In this blog post, Sakshi Bhatnagar of National Law University Odisha, Cuttack writes about the duties of bailee in a contract of bailment and the various obligations on bailee in case the goods are not returned.

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Introduction

Bailment is a common law term and involves the change of possession, i.e., delivery of goods or personal property by one person to another, but the ownership remains unchanged. Chapter IX of the Indian Contract Act, 1872 deals with the sections regarding the Contract of Bailment.

Section 148 to Section 171 lays down the definitions, nature of the contract of bailment as well as the rights, duties and liabilities of both the bailor and the bailee. Bailment, as per the Indian Contract Act, puts certain legal obligations on bailee at the time of redelivery or disposing of goods as directed by the bailor.

legal gavel and a business contract

Different sections of this Chapter IX provide for different duties of bailee about the goods bailed to him. Duties of Bailee also depend on upon the very object of the contract of bailment.The obligations of bailee on the goods bailed to him depend on the terms and conditions mentioned in the contract he has entered into. In other words, his duty towards the goods arises at that time when the purpose for which goods are bailed is completed. Such duties, if are not taken care of, may make the bailee liable (according to the contract). Also, there are certain bailment contracts which exempt the bailee from any obligation or liability.

Duties of Bailee

Duty to take reasonable care[1]:

Section 151 of the Contract Act provides that the bailee is under obligation to take care of the goods bailed to him as an ordinarily prudent man in his place would have taken under the similar situation. This means that the duty laid down by this section is general and uniform in nature. This section does not provide for any exceptional situations; rather it covers all the contracts of bailment. In Giblin v. McMullen[2], the court pointed out that “a gratuitous bailee is bound to take the same care of property entrusted to him as a reasonable, prudent and careful man may fairly be expected to take his property of the similar description.”[3] Therefore, the bailee is bound to take reasonable care whether the bailment is gratuitous or non-gratuitous. Additionally, the obligation of a bailee includes not only the duty to take all reasonable precautions to obviate the risks but also the duty of taking all proper measures for the protection of the goods when such risks had already occurred.[4] parcel11

The parties under the contract of bailment may insert any special provision increasing the responsibility of the bailee in respect of care to be taken against the goods bailed, but they cannot decrease the standard of care. Section 152, in this regard clearly states that one has to fulfill the requirement of reasonable care mentioned in Section 151 even if the contract has any special provision. The standard of duty cannot be reduced, as it would be unfair if bailee is not held liable for his negligence of not taking standard care. Even where he has contracted himself out of liability due to his negligence, the bailee has still to show that he took as much care of the pledged goods as an ordinarily prudent man as required by Section 151.[5]

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In Sheik Mohamed v. the British Indian Steam Navigation Co. Ltd.[6] The case, it was pointed out that a bailee’s liability cannot be reduced by any provision which is under the limit provided in Section 151; also it was held that any such contract which results in complete exclusion of bailee from liability in case of his negligent act is not valid.

In certain situations the standard of care of care is increased the i.e., special degree of care is required to be fulfilled. In Pitt Son and Badgery Ltd v Proulefco SA[7], a wool broker sold wool but retained it in his store. The store was wooden, old and surrounded by a fence with gaps large enough for a person to enter. The wool was destroyed in the fire caused by an intruder who entered through the gaps, and set light to the store from outside. It was held that the broker, as a bailee, was responsible for the loss; he was in breach of duty because the fence was insufficiently secure to keep out intruders.

Duty not to make any unauthorized use:

In a contract of bailment, the bailor transfers the goods to the bailee for some purpose, and the bailee is responsible for using the goods bailed according to the purpose of bailment. Section 154 of Indian Contract Act imposes liability on bailee if goods are not used authoritatively. Using goods beyond the conditions of a contract would make the bailee liable to bailor if due to such unauthorized act the bailor has suffered any loss or if goods are damaged. This implies that the bailee is not entitled to use the goods for personal benefits (unless the bailment for his use) by doing an unauthorized act. Even if the goods bailed are for his personal use, he is not authorized to let the goods be used by another person. Nevertheless, if the situation requires, the bailee may use these goods for preservation.[8] But in the other circumstances, he is required to have express or implied consent of the bailor to use the goods against the conditions of bailment contract.

Duty not to mix or part with the goods:

The bailee has to take certainly reasonable care while dealing with the goods of the bailor. One such responsibility includes his duty not to mix the bailor’s goods with his own or part of the goods. According to Section 155, if the bailee has mixed the goods with his goods and while doing so he had the prior consent of the bailor, then the bailor will have interest over the goods in proportion to the goods he has bailed. But this section specifically states that the bailee had the consent of bailor.

