Rishabh Soni has written this article and has been updated by Dilpreet Kaur Kharbanda. It is an effort to delve into the concept of contract of bailment under the Indian Contract Act, 1872. The rights, duties and liabilities of bailor and bailee have been discussed at length in the article. The concept of the finder of goods also considered a bailee under the Act, has also been touched upon. Along with that, the difference has been drawn between bailment and deposit, sale, pledge and mortgage.

Introduction 

Bailment is one such concept that enters in a very subtle manner in our day-to-day lives, though we may not practically feel it. In most simplest terms, the contract of bailment involves the temporary transfer of possession of goods or property from one person to another for a certain purpose, with an express understanding that when the purpose is fulfilled, the property is to be returned or otherwise dealt with as instructed by the owner. 

In the case of sending our clothes to the dry cleaners, we deposit our clothes with the expectation that they will be washed and returned to us in the desired condition. Another example of bailment that we see in our daily lives is when we leave our cars with the valet or put them in a paid parking lot. In this case, the valet or parking service has the responsibility of ensuring that our car is returned in the same condition as when it was picked up. 

The legal aspects of bailment under the Indian Contract Act, 1872, are discussed further in the article. Let us start by understanding what bailment is before jumping into the concept of the contract of bailment, its essentials, parties, as well as their rights and duties, along with case laws.

Meaning of bailment

Bailment is defined under Section 148 of the Indian Contract Act, 1872. It is defined as the delivery of goods by one person to another for some specific purpose, upon a contract that these goods are to be returned when the specific purpose is completed. The person delivering the goods is known as a ‘bailor’ and the person to whom the goods are delivered is known as a ‘bailee’. However, if the owner continues to maintain control over the goods, there is no bailment.

For example, ‘A’ gives his car to ‘B’, his neighbour, for 10 days, but at the same time he keeps one key with himself. During this period of 10 days, he used the car himself. Now, this will not be a case of bailment as ‘A’ is keeping control over the property bailed.

Essentials of a contract of bailment

Existence of a valid contract

The existence of a valid contract is the first condition in bailment, which implies that goods are to be returned when the purpose is fulfilled. A contract of bailment arises from the agreement between the bailor and the bailee. This agreement can be expressed or implied and can be written or oral. A finder of lost goods is also known as a bailee, although there may not be any existing contract between him and the actual owner.

Temporary delivery of goods

The whole concept of bailment revolves around the fact that the goods are delivered for a temporary period and the bailee cannot have permanent possession. Delivery of goods can be done through actual delivery (physical transfer) or through constructive delivery (symbolic transfer), which means doing something that has the effect of putting the goods in possession of the bailee or any other person authorised by him.

There must be a change of possession for a transfer to be considered a bailment, and that too transfer of the exclusive right of possession. In the case of Kavita Trehan & Ors. vs. Balsara Hygiene Products Ltd. (1992), the main focus was on the requirement of delivery of goods to the bailee. Delivery of possession to the bailee is a sine qua non of bailment. To constitute a bailment, a change of possession is necessary.

Return of particular goods

The bailee is bound to return the goods to the bailor after the purpose for which it was taken is over or is achieved. If the person is not returning the goods, then it will not be a bailment.

If the bailee fails to return the goods or uses them in a way that was not agreed upon, the bailee could be held responsible for the breach of the contract, leading to potential claims for damages. So, returning the goods is not just a formality, rather, it is the foundation of the entire bailment arrangement. It ensures that the bailor retains his rightful ownership, and it emphasises that the bailee’s possession is only temporary and limited to the extent of the agreed purpose. In the case of Re, Gangaram AIR 1943 Nag 168, the court held that a contract of bailment could not exist if there was no requirement to return the subject matter or the particular commodities in question. The same position was adopted by the court in the case of Anamalai Timber Trust Ltd. vs. Trippunitura Devaswom (1954).

Parties to bailment 

In a contract of bailment, there are primarily two parties involved, one the ‘bailor’ and the other the ‘bailee’.

Bailor

The bailor means the owner of the good or property who transfers the possession of that good to another person but for a temporary duration. It means that in the contract of bailment, the ownership of the goods or the property remains with the bailor, but its physical custody is transferred to the bailee for a particular period or till the accomplishment of a particular purpose.

Let’s understand with an illustration, Abha, before moving to Bangalore, asks her friend Ashi to store her laptop at her place for the time she is away. Here, Abha is the bailor because she hands over the possession of her laptop to Ashi, and she expects Ashi to return it when she comes back.

Bailee

The bailee is the person or entity to whom the goods or property are delivered by the bailor temporarily. The bailee holds the goods or the property for a certain period and is responsible for its care for that period. Also, the bailee has to follow the directions, if any, issued by the bailor.

Let’s understand with an illustration, that ‘X’ gives her jewellery to a jeweller for polishing and minor repairs. The jeweller agreed to do the needful and asked ‘X’ to collect the jewellery after 2 days. Here, the jeweller is the bailee as he received the jewellery from ‘X’ for a particular purpose and is responsible for returning the same to the bailee after two days as decided.

