Special Contract Project Report

Bailee And Its Duties

University institute of legal studies

Submitted to: Submitted by:

Miss. GURPREET KAUR Miss Rashika Goyal

Roll no. 361/22

B.com L.L.B
Semester-2nd
 ACKNOWLEDGEMENT

I deem it my proud privilege to express my indebtedness and sincere thanks to all those
who have in various ways, helped in the successful completion of the project and without
their invaluable help this project would not have been a reality.

I am extremely thankful to Miss Gurpreet kaur faculty of law who was constant source
of knowledge and inspiration at all levels throughout my project who took a lot of pain in
providing guidance about project report.

Finally I express my most sincere gratitude to my family members for supporting and

encouraging me to do this challenging project. I deeply acknowledge the support and
inspiration by my academic career.

RASHIKA GOYAL
 Index

TOPIC PAGE NO.

INTRODUCTON 1

Duties Of Bailee 2-6

CONCLUSION 7

BIBLOGRAPHY 8
 INTRODUCTION

Bailment as defined in section 148 of Indian Contract Act, 1872. A bailment is the delivery
of goods by one person to another for some purpose; upon a contract that they shall,
when the purpose is accomplished, the property must be returned back or otherwise
disposed off according to the directions of the person delivering them. In bailment,
possession of products or goods is transferred or delivered, but property i.e., ownership of
goods is not transferred. Bailment is restricted to tangible goods only and cannot be
practiced upon immovable goods such as land, lake, building, factory, etc since the
delivery of goods is an essential of bailment and immovable goods cannot be delivered or
transferred. The parties in a Bailment known as Bailor and bailee are also defined in
section 148. The person who delivers the goods (movable property) is called the bailor.
The person to whom the goods are delivered is called the bailee. And the contract
between the bailor and bailee is called the contract of bailment.

Every party in a special contract has some duties obliged to him. The duties and rights of
Bailee shall be discussed in the project ahead.

A bailee is a person who gets interim possession of the goods or property but not the
ownership. The bailee is also called the custodian, as he gets the possession of the
property or goods by some other person(Bailor). The bailee’s connection with the bailor is
incorporated entirely upon bailment. The bailment specifies the purpose and reason of
the changes in custody of the goods and product and is outlined in writing such as receipt
or a chit. The bailment determines the objective and the reason for the transfer of the
property, goods or products and is highlighted in writing in the form of a receipt, written
statement, document or even a chit.
 Duties Of Bailee

1. Duty to Take Reasonable Care

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.The bailee is bound to take
reasonable care whether the bailment is gratuitous or non-gratuitous.
Additionally, the obligation of a bailee includes the duty of taking all proper
measures for the protection of the goods when such risks had already occurred.
In Gopal Singh v. Punjab National Bank 1, because a bank was forced to
evacuate Pakistan with a large migration to India as a result of the country’s
division, the bank was deemed not liable for items bailed to it in Pakistan and
lost there. “No cast iron standard can be given down for the measure of care
expected from a bailee,” the court stated, “and the nature and amount of care
must vary with the posture of each instance.” The kind, quality, and bulk of the
commodities bailed, the purpose of the bailment, and reasonably available
facilities for safekeeping, among other factors, will be considered in assessing
whether adequate care was exercised. If the damage was caused by the bailee’s
servant’s actions, the bailee would be liable if the servant’s actions were within
the limits of his employment.
Section 152, in this regard clearly states that one has to fulfil 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.

1
AIR 1976 Delhi 115
In Sheik Mohamed v. the British Indian Steam Navigation Co. Ltd.2The 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 SA3, 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 wasdestroyed 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.

2. 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. But in the other circumstances, he is required to have express or

2
I Ind Cas 977
3
(1984) HCA 6; 153 CLR 644
implied consent of the bailor to use the goods against the conditions of bailment
contract.

3. 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.

4. 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.
Section 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. 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.
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.
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.

5. 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; 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.
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.
The plaintiff in Shaw & Co. v Symmons & Sons4 entrusted books to the
defendant, a bookbinder, to be bound, with the latter pledging to return them in
a reasonable amount of time. The defendant failed to deliver all of the volumes
that were then bound within a reasonable time after the plaintiff demanded

4
1971
them, and they were later burned in an accidental fire on his property. The
defendant was found accountable for the loss of the books in damages.
If the bailee is unable to return the items due to no fault of his own, such as when
goods are taken pursuant to valid government instructions, the bailee is not
accountable.

6. 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.
In Motilal v. Bai Mani5, Mani, the daughter of Girdharilal Dalpatram, was the
plaintiff in a dispute with Achratal over 48 shares in the Ahmedabad Ginning and
Manufacturing Company. Arbitration was used to resolve that conflict. As a
result, Girdharilal transferred twenty-four shares to Achratal; the remaining
twenty-four shares were to remain in Girdharilal’s possession, but he was only to
keep Rs 1100 from the dividends; the remainder was to be paid to Achratal and
Gulab. Girdharilal transferred five of the twenty-four shares he kept in 1883 in
exchange for Rs 7,500 borrowed from Achratal. Gridharilal did not pay extra
profits over Rs 1100 to Gulab after Achratal died in 1885. It was held that new
shares are an increase and Gulab was entitled to them also.

5
(1925) 27 BOMLR 455, 87 Ind Cas 269
 Conclusion

The notion of bailment entails transferring things to another for a specified

purpose, whereas the concept of pledge entails transferring assets to another for
the purpose of keeping them as a security for debt repayment.
It can be concluded that a bailment is a contract in which a person is given
ownership of certain commodities for a specific purpose with the understanding
that the goods will be returned or disposed of once the purpose has been fulfilled.
Bail is not the same as a license or a sale. As previously stated, the bailee has six
key duties. A bailment contract can be cancelled by either the parties or by the
operation of law.
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.
 Bibliography

1. Singh Avtar (2017). Contract and Specific Relief (12th ed). Lucknow:
Eastern Book Company

2. Meena R.L (2008). Textbook on Law of Contracts including Specific

Relief. Delhi Universal Law Publishing

3. Pollock and Sir Dinshaw Fardunji Mulla (2017) The Indian Contract
Act and Specific Relief Acts (15th Ed) Vol. 2. Gurgaon, Haryana:
LexisNexis