Section 156 and 157 speaks about the conditions wherein the bailor’s consent was not there while mixing the goods. In those situations wherein the goods are separable, the law imposes liability on the bailee for any loss or damage that the bailor might suffer due to such mixing. But if it is not possible to separate the goods, the bailor is entitled to claim reimbursement for the loss of goods.

Duty to return goods:

One of the essentials of a contract of bailment is that once the purpose for which goods are bailed is accomplished, the bailee has to return the goods back to the bailor or dispose of as per the direction of the bailor. Section 159 states that the bailor may ask for the return of loan at any point of time if the loan is provided gratuitously to him. And the bailee is under obligation to return so. However, he can claim compensation if he has suffered any loss from such act of bailor.

460574257_XSSection 160 provides that if the time of bailment has expired or the purpose is fulfilled, then the bailee is bound to deliver the goods as per the directions of the bailor without demanded by bailor, i.e., he has to be cautious about the delivery of the goods. There is an implied contract in a bailment to return the articles in a reasonable time after the purpose is served even if no time is stipulated for return.[9] The bailee is under a duty to return the goods bailed on the expiration of the period of bailment unless he can show good cause for not returning them.[10] Where an article is hired for use or a purpose but such article is unfit for such use or purpose, this is treated as a breach of warranty, and the bailee is not bound to return it to the bailor because the purpose cannot be accomplished. In such a case, the bailee may give notice to the bailor who is then bound to take it back.[11]

Section 165 says that in the cases involving more than one owner of the goods bailed, the bailee is under obligation to return it to any one of the owner or as per directions were given to him.

Obligations of Bailee if the Goods are not Returned

Section 161 clarifies the responsibility of bailee if he has failed to deliver the goods after the expiry of time or completion of purpose. The bailee is not liable if the delay in delivering the goods or disposal of goods is due to default of others. Unexplained failure to return the thing bailed is presumed to be by the bailee’s default;[12]And it would be presumed as his negligence. A bailee who refuses to give delivery, except upon some unjust or unreasonable condition, is by default.[13] Moreover, if the bailee fails to return or dispose of the good, then the bailee, at his risk, keeps the goods with him and if after that any loss or damage happens, the bailee would be held liable for the same. download

Duty to deliver increase or profit accrued from bailment:

Section 163 of ICA states that “in the absence of any contract to the contrary, the bailee is bound to deliver to the bailor, or according to his directions, any increase or profit which may have accrued from the goods bailed.” This section provides that if there is any gain with regards to the goods bailed, then such gain must be handed over to bailor along with the goods and bailee is not entitled to keep it with him. But the bailor cannot claim profit or increase before the completion of the purpose of bailment or before the expiry of time of bailment contract.

Conclusion

The bailee has to perform according to the obligations laid down in the contract of bailment and as per the law of the land. He is being inconsistent or negligent while performing his obligation or duty would make him liable under various provisions of law. In each contract of law, he has a certain uniform or fixed obligations to comply with, and he cannot part with those basic obligations even if a contract does not provide for any such obligations. These obligations are the essence of bailment contract. The obligations might differ depending on the facts but there are certain duties which are implied, and reasonable care is to be taken by the bailee. The bailee’s responsibility towards the goods bailed can be increased by way of providing provisions in that regard but it cannot be lowered down, i.e., he cannot repudiate his responsibility.

 
 
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Footnotes:

[1] Section 151, Indian Contract Act 1872.

[2] Giblin v. McMullen, (1703) 2 Ld Raym 909.

[3] Id.

[4]Lakhichand Ramchand v. G.I.P. Rly. Co., (1912) 14 Bom. LR 165.

[5]Central Bank of India v. Grains and Gunny Agencies, AIR 1989 MP 28.

[6]Sheikh Mohamed v. The British Indian Steam Navigation Co. Ltd., (1908) 32 Mad. 95

[7]Indian Airline Corpn. v. Madhuri Chowdhury, AIR 1965 Cal 252.

[8]Fothergill v. Monarch Airlines Ltd [1980] 2 All ER 696, p 702.

[9]Chaturgun v. Shahzady AIR 1930 Oudh 395.

[10]Pollock and Mulla Indian Contract and Specific Relief Acts, Ed. 13th 2006, Section 160

[11] Isufalli v. Ibrahim, 23 Bom LR 403.

[12]Kush Kanta Barkakati v. Chandra Kanta Kakati AIR 1924 Cal 1056.

[13]GIP Rly v. Firm of Manikchand Premji, AIR 1931 Nag 29.

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