Duties of Bailor and Bailee

Author: Rishi Tibrewal, Damodaram Sanjivayya National Law University

Introduction:

Bailment means a relationship in which one person’s personal property is temporarily held by another person. The ownership of the products or items is with one person and the possession is with another person. There are several circumstances in which this takes place. Bailment is therefore an important topic of public interest.

“Bailment” is defined in Section 148 of the Indian Contract Act in the following words:

“A bailment is a 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.”^[1]

The following essential features of “bailment” are emphasized by this definition.

• Delivery of possession – The first significant element of bailment is the handover of possession from one person to another. For the purpose of bailment the property must be given over to the bailee. Once this happens, a bailment takes place regardless of the manner in which it occurs. If the bailor gives the property over to the bailee, then “actual delivery” takes place. When no change of physical possession takes place, the things remain where they are, but something takes place that makes them own the bailee. This is called “Constructive delivery”.

• Delivery should be upon contract – Delivery of goods should be made for a purpose and under a contract that when the purpose is fulfilled the goods shall be restored to the bailor. If the goods of a person are possessed by another person without any contract, no bailment shall take place within the meaning of the definition. The contract may be express or implied.

• Delivery should be upon some purpose – The bailment of goods is always for some objective and provided that the items are returned to the bailor, or disposed of as per his/her mandate when the objective is fulfilled. If the person who receives the goods does not have to return the goods to the person who delivers them or deal with them as directed, the relation to the bailor is not that of the bailee. It is this bailment characteristic that differentiates it from many other similar transactions.

Duties of the Bailor

There are two types of bailments – gratuitous bailment and non-gratuitous bailment/ bailment for reward.

A bailment without consideration is referred to as a gratuitous bailment. Neither the bailor nor the bailee has the entitlement to any pay or reward under such bailment arrangements. Such a bailment could be for either party’s sole interest.

Unlike gratuitous bailment, a non-gratuitous or a bailment for a reward involves some consideration between the bailor and the bailee. The goods shall be delivered to the reciprocal advantage of both parties in this scenario.

Duties of the bailor are as follows –

1. Duty to disclose faults in goods bailed

Section 150 describes the bailor’s duty to disclose faults in goods bailed. Whether the goods are bailed gratuitously or not, the bailor is obligated to reveal every known defect of the goods to the bailee. The bailor is responsible for this. In the absence of such a disclosure, the bailor would be obliged to compensate the bailee directly for any loss caused by that fault.

The following conditions have to be met in order to establish liability of the bailor –

a) He ought to be aware of the deficiency and bailee ought not to be aware of it.

b) The defect in the product must be such that it exposes the bailee to special risk or interferes considerably with the use of the goods.

However, it should be noted that the bailor is accountable for even those problems of which he/she is not aware in the case of a gratuitous bailment. The bailor’s responsibility is far greater in non-gratuitous bailment. He benefits from his occupation and consequently has the obligation to ensure that the goods he delivers are reasonably safe for bailment purposes. For him to assert that he was unaware of the defect is no defence. Section 150 states clearly 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”. The bailor is responsible for such harm. He should evaluate the goods and remove problems that would have been revealed by reasonable scrutiny.

In Hyman & Wife v Nye & Sons, for a specified trip, the plaintiff rented a carriage, a horse-drawn pair and a driver from the defendant. The split bar had been dislodged, the carriage disrupted and the plaintiff hurt during the travel by a crack in the bottom of the rail carriage. Justice Lindley held the defendant responsible and said: “A person who lets out carriages is not responsible for all defects discoverable or not; he is not an insurer against all defects. But he is an insurer against all the defects which care and skill can guard against. His duty is to supply a carriage as fit for the purpose for which it is hired as care and skill can render it.”^[2]

Similarly in Reed v Dean, for a holiday in the Thames river, the plaintiffs hired the defendant’s motorboat launch. The launch caught fire, and the plaintiffs could not extinguish it, because the firefighting system was out of operation. They had been wounded and lost. The court found that it was assumed that the launch was fit as well as reasonably safe and operational for the purpose for which it had been commissioned. The defendant was therefore deemed responsible.^[3]

If a bailor gives goods to another person for transport or for some other reason and the items are harmful, the fact should be disclosed to the bailee.

2. Duty to bear expenses of bailment

In the instance of a non-gratuitous bailment, the bailor shall incur any exceptional costs, but the bailee shall bear all usual and reasonable expenses of the bailment. However, the bailor shall pay all costs necessary for the bailment of the delivered property if the bailment is gratuitous.

In Forbes Forbes Campbell and Co. Ltd. Vs. The Board of Trustees of the Port of Bombay and Metal Fabs India Pvt. Ltd., the Supreme Court noted that a bailment contract had arisen. The bailee therefore had the right to be compensated for the costs expended for bailment purposes.^[4]

3. Duty to compensate the bailee on premature termination

The bailor is obligated to compensate the loss sustained by the bailee for the maintenance of the contract by virtue of Section 159. At any given stage, if the bailment is gratuitous, the bailor may request the goods for usage, even though he has lent them for a set period or cause. Should, however, the bailee operate in a way that the return of the goods lent prior to the time set would eventually lead to damages beyond its actual advantage from the goods, the bailor must reimburse the bailee for the sum where the misfortune so caused exceeds the advantages so ascertained.

