fiduciary relationship
Image source: https://bit.ly/3jh0Ipo

This article is written by Vividh Jain, from the Institute of Law, NIRMA University. In this article, the author presents a critique of Section 71 of the Indian Contract Act, 1872.

Introduction

Section 71 of the Indian Contracts Act deals with the provisions related to the responsibilities of the finder of the lost goods. It says that when any person finds a lost good belonging to another person and takes those goods into his custody, the finder of lost goods is subject to act as the bailee to the real owner of that goods and he has the same responsibility as a bailee towards the owner of that goods. We are living in a modernized world where everything around us is developing at a rapid pace. Even our Constitution is also modified when some necessary amendments are required which is mentioned under Article 368 of the Constitution of India, 1950. If we talk about Section 71 of the Indian Contracts Act, there are some loopholes in this provision which needs to be changed.  

Importance of Quasi-contract

Quasi Contracts are fictional contracts where no prior meeting of minds and agreement exists between the parties and in which the obligations on the parties are imposed by an order of the court. The importance of a Quasi-contract is to prevent the real owner of goods from misappropriation of his property, which he mistakenly lost or left at some other place. For example: If a delivery boy wrongly delivered a parcel to B which he was supposed to deliver to A, then it is a duty of B to keep that parcel in good condition, such obligation on B is imposed by law in absence of an agreement between A and B. Thus, in this case, the law prevents the right of A, by obligating B to perform his duty. 

Position of the finder of goods under ICA

The position of the finder of lost goods has been considered with the agreement of bailment. As per Section 148 of the Indian Contracts Act, 1872, a bailment is an act of delivering goods to a person for any purpose or to accomplish the motive. The person delivering such goods is the bailor and to whom the goods have delivered is the bailee. A bailment is an act of placing the goods in the custody of another person using an agreement in which the bailee is obliged to keep those goods safe and return it when the terms and conditions of the agreement are fulfilled.

For example, Ram (bailor) wants to transport his goods from Mumbai to Goa and comes into a bailment agreement with XYZ transport company (bailee) and imposes a duty on the bailee to safeguard the goods and deliver them as per terms and conditions of the agreement. Various provisions of the Indian Contract Act, 1872 oblige the finder of goods, to perform a duty of bailee in the contract of bailment.

Necessary conditions to be satisfied

In order to constitute an agreement of bailment, three elements of bailment must be fulfilled i.e. delivery, acceptance and consideration. 

  • Delivery: There must be the deliverance of actual possession of goods from bailor to bailee by which the bailor imposed some duties and responsibilities on the bailee and allows the bailee to attain his duties toward the goods. Here, actual possession does not mean physical custody of goods, rather constructive delivery of goods can also be considered in the contract of bailment.  
  • Acceptance: A prerequisite for the contract of bailment is expressed or implied acceptance over the custody of goods by the bailee because bailment is a contract of knowledge and acceptance must be required to accomplish the agreement. 
  • Consideration: Consideration is something for something meaning to say, bailor has to pay something values in exchange for a contract of bailment. The bailor has to give something of value in exchange for the transfer of custody of the property to the bailee. 

But consideration as an essential ingredient for bailment has not been shown in case of discovery of lost goods by any person until and unless the owner of lost goods puts some reward on the deliverance of such property.

Rights of the finder of goods

Section 168 and Section 169 of the Indian Contract Act, 1872 confers the following rights to the  finder of goods:

  • Section 168: This section deals with the rights of finders of goods that may sue for the specific reward offered by the owner of the property. The finder of the goods has no right to bring a suit against the owner of that goods for demanding compensation for the trouble and expenses voluntarily incurred by him to find the owner of lost goods or to preserve that property; but he may retain those goods against the owner until he receives such compensation or in the case where the specific reward has been announced by the owner on the return of lost goods, the finder may bring a suit claiming such reward and may retain the goods until he receives such compensation. 
  1. Right of Lien: As per Section 168 of the Indian Contracts Act, The finder of lost goods has no right to bring a suit against the owner of those goods for demanding compensation for the trouble and expenses voluntarily incurred by him to find the owner of lost goods or to preserve that property. However, he has the right of lien regarding those goods. He may retain those goods against the owner until he receives such compensation. 
  2. Right of claiming the reward, if announced by the owner: Where the specific reward has been announced by the owner on the return of lost goods, the finder may bring a suit claiming such reward and may retain the goods until he receives such compensation. Provided that, if the goods have been voluntarily found and after such discovery, the owner announced some specific reward for his past voluntary services, then the owner is bound to pay the reward to the finder. 
  • Section 169: This section deals with the rights of finders of goods to sell the goods he found. Whenever a thing which is commonly the subject to sale is lost, if the owner can’t found with reasonable diligence, or he refuses to pay the legal expenses incurred by the finder, the finder may sell it: 
  1. When the goods  are perishable and losing its great value;
  2. When the lawful charges demanded by the finder are more than the two-third value of those goods. 