Hon’ble Madhya Pradesh High Court in the case of Lallimal Biharilal and Ors. vs. Rambaboo Vaishya and Ors. (1990) observed that a bailee must follow the instructions of the bailor, on whose account the commodities are transferred to the bailee and held by him for that specific amount of time.

Types of bailments

Bailment under the Indian Contract Act, 1872, can be categorised based on purpose, reward, and the receiver of the benefits.

Based on purpose

Deposit

Deposit:- It is the simple bailment of goods by one man to another for a particular use.

For example, ‘A’ gives his computer to ‘B’ for 7 days, which will be a case of a deposit.

Hire

It includes goods delivered to the bailee for hire.

For example, ‘A’ gives his car to ‘B’ for 7 days on rent of Rs. 700 per day, it will be a case of hire.

Pawn/ Pledge

When goods are delivered to another person by way of security for money borrowed.

For example, ‘A’ takes a loan from the Bank and keeps his papers of the house with the bank as security, which will be a case of pledge.

There are a lot of differences between the concepts of bailment and pledge and the same have been discussed further in the article.

Based on benefit

Exclusive benefit of the bailor

This type of bailment occurs when the bailment is primarily for the benefit of the bailor, and the bailee does not derive any benefit from it.

For example, ‘A’ asks his neighbour ‘B’ to keep their jewellery for a few days, for the time being when they are away on vacation. Since there is no payment made from the bailor to the bailee for the same, this is a bailment made just for the benefit of the bailor.

Exclusive benefit of bailee

In this type of bailment, the bailment is primarily for the benefit of the bailee, and the bailor does not derive any benefit from it.

For example, ‘A’ borrows the bike from his friend ‘B’. While the lender ‘B’ receives no profit from this, the borrower (bailee) benefits from using the bike. 

Mutual benefit of both bailor and bailee

When the bailment benefits both the bailor and the bailee, it is referred to as a mutual benefit bailment.

For example, ‘A’ gives his unstitched suit to a tailor for stitching. The cloth owner benefits from the stitching service of the bailee (tailor), and the tailor benefits from the payment for the service of stitching that he rendered.

Based on reward

Gratuitous bailment 

There is no transfer of money or consideration in this type of bailment. It is done gratuitously by either the bailor or the bailee, wherein no one has a financial gain. Either party can revoke the bailment at any time according to his/her will. The bailee must take a reasonable amount of care of the goods; however, he might not be made liable for any damages unless negligence is proved on his part.

For example, ‘A’ gives the keys to her farmhouse to her friend ‘B’ for her son’s wedding. There is no expectation of any payment. This is a gratuitous bailment.

Non-Gratuitous bailment 

In this type of Bailment, both parties benefit and derive some consideration from one another. Both the parties, the bailor and the bailee, have certain specific rights and duties that they abide by. Usually, some consideration or money is involved in such a type of transaction.

For example, when a car owner brings his vehicle to a mechanic for regular maintenance, the car owner gets the benefit of getting the car fixed, and the mechanic benefits by receiving payment for the maintenance done.

Duties and liabilities of a bailor

Disclose faults in the goods bailed.

This finds statutory expression in Section 150 of the Indian Contract Act, 1872. This Section stipulates that the bailor is required to disclose to the bailee any defects in the goods bailed that he is aware of. If the bailor fails to do so, he will be held directly liable for any damages that the bailee suffers as a result of those defects.

Section 150 can be divided into two cases: one where the bailment is gratuitous and the other bailment for hire. 

When it comes to gratuitous bailments, the bailor has responsibility for any harm that may come to the bailee as a result of the bailor’s failure to disclose to him any flaws in the goods they are bailing.

For example: ‘A’ delivers a car to ‘B’ knowing that the brakes of the car are not proper. Now, if any accident happens, ‘A’ will be liable for the same.

When a bailor offers a fee or price for the commodities in a non-gratuitous bailment, they are under a stronger duty than when they provide a gratuitous bailment. Under Section 150 (2), the bailor is liable for any damages that the bailee may claim if the goods are bailed for hire, regardless of whether the bailor was aware of the fault or not. 

In the case of Hyman and wife vs. Nyl and Sons (1881), the plaintiff rented a cart from the defendant for a certain trip. The plaintiff was hurt when the cart’s foundation collapsed while it was being moved. The court determined that the plaintiff is entitled to damages from the defendant for the harm he endured.

Duty to pay necessary expenses

According to Section 158, there are situations in which the bailor is required to reimburse the bailee for all necessary costs that he would have incurred to complete the bailment. These situations include situations where the bailee is required to perform labour or carry goods and is not paid remuneration for doing so, then the bailor must pay the necessary expenses to the bailee.

Duty to indemnify the bailee

Under Section 159, if the bailee is forced to return the goods before the bailment time decided between the parties, then it becomes the duty of the bailor to compensate the bailee for any loss that the bailee may suffer. Thus, if the bailor ends the contract before the agreed period or before the purpose of bailment has been fulfilled, the bailor is bound to pay the bailee compensation for the losses incurred by the bailee, if the losses are higher than the profit/ benefit received by the bailee.

