2024

Chapter IX of the Indian Contract Act of 1872 discusses the idea of “contract of bailment.” The technical common-law word “bailment” refers to the changing or transfer of ownership of things upon a contract to return or dispose of the commodities in accordance with the person who delivered them once the transfer’s intended purpose has been fulfilled.

what is bailment in contract law?

  • A written or verbal agreement, maybe involving consideration, between the person granting and the person receiving possession is known as a bailment.
  • According to section 148 indian contract act of 1872, bailment refers to the transfer of goods from one party to another for a specified purpose with an agreement that the items will be returned once the purpose is fulfilled.
  • The person receiving the goods is referred to as the bailee, while the one delivering them is referred to as the bailor. On the other hand, there is no bailment if the owner keeps custody of the items.

bailment contract example

  • Example: An example of bailment is when someone delivers their car to the service center for repair.
  • Illustration: If A gives B, his neighbor, his car for ten days, but B also maintains one key with him and used to take the car throughout that time, then what happens? Since A is maintaining control over the property bailed, this will not be a case of bailment.

contract of bailment: Essentials

  • Presence of a Legitimate Contract: A primary requirement for bailment is the presence of a legitimate contract, which indicates that the commodities must be returned once the intended use is achieved. Even if there might not be a contract in place between him and the real owner, the person who finds missing property is also referred to as the bailee.
  • Temporary Goods Delivery: For a limited period, and the bailee is not permitted to keep possession indefinitely. Goods may be delivered via actual delivery or constructive delivery, which is defined as doing any action that results in the bailee or any person designated by him obtaining ownership of the goods.
  • Return of Particular Goods: After the good is used for its intended purpose, the bailee is required to return it to the bailor. It won’t be considered a bailment if the recipient doesn’t return the items.

kinds of bailment in Indian contract act

  • Deposit Bailment: When someone gives their belongings to another person for protection or storage, this is known as deposit bailment. It benefits both the bailor and the bailee. A piece of clothing is given to the dry cleaner by the bailor, who then holds onto the cleaned item and charges the bailee.
  • Loan for Use Bailment: When someone temporarily lends their belongings to someone for use, it’s known as a loan for use bailment. In X and Y’s case, the arrangement was a loan for use bailment, meaning Y was allowed to drive X’s car while it was at Y’s place.
  • Gratuitous Bailment: Gratuitous bailment is the release of goods without any payment or compensation. This kind does not require the bailee to pay any fees in exchange for the bailment. For example, using a friend’s vehicle. A gratuitous bailee is only accountable for property damage if it results from the bailee’s willful misconduct.

contract of bailment: Rights of Bailor and Bailee

Rights of Bailor:

  • A bailor is entitled to damages for usage of the items they bailed that are used without authorization.
  • When things are bailed out gratuitously, the bailor is entitled to demand their return at any moment, even if they were lent for a predetermined period of time or use. But if the loss from the bailment exceeds the profit, the bailor will have to reimburse the bailee.

Rights of Bailee:

  • Possession of the items that are affected by the condition is one of the bailee’s rights. However, the right to possess is restricted. Without the Bailor’s permission, the Bailee may only use the items for that intended purpose and no other.
  • Until the charges pertaining to the goods are settled, the bailee retains the right to lien, allowing them to reclaim control of the items that the bailor had bonded. When there is a formal contract between the parties, that is, a contract of bailment, this right would be available.

contract of bailment: Liabilities of Bailor and Bailee

Liabilities of Bailor:

  • All information on the products delivered to Bailee must be disclosed by the Bailor. Section 150 of the Indian Contract Act of 1872 provided a definition for it.
  • The obligation of the Bailor to reimburse the Bailee for any loss, damage, or liability sustained during the Bailment period is known as the duty to indemnify the Bailee. It is a crucial component of a bailment arrangement in which the Bailor gives the Bailee access to their property for a defined use.

Liabilities of Bailee:

  • A bailee has an obligation to care for the goods bailed to them in all types of bailments. He must treat the items with the same consideration that a man of average caution would give to his own possessions of like mass, caliber, and worth in comparable conditions.
  • Once the items have been bailed for a set amount of time or their intended use has been fulfilled, the bailee has an obligation to return or deliver the bailed goods in accordance with the bailor’s instructions, without making any demands.

A crucial part of the carrying of goods is the bailment.  Bailment is a more secure way to maintain assets as we know that banks protect our securities and that’s why we can trust them to manage commercial operations. We also keep money along with additional securities in banks without any concerns.

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