What are the Duties of a Bailee under a Bailment Contract?

Duties of a bailee

Section 148 of the Indian Contract 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. In this blog, we shall be discussing the duties of a bailee.

Duties of a bailee

Once a relationship of bailment is created, both the bailor and bailee need to fulfill their respective obligations as per the terms of the agreement. A bailor, for instance, should ensure that he has disclosed any defects in the goods bailed that might expose the bailee to some risk. The goods must be fit to use for the purpose for which they are meant. Other duties of a bailor include bearing the expenses incurred by the bailee for the purposes of bailment, indemnifying the bailee for loss suffered on account of the bailor’s title being defective, receiving the goods back from the bailee, etc. To know more about the duties of a bailor, you may refer to this blog:

Duties of a Bailor under a Contract of Bailment

On the other hand, the duties of a bailee are discussed below:

Duty to exercise reasonable care of the goods bailed:

Section 151 of the Indian Contract Act specifies the degree of care that a bailee has to exercise in respect of the goods bailed to him. He has to exercise as much care of the goods bailed as a person of ordinary prudence would do for his own goods of the same nature and characteristics as the goods bailed. It makes no difference whether the bailment is gratuitous or non-gratuitous. A bailee would be liable if the goods suffer any loss on account of his negligence.

However, Section 152 of the Contract Act says that the degree of care to be taken by the bailee can be increased to a greater level if a separate contract is entered between the two parties to that effect. In such a situation, a bailee is bound to take as much care of the goods bailed as may be determined in the contract. In the absence of any such contract, he has to only exercise standard care as a person of ordinary prudence would do. And where it is proved that he took standard care, he shall not be responsible for loss or destruction of the goods bailed.

To take an example, if a diamond ring is stored by its owner A for safe custody with another person B and B is not to earn any payment for it, the bailee should keep it secured in an iron safe or some other protected place but not in his lumber-room, just because the bailment is gratuitous. Similarly, if a cow is brought for safe custody, it is adequate if it is kept in a securely enclosed backyard, and even if it is for reward, no one expects it to be kept in the drawing-room. In case the commodities are stolen, lost, or otherwise damaged, even though the bailee has exercised reasonable care, the bailee is not accountable for the loss. This loss would have to be borne by the bailor.

Duty not to make unauthorized use of goods:

The bailee is under an obligation to use the goods bailed according to the terms of the bailment contract. If the bailee treats the goods in a manner contrary to the terms & conditions of the contract, the contract becomes voidable at the option of the bailor. In addition, the bailee shall be liable to compensate the bailor for any loss caused to the goods due to their inconsistent use. It must be noted that if the bailee makes unauthorized use of the goods bailed, he shall not be saved from liability even when he exercised due care as a prudent person.

For example, A lends his automobile to B so that he can travel to Delhi from Hyderabad. B was to drive the car. B brings along a friend C who has been driving his car for the past ten years. Instead of travelling to Delhi, B travels to Calcutta. The bailor has the option to make the contract void. B permits C to drive the automobile on the way to Calcutta. Despite the fact that C drives the automobile at a very slow speed in accordance with B’s instructions, an accident occurs and the car is damaged. A is entitled to be paid for his loss.

Duty not to mix bailor’s goods with his own goods:

One of the main duties of a bailee is to keep the bailor’s goods separate from his own goods. Sections 155 to 157 of the Contract Act provide for the following rules:

1) In case the bailee, with the consent of the bailor, mixes the goods bailed with his own goods, both the parties shall have an interest in the produced mixture in proportion to their corresponding shares (Section 155).

2) If the bailee mixes the bailor’s goods with his goods without the bailor’s consent and the goods can be separated or divided, the parties’ property in the goods remains separate; however, the bailee is responsible for the cost of separation or division, as well as any damages resulting from the mixture (Section 156).

For example, A delivers 100 bales of cotton labelled with a certain mark to B. If B combines these 100 bales with other bales of his own having a different mark without A’s authorization, A is entitled to have his 100 bales returned, and B is obligated to bear any expenses spent in the separation of the bales, as well as any other incidental damages.