Bailor’s responsibility to the bailee 

Under Section 164, the bailor has a responsibility towards the bailee, wherein the bailor would be responsible for any loss sustained by the bailee because of any of the reasons mentioned hereunder: 

• To make the bailment
• To receive the goods
• To give directions concerning Section 164
• Obligation to indemnify the bailee

Duty to claim back the goods

By the terms of the agreement, the bailor is required to accept the goods when they are returned by the bailee. If he declines to receive it at the appropriate time without giving a valid cause/ground, he will be held accountable for any potential damage to the goods.

Duties and liabilities of a bailee

Duty to take care of the goods bailed.

Under Section 151, in every instance of bailment, the bailee must exercise the same degree of care over the goods entrusted to them as a prudent man would use for their goods of comparable type, quality, and worth. Therefore, he will not be liable for any loss, destruction or deterioration of the thing bailed if he has taken due care. In the case of Calcutta Credit Corporation Ltd vs. His Royal Highness Prince Peter of Greece (1963), the court defined the phrase “as a man of ordinary prudence would take of his goods.” It was also clarified that the standard does not imply that the bailee has taken the reasonable care required of him by law simply because his goods are lost along with the items bailed at the same location. The bailor may put forth that the bailee did not exercise the reasonable level of caution necessary under the law, irrespective of the fact that the bailor was aware of how the bailee handled his goods. It was held by the Hon’ble Calcutta High Court that the defendant had not taken reasonable care to prevent the plaintiff’s car from burning. 

In the case of Union of India vs. Amar Singh (1959), goods were shipped from Pakistan to New Delhi. Pakistan Railways sent the goods to Indian Railways for additional transit. During this journey, the products were lost. According to Section 151 of the Indian Contract Act, 1872, the Supreme Court ruled that the Indian Railways had engaged in negligence by failing to take the reasonable care that a man of ordinary prudence would take with his belongings. 

Thus, it can be concluded that the bailor must treat the bailed goods with the same amount of care that a man of reasonable prudence would take of his goods of similar nature and value.

Further, Section 152 elucidates that, unless otherwise agreed upon by the parties to the contract, the bailee shall not be held accountable for any loss, damage, or deterioration of the bailed goods, but the underlining proviso is that the provided that the bailee used the degree of care provided under Section 151 of the Indian Contract Act, 1872.

Duty not to make unauthorised use of goods 

According to Section 153, a contract of bailment is voidable at the bailor’s discretion. If the bailee does any act after the parties have entered into the contract, and the bailee does not comply with the terms of the bailment, the bailor may end the bailment at that point.

As per Section 154, the bailee is responsible for compensating the bailor for any loss or damage to the bailed goods that is caused due to the bailee’s unauthorised use of the goods.

Let’s understand this with an example:

Aman hires a car from Bobby in Chandigarh to travel to Mussoorie. However, Aman rode the car to Ladakh instead. Despite exercising due care, the car accidentally skids and bangs into a tree. In this case, Aman would be responsible for compensating Bobby for the damage caused to the car.

Applying the principle set out under Section 154, the bailee must use the commodities bailed for the exact purpose for which the bailor had entrusted them. Any unauthorised use of the goods renders the bailee fully liable for any resulting loss or damage. This liability remains even if the damage is caused by an act of God or an unforeseen accident. 

Not to mix goods

The Indian Contract Act, 1872 addresses three distinct scenarios where the goods bailed are mixed by the bailee with his own goods (Sections 155, 156 and 157). 

Under Section 155, in a case where the bailor consents and the bailed goods are mixed with the bailee’s goods, the parties will have a proportionate interest in such mixed goods.

Under Section 156, if the bailee mixes the bailed goods with his own without the bailor’s permission and the bailed products are separable, then in such a scenario:

• The bailee is made responsible for covering the costs of separation and 
• The bailee is responsible for compensating the bailor for any damages incurred.

Under Section 157, if the goods bailed are mixed by the bailee with his goods without the bailor’s consent and are of a kind that makes them inseparable, the bailee shall reimburse the bailor for any damages/loss incurred.

Return the goods bailed

As per Section 160, if the contract’s time limit has passed (expired), the bailee is required to return the goods without waiting for the request to come from the bailor’s end. Even in the absence of the bailor’s request, the bailee is required to return the goods if the original intent behind the bailment has been fulfilled.

If the bailee does not return the goods in accordance with Section 160, then in such an instance, as per Section 161, the bailee would be responsible for the goods and the goods would be at their own risk. The bailee would nonetheless be responsible for any loss that happens, even if it was caused by an irresistible force or an act of God and not his negligence.

Return accretion to goods

As per Section 163, accretions with respect to the goods bailed must be returned when the goods themselves bailed are returned. In the case of Standard Chartered Bank and Anr. vs. Custodian and Anr. (2000), the Hon’ble Supreme Court ruled that bonus shares and dividends are also a part of the pledged shares and debentures.

