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Bailment and Pledge are special class of contracts, which are dealt with in Secs. 148 to 181 of the Indian Contract Act, 1872.
What is Bailment?
The term Bailment takes its roots from the French word Baillior which means To Deliver.
According to Sec. 148 of the Act,
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 who is delivering the goods is called the Bailor and the person to whom the goods are delivered is called the Bailee.
Example 1: A gave his washing machine to B, a mechanic, for repair. This is a contract of bailment between A and B.
Example 2: A lends his car to B for his use. This is a contract of bailment between A and B.
Similarly when a person delivers some gold to a goldsmith for the purpose of making ornaments, there arises a contract of bailment.
It may be noted here that it is not necessary that a contract be entered for a bailor and bailee relationship to be formed. Just like in any other form of contract, consideration also forms part of bailment. It is normally given in the form of money.
Requisites of Bailment
Bailment is always based upon a contract. However, a contract may be “Express” or “Implied”.
Example: A delivered his car to B, a mechanic, for the purpose of repairing. In this case, there is express contract of bailment between A and B. In exceptional cases, it may arise without a contract also i.e., it may be implied by law.
2. Delivery of Possession of Goods
The delivery of possession of goods is an essential requisite in a contract of bailment. If the possession of goods is not delivered to the bailee, then there will not be any contract of bailment.
It may be Actual or Constructive. Actual delivery may be made by handing over goods to the bailee. Constructive delivery may be made by doing something, which has the effect of putting the goods in possession of the intended bailee, or any person authorised to hold them on his behalf .
Example 1: A who was holding goods on behalf of B, agrees to hold them on behalf of C, there is constructive transfer of possession.
It is to be noted that bailment is concerned only with goods. Current Money i.e., the legal tender is not goods. Therefore, a deposit of money is not bailment.
3. Some Purpose
Sec. 148 of Indian Contract Act 1872, which defines the term bailment specifically, states that the goods should be delivered by the bailor to the bailee for some specific purpose. Hence, there should be some purpose for delivering the goods to the bailee.
Example: A delivered his furniture to B, a carpenter, for the purpose of repair. There is a contract of bailment between A and B.
4. Return of Specific Goods
Goods are delivered upon a condition that they are to be returned in specie. On the accomplishment of the purpose of the contract of bailment, the very goods in their original form are to be returned by the bailee or are otherwise to be disposed of according to the directions of the bailor. However, goods may be returned in its original form or in its altered form.
For example, delivery of a piece of clothe to a tailor to make it into a coat, delivery of furniture to a carpenter for repair and polish etc.
Consideration in a Contract of Bailment
As stated already, in a contract of bailment, the consideration is generally in the form of money payment either by the bailor or the bailee. For example, A gives his T.V. to B, a mechanic for repair, A deposited his luggage in a cloak room at the railway station. Here the bailor has to pay the money as consideration in support of the contract. On the other hand, A takes furniture on hire. Here the bailee has to pay money as consideration.
The detriment suffered by the bailor, in parting with the possession of goods, is sufficient consideration to support the bailee’s promise to return them. Thus even in a gratuitous bailment, the bailee cannot disclaim his obligation to return the goods bailed.
Classification of Bailment
The bailment may be broadly classified into two namely,
1. On the basis of Reward
On the basis of reward bailment may be divided into two as follows:
1. Gratuitous Bailment
Gratuitous Bailment is one where no consideration passes between the bailor and the bailee. Example: A lends his calculator to his friend B. This is a gratuitous baihnent.
2. Non-Gratuitous Bailment
Non-gratuitous bailment is one where consideration passes between the bailor and the bailee. Example: A hired an auto rickshaw from B for Rs.150 per day. This is a non-gratuitous bailment.
2. On the Basis of Benefits
On the basis of benefits, the bailment may be divided into three as given below:
1. Bailment for the Exclusive Benefit of the Bailor
This is a bailment in which goods are delivered by the bailor to the bailee only for the exclusive benefit of the bailor himself.
Example: A, at the time of going out of station for about a month, delivered some valuables to B, his neighbour, for safe custody without any charges. This is a bailment for the exclusive benefit of the bailor (A).
2. Bailment for the Exclusive Benefit of the Bailee
This is a bailment in which goods are delivered by the bailor to the bailee only for the exclusive benefit of the bailee.
Example: A lent his scooter to B, his friend, for the temporary use without any charges. This is the bailment for the exclusive benefit of the bailee (B).
3. Bailment for the Mutual Benefit of the Bailor and the Bailee
This is a bailment in which the goods are delivered by the bailor to the bailee for the mutual benefit of both of them.
Example: A delivered 10 bundles of books to B, a transporter, for the purpose of sending them at his (A’s) business place. B agreed to carry the bundles at A’s business place for Rs.1,000 as transportation charges. This is the bailment for the mutual benefit of both the bailor (A) and the bailee (B) as both of them are to be benefited. The bailor’s benefit is that the bundles are conveyed at his business place and the bailee’s benefit is that he gets charges for the transportation of bundles.
Termination of Bailment
A contract of bailment is terminated in the following cases:
1. On the Expiry of term: Where the bailment is for a specific period of time, it terminates on the expiry of that time.
2. On the Fulfilment of the Object: The bailment terminates as soon as the object for which the goods were bailed has been fulfilled.
3. On Inconsistent Act: If the bailee uses the goods in an inconsistent manner as to the terms of the contract, the bailment terminates.
4. On the Destruction of the Goods Bailed: When the goods bailed are destroyed or becomes incapable of use for the purpose of bailment due to the change in its nature, the bailment is terminated.
5. Gratuitous Bailment: In case of gratuitous bailment, the bailment can be terminated by a notice from the owner to the bailee provided the termination does not cause inconvenience to the bailee.
6. On the Death of the Bailor or the Bailee: A gratuitous bailment terminates on the death of the bailor or the bailee.