4. Duty to receive back the goods

At the conclusion of the bailment time or when the purpose is achieved, the bailor has a duty to receive goods from the bailee. However, if the bailor refuses to do the same, then he or she is obliged to reimburse the custody and care fees accrued.

Duties of the Bailee

1. Duty to take reasonable care of the goods bailed

Section 151 lays down this duty in the following terms: “In all cases of bailment 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.”^[5] If the goods are damaged or destroyed even after reasonable care, the bailee shall not be responsible for the loss of the goods bailed.

In the case of Blount v War Office, the War Office requested a residence belonging to the plaintiff. In a strong room in the house the plaintiff was permitted to store some items, which he locked. Of the soldiers that were stationed there, some broke into the chamber and stole a number of silver plates. The War Office was deemed responsible. The court said: “There was a voluntary bailment of the goods to the defendants in the way of deposit and the standard of care required of them was reasonable care which a man would take of his own property. It is hard to believe that any reasonable man, who had valuable property of his own stored in those” “circumstances, would leave it to the tender mercies of seventy or eighty displaced persons of that type without taking any precaution. The Ministry was negligent.”^[6]

The expected standard of care of a gratuitous bailee is the same as that of a non-gratuitous bailee. In all cases of bailment, a uniform standard of care is to be maintained, that is, a level of care that a man of ordinary caution would take of his own property of the same sort and in similar conditions. If the care dedicated by the bailee drops below this standard, he will be responsible for loss of or damage to the property.

The burden of proof is on the bailee to demonstrate that he was reasonably careful and he is not responsible if he can prove this. If the bailee provides proof that he has taken reasonable care to avoid reasonably foreseeable damages, or had taken all reasonable efforts to avoid reasonably apprehended hazards, he would be waived from his liability.

2. Duty to use the goods only for the authorized purpose

Section 154 describes the liability of a bailee making unauthorized use of the goods bailed. It states “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.”^[7]

The bailee shall utilize the goods only for the purposes for which they were bailed. The bailee would be entirely accountable for any loss or damage to the goods if the goods were used in an unauthorized manner. Even Act of God or inevitable accident could not be used as a defence.

In the case of Alias v EM. Patil, a vehicle was transported for repair to a workshop and the business owner permitted the vehicle to be driven by an unauthorized employee and caused the death of one person in an accident. As it was considered an unauthorized usage of the vehicle and the liability was deemed absolute, the bailee was obliged to recompense the deceased and also the car owner. The insurer also paid the deceased the compensation and recovered compensation from the owner of the vehicle.^[8]

3. Duty to not mix bailed goods with own goods

The bailee must safeguard the individual identification of the items of the bailor. Without the bailor’s approval, he should not combine his own products with the bailor’s. If the goods are blended with the bailor’s approval, both shall have a proportionate interest in the mixture generated. The bailee is bound to pay the costs of the separation and any damage arising from the mixing if the mixture is created without the approval of the bailor and when the commodities can be split or divided. But the bailee has to reimburse the bailor for his loss if the mixture cannot be separated.

4. Duty to return the goods

The bailee should return the items to the bailor without any request if the bailing purpose is achieved or the period of time for which the goods were bailed has expired. If he doesn’t do so, it will hold the items at his risk and he will be liable for any loss or damage to the goods.

In Shaw & Co. v Symmons & Sons, The plaintiff entrusted the defendant, a bookbinder, with books to be bound and the latter promised to deliver them in a fair amount of time. After the plaintiff requested the defendant to deliver all the books, the defendant could not deliver them within a reasonable amount of time and they were subsequently burned in his premises in an unintentional fire. The defendant was judged accountable for the destruction of the books. There is no issue of establishing any defence such as “act of God” or “inevitable accident” when the loss takes place while the wrong act of the bailee’s occurs. In every event, he is accountable.^[9]

Conclusion

The bailment contract means the transfer of possession of the product for a special purpose from the bailor to the bailee. The sale of products differs from the sale of goods as the sale involves the transfer of ownership of the commodities. All essential features must be met in order for the bailment contract to be legal. Both the bailor and the bailee have certain rights and duties to be complied with, wherever applicable. Although responsibilities will depend on the specifics of the case, some requirements, such as the bailee’s responsibility to reasonable care, are inherent in any bailment contract and are consistent and apply all over.

[1] Indian Contracts Act, No. 9 of 1872, § 148, India Code (1993).

[2] Hyman & Wife v Nye & Sons, (1881) LR 6QBD 685.

[3] Reed v Dean, (1949) 1 KB 188.

[4] Forbes Forbes Campbell and Co. Ltd. Vs. The Board of Trustees of the Port of Bombay and Metal Fabs India Pvt. Ltd. AIR 2006 Bom 162.

[5] Indian Contracts Act, No. 9 of 1872, § 151, India Code (1993).

[6] Blount v War Office, (1953) IWLR 736.

[7] Indian Contracts Act, No. 9 of 1872, § 154, India Code (1993).

[8] Alias v EM. Patil, AIR 2004 Ker 214.

[9] Shaw & Co. v Symmons & Sons, (1917) 1 KB 799.