Not to set up an adverse title

The bailee has no right to allege that the bailor had no authority to bail the goods. In addition to the Contract Act, a bailee cannot dispute the bailor’s ownership or claim that he was not authorised to deliver the goods at the time of delivery under Section 117 of the Indian Evidence Act, 1872. In case the goods are transferred by the bailee to a third party, the bailee may put forth that he has a legitimate claim over the goods against the bailor. (Explanation (2) to Section 117).

As provided under Section 166, the bailee shall not be accountable to the true owner for the delivery of pathetic goods, if the bailor does not have legal title to the goods and the bailee returns the goods to the bailor in good faith or as per the instructions of the bailor, disposes of them off.

Rights of the bailor

Termination of bailment

If the bailee violates any of the terms and conditions of the bailment contract, the bailor is entitled to terminate the bailment under Section 153.

In the case Municipal Board vs. Abdul Razzak AIR 1931 Oudh 15, it was held that, regardless of whether a bailment is gratuitous or not, a bailee is liable if he does anything about the goods bailed that causes loss to the bailor. This conclusion can be drawn from a combined reading of Section 153 and general principles of law.

Restoration of goods

As per Section 159, in the event of a gratuitous bailment and for a specific purpose, the bailor may demand the return of the goods bailed. If the goods are returned before the agreed time under the contract, the bailor will be responsible for compensating the bailee for any losses incurred. The bailor has a right in the case of a gratuitous bailment to enforce the return of the goods from the bailee before the period designated for the duration of the bailment has expired.

File suit against the wrongdoer

As per Section 180, the bailor is entitled to take legal action against any third party that either destroys the goods or prevents the bailee from using them.

Rights of bailee

Right to compensation

As per Section 164, if the bailor lacked the authority to establish the bailment or to offer instructions regarding the goods, the bailee may be entitled to reimbursement from the bailor for any losses incurred. This means that the bailee may be entitled to compensation for losses resulting from the title defect or lack.

Right to apply to the court.

Under Section 167, if someone other than the bailor claims ownership of the bailed goods, the bailee can apply to the court and seek the intervention of the court so that:

• The delivery of the goods to the bailor can be stopped and
• The dispute over the title of the goods can be resolved.

As a result, it gives the bailee the legal ability to stop the goods from being forcibly returned to the bailor and allows the ownership dispute to be settled through court proceedings.

File suit against the wrongdoer

Similar to the right of the bailor, as per Section 180, the bailee has a right to bring a lawsuit against anybody who damages the goods or prevents him from using the goods that were bailed.

Right of lien

A lien is essentially the right of one person to hold onto property that belongs to another while it is in their possession, up until specific conditions are met. It consists of anything the bailee did for the benefit of the bailment that required labour or expertise about the bailed commodities. For example, ‘A’ gives a piece of cloth to tailor ‘B’ for stitching a suit. Then, ‘B’ is entitled to keep the suit with him until ‘A’ pays him for the cost of stitching.

In the case of Syndicate Bank vs. Vijay Kumar and Others (1992) Hon’ble Supreme Court held that lien means the right to retain a property or goods until some charges due upon it or services rendered for its improvement are paid. The court noted that a lien only grants the right to keep the goods and does not grant the bailee any ownership or property rights. If the bailee has used his labour or expertise to provide any kind of service related to those goods, then in that case he is entitled to keep the items until he is paid for his services. 

 

Particular lien 

Section 170 deals with the Particular Lien. For exercising this particular lien following factors are to be considered:

1. The bailee must have rendered some service involving labour or skill,
2. The service must be for the purpose of the bailment,
3. This service must be about the thing bailed,
4. There must be no contract to the contrary.

General lien

Section 171 deals with the general lien. The right to keep another person’s property for a general balance of accounts is known as a general lien. It grants the person in possession of the commodities the right to keep them until all of their claims or accounts against the owner of the items are fulfilled. One example of a general lien is a banker’s right to keep the items until the obligation owed to the bank is settled.

The right of general lien is enunciated by Section 171 only on certain categories of bailees, and these are:

Bankers

A banker possesses a general lien over all assets, including goods, cash, cheques, and securities deposited with the bank by a customer. This lien creates the banker’s right to keep the goods in exchange for the timely payment of the debt that the client owes the banker.

This suggests that if there are outstanding debts in another account, the bank may prevent the client from using or accessing the account with the positive balance until those debts are paid in full. The general lien acts as a kind of security for the bank, guaranteeing that any amount owed will be recouped by taking control of the customer’s assets. The right to a general lien is an important aspect of the relationship between a bank and its customers since it gives the bank some protection against potential losses resulting from unpaid obligations from the latter.

The Hon’ble Court ruled in the case of Syndicate Bank vs. Devendra Karkera (1993) that a loan obtained by a client from any other branch of the bank is not protected under the concept of general lien. In the present case, when the bank guarantee expired, the guarantor was entitled to retrieve his securities from the bank. The guarantor was a director of another company, and the bank was not permitted to keep the assets after the expiration of the guarantee for that particular loan.