Duties of the finder of goods

The finder of lost goods, as a bailee possesses some duties towards the owner of that goods. If any person finds something he does not become the actual owner of that thing but law assigned him the role of the bailee to take care of the goods until the actual owner of that goods is found. A finder of the lost goods possesses some duties as mentioned under the Indian Contracts Act as follow: 

    • Section 151: As per Section 151, the finder of the lost goods is bound to take care of that goods bailed to him as a prudent person who would under similar circumstances take such care as his goods. If he failed to act as a prudent man, he cannot argue by saying that he had taken the same care for his own goods and his own goods have also been damaged along with bailed goods. 
    • Section 152: As per Section 152, the finder of lost goods in lack of a special contract, is not liable or responsible for the loss, deterioration or destruction of that goods, if he has taken the sufficient amount of care as mentioned under Section 151. 
    • Section 153: Section 153 deals with the provision related to the termination of the contract of bailment on the option of the actual owner of the goods, if the finder of the goods makes unauthorised access to a goods which has found inconsistent with the conditions of the agreement. 
    • Section 154: Section 154 deals with the liabilities of the finder of lost goods, makes unauthorised access to those goods which has found inconsistent with the conditions of the agreement and is liable to pay compensation for any damage that arises after using those goods.   
    • Section 155: As per Section 155, if the finder of the goods mixes those goods with his goods with the consent of the actual owner of the bailed goods, then the finder and the owner of goods must have the proportionate interest in the mixture so produced.
    • Section 156: As per Section 156, if the mixer is produced without the consent of the owner and can be separated, the owner and the finder of the goods remains the possessor of their share, but the cost of separating those goods would be solely bear by the finder of goods.
    • Section 157: As per Section 157, if the mixer is produced without the consent of the owner and cannot be separated, it is a deemed loss of goods and bailee is entitled to compensate the bailor for the loss of those goods. 
    • Section 160: As per Section 160, the finder of the goods has to deliver or return the goods found to the actual owner before the expiration of time as specified by the owner. 
  • Section 161: As per Section 161, if a fault has proved on the part of the finder of goods in which he was unable to deliver or return goods on time, the finder of that goods would be liable for the damage that occurred to the owner from that time. 

Grey areas of the Act

It has been noticed that the finder of lost goods maintains a limited connection with the terms and conditions of Quasi-contracts. It would be worth nothing if we match the duties and responsibilities of the bailee with the finder of lost goods. There is no criteria on which we can find a similarity between the bailee and the finder of goods. Both of them entered with different circumstances into a contract of bailment, so the treatment they will receive should not be the same. The finder of goods shall not have the same obligation towards the owner as given to the bailee.

Sometimes the goods are delivered to the wrong person who appropriates them and now it is difficult to distribute the benefits obtained by such a person. Also, sometimes the owner of goods dies and it becomes hard to find the real owner of the goods. Likewise, the provisions related to the expiration of time have not proven efficient because it makes bailee liable without considering the reason behind such delay.

In case, theft of the bailed goods occurs from the bailee, it becomes hard to prove the duty of bailee and there are not any specific rights mentioned under the statute to prevent bailee from this mishap situation. Also, the interpretation of the word ‘reasonable care’ is required because the meaning of this word varies from person to person. 

Contract of bailment inferred between a finder of goods and the real owner

Any person who finds a lost good is not the absolute owner of that goods, he only possessed those goods until the true owner came and claimed ownership of those goods. The person who finds the lost goods is the best owner of the goods and has superior rights over others except for the true owner of goods. The ownership title of goods for finders is contingent as it depends on the discovery of the true owner.

A bailment is an act of placing the goods in the custody of another person through an agreement in which the bailee is obliged to keep those goods safe and return it when the terms and conditions of the agreement are fulfilled. When any person finds a lost good belonging to another person and takes those goods into his custody, the finder of lost goods is subject to acts as the bailee to the real owner of that goods and he has the same responsibility as a bailee towards the owner of that goods and from here the contract of bailment arises between a finder of goods and the real owner of that goods. 

Important case law

In the case of State Of Bombay (Now Gujarat) vs Memon Mahomed Haji Hasam [1967 AIR 1885], the Supreme Court passed a ruling in which it says that the bailment is a relationship between the bailor and bailee and in certain circumstances, the finder of lost goods plays the role of the bailee. Hence, the finder of lost goods is subject to acts as the bailee to the real owner of that goods and he has the same responsibility as a bailee towards the owner of that goods and also the provisions of Section 148 would be applicable on finders of lost goods. 

Conclusion

After the analysis and thorough reading of the provision of the Indian Contracts Act, it is concluded that the finder of lost goods is a part of quasi-contracts and hence guided under the provisions of bailment. But after this, there are many loopholes between the sections of the Indian Contracts Act which are required to be amended as there is no criteria on which we can find a similarity between the bailee and the finder of goods. Hence, it is concluded that Section 71 of the Indian Contracts Act, 1872 has not established a difference between the bailee and the finder of the lost goods and must be amended to heal the loopholes. 

References


LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:

Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.

LEAVE A REPLY

Please enter your comment!
Please enter your name here