Bailment is a specific type of contract under contract law.
It is the delivery of goods by one person to another for a specific purpose. The goods are delivered on the condition that after the purpose has been achieved, the goods shall be returned or otherwise disposed of in accordance with the terms of the contract. The person who delivers the goods is called the bailor and the person to whom the goods are delivered is called the bailee.
For example, when A delivers his car to B for repair, A is the bailor and B is the bailee.
Only the possession of goods is given to the bailee while the ownership remains with the bailor. Also, actual or constructive delivery of goods may be done, for example, when the key to a go-down is handed over to another person, this corresponds to the delivery of products in the go-down.
Some popular forms of bailment are:
- Delivery of goods by one person to another to be held for the bailor’s use.
- Hiring of goods
- Goods are given to a friend for his own use without any charge
- Delivery of goods to a creditor to serve as security for a loan
- Delivery of goods for carriage
- Delivery of goods for repair with or without remuneration
There are two basic ways to classify bailment:
- On the basis of the reward received by the parties
- On the basis of benefit
Kinds of Bailment on the basis of reward received by the parties
Bailment is defined as either gratuitous or non-gratuitous depending on whether the parties receive or do not receive some value out of the contract of bailment.
1. Gratuitous Bailment
A gratuitous bailment is one in which there is no consideration involved in the contract of bailment. Neither the bailor nor the bailee is entitled to any remuneration.
For example, if you lend your bicycle to a friend so he can ride it or if you borrow his books to read, you are engaging in a gratuitous bailment because no exchange of money or other consideration is involved. Neither you nor your friend is entitled to any consideration in this situation.
A gratuitous bailment comes to an end on the death of either the bailor or the bailee (Section 162).
2. Non-gratuitous Bailment
On the other hand, a non-gratuitous bailment is a contract of bailment in which some consideration is exchanged between the bailor and the bailee. For example, if your friend hired a bicycle from a local bike shop or you borrowed a book from a bookshop on hire, this would be a case of non-gratuitous bailment.
Difference between gratuitous and non-gratuitous bailment
The following table will differentiate between gratuitous and non-gratuitous bailment:
|Gratuitous bailment||Non-gratuitous bailment|
|It would be either for the exclusive benefit of the bailor or the bailee.||Both parties get some benefit. It is a bailment for the benefit of both the bailor and the bailee.|
|No consideration is involved.||A consideration is involved.|
|It is terminated by the death of either the bailor or the bailee.||It is not terminated in such cases. The responsibility passes on to the legal representatives.|
|The bailor is responsible for damages arising to the bailee on account of faults in the goods bailed, of which the bailor is aware. (Section 150)||The bailor is responsible for damages arising to the bailee on account of faults in the goods bailed, of which the bailor is aware or unaware.|
|The bailor can terminate the contract at any time even before the expiry of the term fixed or the achievement of the object. (Section 159)||The bailor cannot terminate the contract at any time before the expiry of the term fixed or the achievement of the object. Section 159 applies to gratuitous bailment only.|
|The bailor is obligated to compensate the bailee for all the necessary expenses incurred for the purpose of bailment. (Section 158)||The bailor is not obligated to compensate the bailee for all the necessary (ordinary or regular) expenses incurred for the purpose of bailment. The same is borne by the bailee.|
Kinds of Bailment on the basis of benefit
Another way to classify bailment is on the basis of benefits derived by parties.
The contract of bailment can be classified into the following types based on the benefits accruing to the parties:
1. Bailment for the exclusive benefit of the bailor
This is the case when a contract of bailment is undertaken solely for the benefit of the bailor and the bailee receives no benefit from it. For example, if you are going to a different city and leave your valuables with your neighbour for safe custody, this contract only benefits you as the bailor and not the bailee (neighbour).
2. Bailment for the exclusive benefit of the bailee
This is the case when a contract of bailment is undertaken solely for the benefit of the bailee and the bailor derives no benefit from it. For example, if you lend your books to a friend for free so that he can prepare for his exams, it is only your friend, as the bailee, who alone is going to gain from this contract.
3. Bailment for the mutual benefit of the bailor and the bailee
Both the bailor and the bailee benefit from the contract of bailment in this scenario. For example, if you offer your shirt to a tailor for getting it stitched, this kind of contract will benefit both of you. While you will have a stitched shirt, the tailor will receive the stitching charges.
Another example is when A rents out his car to B. A is the bailor and receives the hire charges, while B is the bailee and gets to use the car. Similarly, when A hands over his goods to B, a carrier, for carriage at a price, A is the bailor who benefits from the carriage, and B is the bailee who is given a price for carrying the goods.
Relevant case laws (bailor responsible for damages)
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.
Bailment is classified into three categories i.e., for the exclusive benefit of the bailor, for the exclusive benefit of the bailee, and for the mutual benefit of the bailor and the bailee. And on the basis of reward, bailment may be classified as gratuitous or non-gratuitous bailment.