Factors

A factor is an agent who is entrusted with the possession of goods by their principal to sell them. A factor holds a general lien over the goods of the principal, which gives the factor power to retain possession of the goods in a case where the principal owes him money, whether about advances or remuneration. 

Wharfingers

When goods are stored at a wharf, a wharfinger is entitled to a general lien on them, which allows him to keep the commodities there until the owner of the goods pays all fees associated with using the wharf. A wharfinger is a person who oversees a wharf, which is any designated section of the shore and along a port used to store cargo while it is being loaded and unloaded from a ship. With the use of this lien, the wharfinger can keep custody of the goods until the specific charges associated with them are settled.

However, a manufacturer that owns a wharf exclusively for the purpose of receiving products from its customers is not eligible for any of the general lien rights that are granted to wharfinger businesses. 

Attorneys or solicitors 

A High Court attorney or solicitor has a general lien on all papers and documents belonging to their client that are in their custody in a professional role. He is free to withhold such records from the client until he has covered both his fees for the services provided and any associated additional charges. The right to enforce the lien against the solicitor expires if he declines to continue acting on behalf of the client under the terms of his retainer. 

Policy-brokers

Policy-brokers have the right of general lien, which is exercised by holding on to the fire or marine insurance policy as collateral for their brokerage fees. Their lien includes any amount that is pending to be paid against any insurance account of that particular person who hired them to arrange the said insurance policy.

Finder of goods

Section 71 of the Indian Contract Act, 1872, lays down the responsibility of the finder of the goods. The provision puts forth that the person who finds the goods is obligated to act as a bailee.

There is an implied agreement between the finder and the owner of the goods. Finder of the lost goods has the same duties as those of a bailee, and they are:

• To take the initiative to find the real owner of the goods
• To take reasonable care of the goods found
• To not use the goods found for his personal use
• Not to mix the goods found with his goods.

Rights of finder of goods

Sections 168 and 169 of the Indian Contract Act, 1872, elucidate the rights of finders of goods.

Under Section 168, the finder of the goods is not entitled to sue the owner of the goods to compensate for any trouble or expenses voluntarily incurred by the bailee, like as preserving the goods or finding the true owner.

However, the finder of the goods is entitled to the right to file a suit and the right of lien. The finder of the goods has the right to sue the owner of the goods for payment of any reward offered by the owner for the return of goods lost and can exercise the right of lien (retain the goods) till the payment is made.

Under Section 169, if a thing that is commonly the subject of sale is lost, and the owner cannot be located despite reasonable efforts, or if the owner is located but does not pay the finder’s lawful charges, the finder of the item is entitled to sell it.

Then, the finder of the goods is entitled to sell the goods found. But, there is a further rider attached to it under the Act, that is:

• The thing must be in danger of perishing or
• The thing is in danger of losing the greater part of its value or
• The lawful charges of the finder amount to 2/3rd of the value of the thing lost and found.

Termination of bailment 

There are certain situations in which the bailment gets terminated, they are discussed one by one.

Expiry of agreed/ specified period

When the contract of bailment is for a specific period, it terminates on the expiry of that specified period.

For example, ‘ A’ lends his car to ‘B’ for six months, starting from January to July. The contract of bailment will terminate by the end of July.

Accomplishment/ fulfilment of the specified purpose

Where the contract of bailment is for a specified purpose, the contract terminates when such purpose is accomplished.

For example, ‘A’, a contractor, hires the JCB from ‘B’, his contractor friend, to finish the work at a site in Kolkata. Since the contract of bailment ends when ‘A’ completes his job at the site, ‘A’ is required to return the JCB to ‘B’ as soon as the work is finished.

Bailee acts inconsistently with the terms of the contract

Section 153 of the Indian Contract Act, 1872 states that the bailor may exercise his right to terminate the contract of bailment if the bailee acts inconsistently with the agreed terms and conditions of the contract of bailment. 

For example, Arjun gives his car for repairs to his friend Happy, who owns a garage. After the completion of repairs, Happy further gave the car to his son for a trip. Arjun can terminate the contract.

Destruction of subject matter

The goods bailed shall terminate at the time of their destruction for whatever reason, and the contract of bailment shall expire if the nature of the goods is so altered as to render them useless for the contract.

For example, ‘P’ hires a truck to carry raw materials from his manufacturing unit from one place to another. However, the truck met with an accident and was beyond repair to be used any further. Bailment comes to an end.

Gratuitous bailment 

As discussed above, gratuitous bailment can be terminated at any point in time by the bailor even though it was for a longer fixed period. In addition to this, as per Section 162 of the Indian Contract Act, 1872, a gratuitous bailment comes to an end upon the death of either the bailor or the bailee.