3) If the bailee, without the bailor’s consent, mixes the goods of the bailor with his own goods in such a way that it is impossible to separate the bailed goods from the other goods and give them back, the bailor is entitled to compensation from the bailee for the loss of the goods (Section 157). Even when the bailee offers to return the goods without sorting them out, the bailor can refuse to take the delivery in total and can claim compensation for the loss.

For example, A delivers a barrel of cape flour (worth Rs. 50) to B. B, without A’s permission, combines the flour with his own country flour, which is valued at Rs. 20 a barrel. B must compensate A for the loss of his flour.

Duty not to create an adverse title:

The bailee has a legal obligation not to do anything that contradicts the bailor’s title. He should not establish his own or a third-party’s title on the goods bailed to him.

Duty to return the bailed goods:

This is one of the most crucial duties of a bailee. The bailee has to return or deliver the goods in accordance with the bailor’s instructions, without demand, after the time limit expires or the purpose is completed. If he does not return or deliver the goods as instructed by the bailor, or tender the goods at the correct time, he becomes liable to the bailor for any loss, destruction, or deterioration of the goods from that time onwards. He shall be liable even without his negligence. For example, if a bookbinder keeps books beyond the time allowed for binding and they are lost in an unexpected fire, the binder is liable.

If, on the other hand, the bailment is gratuitous, the bailee must return the goods supplied, at any time on demand by the bailor, even if the goods were lent for a certain period or purpose.

Duty to return accretions to the goods:

In the absence of a contract to the contrary, the bailee must deliver to the bailor, or as directed by him, any increase or profit derived from the goods bailed. For example, A may leave a cow in the custody of B to be cared for. The cow has given birth to a calf. B is obligated to provide both the calf and the cow to A.

Conclusion

Where relevant, both the bailor and the bailee have certain rights and duties that must be met. Although responsibilities will vary depending on the facts of the case, some requirements, such as the bailee’s duty to exercise reasonable care, are inherent in any bailment contract and are consistent and apply everywhere.

FAQs

What are the duties of a bailee?

The duties of a bailee include the following:

  • Duty to exercise reasonable care of the goods bailed
  • Duty not to mix bailor’s goods with his own goods
  • Duty not to make unauthorized use of goods
  • Duty not to create an adverse title
  • Duty to return the bailed goods
  • Duty to return accretions to the goods

Can Bailee be held liable when due care is taken?

A bailee would be liable if the goods suffer any loss on account of his negligence. And where it is proved that he took standard care, he shall not be responsible for loss or destruction of the goods bailed.

Can a bailee mix the goods of the bailor in his own goods without consent?

If the bailee, without the bailor’s consent, mixes the goods of the bailor with his own goods in such a way that it is impossible to separate the bailed goods from the other goods and give them back, the bailor is entitled to compensation from the bailee for the loss of the goods.

What are the legal provisions when the bailee mixes the goods bailed to him with his own goods?

One of the main duties of a bailee is to keep the bailor’s goods separate from his own goods. Sections 155 to 157 of the Contract Act come into play when the bailee mixes the goods bailed to him with his own goods.

Can a bailee be held liable when negligent?

A bailee has to exercise as much care of the goods bailed as a person of ordinary prudence would do for his own goods of the same nature and characteristics as the goods bailed. It makes no difference whether the bailment is gratuitous or non-gratuitous. A bailee would be liable if the goods suffer any loss on account of his negligence.

What is the liability of a bailee for damage to the goods?

If the bailee treats the goods in a manner contrary to the terms & conditions of the contract, the contract becomes voidable at the option of the bailor. In addition, the bailee shall be liable to compensate the bailor for any loss caused to the goods due to their inconsistent or unauthorized use.

Who has the right to receive any accretion to the goods which were bailed?

The bailor

Is the bailee bound to return any accretion to the goods bailed?

In the absence of a contract to the contrary, the bailee must deliver to the bailor, or as directed by him, any increase or profit derived from the goods bailed.


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Ruchi Gandhi

The author enjoys to write informational content in the domain of company law and allied laws. She takes interest in doing thorough and analytical research on legal topics. She is a CA along with MBA (Fin) and M. Com.

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