Law of bailment and duties of a bailor
A bailment is a specific category of contracts. The Indian Contract Act, 1872 does not deal with all types of contracts, rather there are various other Acts as well that deal with specific contracts, for example, the Railways Act 1890, Carriers Act 1865, etc. Nevertheless, the general principles underlining a contract of bailment are covered in Chapter IX (Section 148-181) of the Contract Act. Taken from the French word ‘bailer’ which means ‘to deliver’, the term ‘bailment’ in its technical sense means the change of possession of goods from one individual to another.
Section 148 of the Act says that bailment is the delivery of goods from one person to another for some specific purpose under a contract. Under such contract, when the desired purpose is accomplished, the goods shall be returned or shall be disposed of following the directions of the person who delivers them. The person to whom goods are delivered is the bailee and the one who delivers them is the bailor. Suppose you deliver a piece of gold to a jeweller to make some bangles. Here, you are the bailor and on delivering the gold to the jeweller (bailee), a contract of bailment is created between you and the jeweller.
In this blog, we are going to discuss the duties of a bailor in a contract of bailment. But before that, let’s see what are the essential requirements for bailment.
Essentials of bailment
In order for a contract of bailment to be valid, the following essential features must be present therein:
- Firstly, the existence of an agreement between the bailor and the bailee is an essential pre-requisite. The agreement between them can be either express or implied.
- Next, for a relationship of bailment, it is important that goods must be delivered to the bailee. This implies that bailment can be for movable goods only and it is essential that their possession should be voluntarily transferred by the bailor in accordance with the contract.
- Further, in a bailment, the goods must be delivered for some specific purpose.
- Lastly, it is crucial that the goods, being the subject matter of bailment, must be returned to the bailor or they should be disposed of as per the directions given by him, once the purpose is accomplished or on expiry of the period of bailment.
Obviously, when goods are transferred to another person in consideration of a price, it is a sale. Or, when goods are not to be returned back but their price is paid, it is not a bailment. Some common examples of bailment are where a car is given for repairing, some diamonds are given for being set in an ornament, pledge of jewellery on the security of which money is borrowed, delivery of jewels to a bank for safe custody, goods sent to a railway company for being carried & delivered to the consignee, etc. In all of these cases, the goods given to the bailee shall be returned back once the purpose for which they were given has been fulfilled or they shall be treated (disposed of) in a manner as may have been determined by the bailor.
Duties of a bailor
In any contract of bailment, the bailor has to fulfill some obligations. The duties of a bailor are as follows:
Disclose any defects:
The law of bailment requires the bailor to disclose any flaws in the goods bailed. The bailor is obligated to notify the bailee of any flaws in the goods that would interfere with the use of the goods for which the goods are being bailed or that would expose the bailee to some risk.
Bailment of goods can be either gratuitous (in which neither the bailor nor the bailee receives any reward) or non-gratuitous bailment for reward. In the situation of gratuitous bailment, the law puts an obligation on the bailor to disclose all faults known to him that would interfere with the use of the goods bailed. If the bailor fails to disclose the faults and the bailee suffers a loss as a result, the bailor is obligated to compensate the bailee for the loss. For example, A, the owner of a scooter, lets B, his friend, take his scooter for a joy ride. A is aware that the scooter’s brakes were not operating properly. A does not reveal this information to B. As a result, B had an accident. A is obligated to reimburse B for damages.
In the case of non-gratuitous bailment, i.e., bailment for reward, the bailor is obligated to preserve the goods in excellent condition. The goods must be fit for the purpose for which they are meant. In this case, the bailor is accountable for any deficiencies in the goods, whether he is aware of them or not, and if the bailee suffers any damage, the bailor must bear it. For instance, A hires a tractor from B to plough his land. The tractor’s shaft is broken, but B is unaware of the problem. Because of the flaw, the tractor overturns while A is ploughing the field, thus injuring him. Here, B is responsible for A’s losses.
It should be noted that in the case of gratuitous bailment, the bailor is only liable for defects that he is aware of but does not disclose to the bailee. The duty to reveal is especially critical when the goods bailed are of a risky nature; otherwise, the bailor will be held accountable for the consequences. For example, A delivers some chemicals to B to be transported to Bombay. If not stored below a specific temperature, these chemicals tend to burst. A does not inform B of this precaution. The chemicals burst and harm B while he is transporting them. A is responsible for all of the damages.
One of the most important duties of a bailor is to bear the extraordinary expenses relating to bailment.
But the typical practice in those gratuitous bailments where the bailee is not to be paid is that the bailor has to bear the regular expenses incurred in maintaining the goods, in carrying the goods, or in any work done on them by the bailee for the bailor. The bailor is obligated to compensate the bailee for all the expenses incurred for the purpose of bailment. For instance, suppose A, a farmer, gives some gold to his friend B, a jeweller, to make a gold ring. B is not to be compensated for his work. However, A is obligated to reimburse B for any expenses incurred in the crafting of the ring.
On the other hand, in the case of other types of bailments (non-gratuitous), the bailor is obligated to bear extraordinary expenses spent by the bailee for the purposes of bailment. However, the bailor is not required to incur ordinary or regular expenses. For example, if a horse is lent for a journey, the bailee is responsible for the horse’s feeding costs. However, if the horse becomes ill and expenses must be incurred, or if the horse is stolen and expenses must be incurred for recovery, the bailor must pay those costs.
Indemnify the bailee:
It is one of the duties of a bailor to indemnify the bailee for any loss occurring as a result of the bailor’s title being defective. The reason for this is that the bailor did not have the authority to make the bailment, receive the goods back, or offer instructions about the goods bailed. For example, A asks his friend B to offer him a cycle for one hour. Instead of his own cycle, B lends C’s cycle to A. While A was riding, the genuine owner of the cycle identifies him and surrenders him to police custody. A is entitled to recover from B all the costs he had to incur in escaping this situation.
It is the bailor’s responsibility to bear the risk of loss, deterioration, and destruction of the goods bailed, on the condition that the bailee has taken reasonable precautions to safeguard the goods from loss.
Receive back the goods:
One of the basic duties of a bailor is to receive back the goods when they are returned to him by the bailee in compliance with the terms of the bailment. If without a reasonable reason, the bailor refuses to take the goods back when they are returned at an appropriate time and location, the bailee can seek compensation from the bailor for all necessary and incidental expenses incurred in keeping and protecting those goods.
Relevant case laws on duties of a bailor
Hyman and wife vs. Nye and Sons, (1881) LR 6 QBD 685
The plaintiff hired a carriage along with a pair of horses and a driver from the defendant. During the ride, a bolt in the under part of the carriage broke, resulting in an accident in which the plaintiff was injured. Even though the defendants were unaware of the condition of the bolt, they were held accountable. The court ruled that the defendant was liable since it was his responsibility to provide a carriage that was as fit for the purpose for which it was leased as care and skill could render it.
Reed vs. Dean, (1949) 1 K.B. 188
The plaintiff hired a motor launch for a vacation on the Thames. Unfortunately, the launch caught fire, and because the fire-fighting equipment was not functioning properly, the fire could not be extinguished. As a result, the plaintiffs were hurt and suffered losses. Hence, the defendant was held liable by the Court.
In a contract of gratuitous bailment, it is the duty of a bailor to disclose any defects known to him that may interfere with the use of the goods bailed. Similarly, for non-gratuitous bailments, a bailor would be held liable for loss suffered by a bailee if he fails to disclose any defects in the goods bailed, whether or not he was aware of them.
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