Difference between bailment and deposit

Sr. No.	Basis	Bailment	Deposit
	Purpose	In the case of bailment, the goods are delivered by the bailor to the bailee for a specific purpose, that could be for repairs, transportation or safekeeping, with a precondition that the goods will be returned after the purpose of the said contract is fulfilled.	In the case of a deposit, the primary objective is safekeeping or custody of the goods or money. The goods or money are to be returned to the depositor upon his request or under the pre-agreed terms and conditions.
	Parties involved	There are two parties involved in a contract of bailment. One is the bailor, who delivers the goods, and the other is the bailee, who receives those goods.	In the case of a deposit as well, there are two parties involved. One is the depositor who deposits the goods or money, and the other is a deposit receiver, who can be an individual or an institution, like a bank, that receives the goods or money.
	Consideration	Bailment may or may not involve consideration. Gratuitous bailment is also a valid form of bailment under the Indian Contract, 1872.	Deposits generally involve consideration, especially in the case of a deposit for safekeeping. For example, a bank charges a nominal amount of fee for opening a locker in the bank for depositing valuables.

Difference between bailment and sale

Sr. No.	Basis	Bailment	Sale
	Meaning	Bailment is defined under Section 148 of the Indian Contract Act, 1872, as the delivery of goods by one person to another for some specific purpose. When the purpose is accomplished, the goods are to be returned or otherwise disposed of as per the direction of the person delivering those goods.	Sale is defined under Section 4 of the Sale of Goods Act, 1930 as a contract, whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price.
	Transfer of ownership	In the case of bailment, there is no transfer of ownership. The bailor retains the ownership of the goods bailed, while the bailee gets possession.	In the case of a sale, ownership of goods is transferred from the seller to the buyer upon the completion of the sale.
	Consideration	In the case of bailment, consideration may or may not be present. Gratuitous bailment is an example of the same.	Sales always involve consideration or price. Where there is no consideration involved, there is no sale.
	Return of goods	The bailee is obligated to return the goods after the purpose of the bailment is achieved.	In the case of a sale, there is no obligation to return the goods once bought. The goods belong to the buyer from the moment the sale is completed.
	Risk	In the case of bailment, normally the risk remains with the bailor unless it is otherwise agreed upon between the parties to the contract. The exception to the same is provided under Section 152 of the Indian Contract Act, 1872.	In the case of a sale, along with the ownership of the goods, the risk attached to the goods is also transferred to the buyer once the sale is complete.
6.	Right to lien	In the case of bailment, the bailee has a right to retain the goods (right to lien) until the payment is made for the services rendered or the goods transferred by the bailor.	There is no such right of lien in the case of a sale. The goods belong to the buyer after the sale is complete unless a lien is contractually agreed upon between the parties to the contract of sale.

Difference between bailment and pledge

Sr. No.	Basis	Bailment	Pledge
	Meaning	Bailment is defined under Section 148 of the Indian Contract Act, 1872, as the delivery of goods by one person to another for some specific purpose. When the purpose is accomplished, the goods are to be returned or otherwise deposited as per the direction of the person delivering those goods.	Pledge is defined under Section 172 of the Indian Contract Act, 1872. The bailment of goods as security for payment of a debt or performance of a promise is called a pledge.
	Parties involved	There are two parties involved in a contract of bailment. One is the bailor, who delivers the goods, and the other is the bailee who receives those goods.	There are two parties involved in the case of a pledge. One is a Pawnor, who pledges the goods, and the other is a pawnee, the person to whom the goods are pledged.
	Right to sell goods	In the case of bailment, the bailee does not have the right to sell the goods.	Under Section 176 of the Indian Contract Act, 1872, the pawnee has the right to sell the pledged goods if the pawnor defaults on the payment or performance as decided between the parties.
	Termination of contract	The contract of bailment terminates when the purpose for which the goods are bailed is accomplished or the time agreed upon between the parties expires.	A pledge gets terminated when the debt is repaid by the pawnee or the promise is performed as decided by the parties to the contract.
	Risk	In the case of bailment, the risk generally remains with the bailor unless it is otherwise agreed upon by the parties to the bailment. The exception to the general rule is enunciated under Section 152 of the Indian Contract Act, 1872.	In case of a pledge, the risk about the goods remains with the pawnor himself, unless it is otherwise agreed upon by the parties.

Difference between bailment and mortgage

Sr. No.	Basis	Bailment	Mortgage
	Meaning	Bailment is defined under Section 148 of the Indian Contract Act, 1872 as the delivery of goods by one person to another for some specific purpose. When the purpose is accomplished, the goods are to be returned or otherwise deposited as per the direction of the person delivering those goods.	A mortgage is defined under Section 58 of the Transfer of Property Act, 1882. A mortgage is defined as the transfer of an interest in a specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of a loan or the performance of an engagement which may give rise to a pecuniary liability. The debt involved can be present or future debt.
	Subject matter	The subject matter of a contract of bailment is only movable property.	The subject matter of a mortgage is only immovable property such as land, buildings, etc.
3.	Possession	Under the contract of bailment, the possession of goods involved is transferred to the bailee only for a temporary period.	In the case of a mortgage, possession is not always transferred to the mortgagee. It all depends on the type of mortgage.
4.	Consideration	Bailment may or may not involve a monetary consideration, like in the case of a gratuitous bailment.	A mortgage always involves a monetary consideration, which is generally in the form of a loan or a debt.

