Difference between sale and bailment

What is the Difference between Sale and Bailment?

We enter into many contracts in our day-to-day life. Sale and bailment are two of them.

A “contract of sale” is a simple contract in which a person buys products, services, or property from a seller in exchange for monetary or non-monetary consideration. The price is agreed upon between the buyer and seller based on the appropriate worth of the goods, services, or property. On sale, the goods become the property of the buyer and he exercises all rights in relation to them.

On the other hand, “bailment” is the delivery of goods by one person to another for a specific purpose. It may or may involve a price. 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.

Obviously, when goods and their title 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.

Difference between sale and bailment

From the above discussion, it is clear that the main difference between a sale and a bailment contract is that while the former is always made in exchange for a price, the latter need not necessarily be for consideration. Bailment contracts can be made gratuitously, e.g., when you lend some goods to a friend for his own use without any charge.

The key differences between sale and bailment are discussed in the following table:

BasisSaleBailment
Parties involvedThis is a contract between a Seller and a Buyer.This is a contract between a Bailor and a Bailee.
Transfer of propertyUnder a contract of sale, property in the goods is transferred from the seller to the buyer.Under a contract of bailment, there is no transfer of property, ownership, or title. Only the possession of the goods is transferred from the bailor to the bailee.
ConsiderationConsideration for a sale is the price given by the buyer in terms of money.Bailment can be either gratuitous or non-gratuitous. That is, it may be for free or in exchange for consideration.
Usage of goodsOn sale, since the goods become the property of the buyer, it is his will to use them the way he likes.Bailee can use the goods only in accordance with the instructions given by the bailor. If there is a wrongful or inconsistent use of the goods, the bailment can be terminated at the option of the bailor. (Section 153)
Governing ActA contract of sale is governed by the Sale of Goods Act, 1930.A bailment contract is governed by the Indian Contract Act, 1872.
Return the goodsThere is no obligation on the buyer to return the goods.In bailment, there is a voluntary delivery of goods for a short period of time with the understanding that they would be returned in the same or altered form. Or the bailee has to dispose of the goods if the bailor has instructed so.
RelationshipA seller-buyer relationship exists between the parties that enter into a contract of sale.Sometimes, a bailor-bailee relationship may arise even without a contract, for example, in the seizure of goods.
Mode of paymentThe consideration may be paid partly in goods and partly in cash.The entire consideration is usually paid in terms of money.
Time of delivery of goodsThe goods may or may not be delivered at the time of contract of sale.The goods are generally delivered at the time of contract of bailment.
Compensate for expensesThe question of any compensation for expenses to be paid by the seller or vice versa does not arise in a sale.Especially in gratuitous bailments, the bailor has to compensate the bailee for all the necessary expenses incurred for the purpose of bailment. For example, costs incurred in feeding the horse bailed. (Section 158)

Takeaway

Sale and bailment are two different contracts. A sale involves the transfer of property in the goods whereas, in a bailment, the goods are needed to be returned back to the bailor once the purpose is achieved or on expiry of the term fixed.


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