Important cases under contract of bailment

Ram Gulam vs. Government of Uttar Pradesh (1950)

Facts of the case

In this case, the plaintiffs’ ornaments were stolen from their house and later recovered by the police from another location. The police seized these ornaments as stolen property under the Code of Criminal Procedure. 

The ornaments were produced as evidence in the trial of those prosecuted for the theft. The ornaments were stored in the Collectorate Malkhana. However, the ornaments were stolen again from the Malkhana and were now untraceable. The plaintiffs sued the government for the value of the ornaments, alleging negligence.

Issues involved in the case

Was the government obligated to compensate the plaintiffs for the stolen ornaments under a contract of bailment?

Judgment 

The court found that the government was not liable as a bailee. The reasoning put forth by the court was that, for a contract of bailment to exist, there needs to be a valid contract in place or existence. In the case at hand,  since the plaintiffs did not intentionally hand over the ornaments to the government under any contractual agreement, there was no contract of bailment and thus, the government was held to be not liable to compensate the plaintiff for the loss caused due to the loss of ornaments.

Lasalgaon Merchants Co-operative vs. Prabhudas Hathibhai and Ors. (1966)

Facts of the case

1. In this case, the Lasalgaon Merchants Co-operative Bank Ltd. granted loans to Prabhudas Hathibhai and another party, secured by agricultural produce, specifically tobacco.
2. When the borrowers defaulted on their income tax payments, the Income-tax Officer initiated recovery proceedings and involved the Collector of Nasik.
3. Acting on the Income-tax Officer’s certificate, subordinates of the Collector, including the Circle Officer, seized the pledged tobacco from the bank’s godown, despite the bank’s protests and its claim of being a secured creditor.
4. While the government had seized the tobacco, it sustained damage due to heavy rains while stored in the godown.
5. The bank filed a lawsuit against the borrowers, the State of Bombay, and the officials involved, alleging that the seizure was illegal and seeking the repayment of the loan amount.

Issues involved 

Did the government’s actions create a bailment relationship, and if so, what duty of care did the government owe to the bank regarding the pledged goods? 

Judgment 

The Hon’ble Bombay High Court ruled in the favour of the plaintiff, the bank and put forth that the government was in the position of the bailee and it was for the bank to prove that they had taken reasonable care as much as they could and the damage caused was due to the reasons beyond their control. Thus, the court put forth that the government, by taking into its possession the tobacco, assumed the responsibility of a bailee irrespective of the fact that the seizure was deemed to be illegal.

State of Bombay (Now Gujarat) vs. Memon Mahomed Haji Hasan (1967)

This case illustrates how the concept of bailment can arise even without a formal contract and how it can apply to government entities. 

Facts of the case

1. Memon Mahomed Haji Hasam’s vehicles were seized by customs authorities under the Junagadh State Sea Customs Act.
2. After Junagadh became part of Gujarat, the respondent won an appeal ordering the return of the vehicles.
3. The vehicles, however, had deteriorated after being left unattended for years, and most parts were stolen.
4. A Magistrate sold the vehicles as unclaimed property, and the respondent sued for their value.

Issues involved 

Whether a relationship of bailment existed between the state and the respondents, and if so, can the state be made liable for not preserving the vehicles in their custody? 

Judgment

The Hon’ble Supreme Court ruled in favour of the respondent, holding that the State did act as a bailee. By seizing the vehicles, the government assumed the role of a bailee with a duty to take care of the property. The State breached its duty by leaving the vehicles unattended, which further led to their deterioration, and thus, violated the duty of care owed to the respondent. Thus, the court highlighted that government entities, like any bailee, are obligated to take reasonable care of property in their possession, even without a formal contract.

Kavita Trehan vs. Balsara Hygiene Products Ltd. (1992) 

Facts of the case

The appellants, M/s. Subhagya Agencies worked as clearing and forwarding agents for M/s. Balsara Hygiene Products Ltd. They were responsible for handling the respondent’s goods, storing them and delivering them to the buyers. At some point, the appellants filed a lawsuit against the respondent, claiming the unpaid commissions. As part of this legal battle, they asked the court to prevent the respondent from accessing their goods. The court initially granted an injunction in the appellants’ favour and allowed them to sell the respondent’s goods. While the case was still ongoing, the appellants sold a large portion of these goods. At the end, their lawsuit was dismissed. But, the court then had to decide whether the respondent should be compensated, as the goods were sold based on a court order that was later found to be improper.

Issues involved 

Whether the arrangement between the appellants and the respondent constituted a relationship analogous to a contract of bailment or not.

Judgment

While the court did not directly mention the concept of bailment, it treated the appellants’ role as similar to that of a bailee. Since the appellants were entrusted with the respondent’s goods, they had a responsibility to act in the respondent’s best interests as the rightful owner. The court pointed out that the appellants overstepped by selling the goods, implying that they had a duty to safeguard them instead.

Further, by ordering restitution, the court recognized that the respondent was entitled to either the goods or their value, even though there was no formal bailment agreement in place.

Thus, the case at hand shows that even without a formal contract of bailment, similar legal principles can be applied when one party is entrusted with another person’s property. The court’s decision to order restitution reflects its duty to correct any harm caused by its orders, especially when one side unfairly benefits from a judicial mistake.

Atul Mehra And Anr. vs. Bank of Maharashtra (2002)

Facts of the case

1. In this case, the appellants rented a locker from the respondent bank on January 15, 1986. The appellants claimed to have deposited jewellery worth Rs. 4,26,160 in the locker.
2. On January 9, 1989, a robbery occurred at the bank, and all 44 lockers in the bank, including the appellants’, were broken into and their contents were stolen.
3. The appellants sued the bank for the value of the stolen jewellery, alleging that there was negligence and misconduct on the part of the bank’s security measures.
4. The bank admitted to the robbery and the locker being rented but denied knowledge of the contents or value of the jewellery inside.

Issues involved 

Did the agreement between the appellants and the bank constitute a contract of bailment, and if it did, was there sufficient evidence of entrustment, quantity, quality, and value of the jewellery to make the bank liable for the loss?

Judgment

The court ruled that the appellants failed to prove the existence of a bailment contract. It emphasised that renting a locker does not, by itself, create a bailment relationship. For bailment to exist, there must be clear evidence of “entrustment,” meaning the appellants (bailors) must have given exclusive possession of specific goods, in this case, jewellery, to the bank (bailee). The court found no proof that the bank was aware of the jewellery or its value, apart from the appellants’ assertions. The appellants did not provide any receipts, valuations, or other evidence showing that the jewellery was stored in the locker. The court also rejected the principle of res ipsa loquitur (where the occurrence of an event implies negligence), stating that the robbery alone did not automatically prove the bank’s negligence.

In essence, the court determined that, without solid evidence showing that specific items were entrusted to the bank and known to be in its possession, the relationship remained that of a locker renter and service provider, not a bailor and bailee with related legal duties.

Conclusion

The Indian Contract Act, 1872, develops a comprehensive legal framework for various types of bailments. The dynamics between the bailor and bailee, the intended purpose of the bailment, and the respective rights and obligations of the parties vary considerably based on the type of bailment. The Act regulates these relationships with principles that bring out the concern for fairness, accountability, and mutual benefit. It contains special provisions that elaborate on the duties and rights of the parties concerned about the bailment to make it just and fair. Further, the differences drawn between bailment and deposit, sale, pledge and mortgage conclude that bailment is a wider concept than the rest.

Frequently Asked Questions (FAQs)

What is the difference between a general lien and a particular lien?

A particular lien gives a bailee the right to retain possession of goods on which they have performed labour or skill as part of the bailment, provided there is no agreement stating otherwise. A particular lien is tied specifically to the goods that were worked upon by the bailee. 

On the other hand, a general lien is a broader right available only to certain professionals like bankers, factors, wharfingers, attorneys of the High Court, and policy brokers. 

They are entitled to not just keep the goods until the services associated with them are paid for, but they can also keep the goods for any other charge or debt owed, even if goods haven’t been improved or worked on.

A general lien simply grants the right to keep commodities in situations where a general balance is due, as opposed to a particular lien, which only functions in situations where the bailee’s labour or expertise has enriched the goods.

Can a hotel be held liable for the theft of a guest’s car from their valet parking service?

The answer to the above question is a yes. It is possible to hold the hotel accountable for the theft of a guest’s car from their valet parking service because at the moment the guest gives the valet parking service providers his car keys, he has entered into an implied contract of bailment with them. 

The reference can be made to the judgment of Taj Mahal Hotel vs. United India Insurance Company Ltd (2018). In this case, the National Consumer Disputes Redressal Commission (NCDRC) held that, even though the parking tag attached to the car stated “owner’s risk,” the hotel would still be liable for the theft of the car that was turned over to it for valet parking service. This is because, when a customer hands over their car to the hotelier for safekeeping, a bailment relationship is established regarding the car and the key, and the hotel is required to take care of the vehicle. The plaintiff also claimed that the hotel owed them a duty of care regarding the vehicle for its safekeeping.

The NCDRC emphasised the concept of infra hospitium, a Latin term which means ‘within the hotel’. Concerning the case at hand, the term means that a hotel that accepts a car has a responsibility to take care of it that goes beyond simply parking it there. The hotel is also liable for any damage that may be done to the car while it is in their care.

References

• http://student.manupatra.com/Academic/Abk/Law-of-Contract-and-Specific-Relief/Chapter10.htm

• https://blog.ipleaders.in/statutory-bailment-jurisprudence/

• https://blog.ipleaders.in/contract-of-bailment-and-pledge/

• Dutt, A. C., & Saharay, H. K., Dutt on Contract: The Indian Contract Act, 1872, Eastern Law House, (2013).

• Markanda, P C, The Law of Contract, Volume 2, 2nd Edition, Wadhwa, Nagpur, (2008).

• Pollock & Mulla, The Indian Contract and Specific Relief Acts, LexisNexis, 15th edition, (2017).

• Avatar Singh, Law of Contract and Specific Relief, EBC, 13th Edition, (2022).

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