DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

VISAKHAPATNAM, A.P, INDIA

Project Title

“Contract of Bailment”

Subject

Law of Contracts-2

Faculty

Mr. Jogi Naidu

Name of the Candidate:- Anagha Koratamaddi

Roll No:- 2018009

Semester:- 3rd

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 Acknowledgment
I would sincerely like to put forward my heartfelt appreciation to our respected faculty for the
Law of Contracts, Mr. P. Jogi Naidu for giving me this golden opportunity to take up this project
regarding “Contract of Bailment”. I have tried my best to collect information about the project in
various possible ways by referring to many materials and documents in the library to depict a
clear picture of the given project topic regarding the project.

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 Contents
Abstract .....................................................................................................................4
Introduction ..............................................................................................................5
Definition...................................................................................................................5
Essential Elements of Bailment...............................................................................6
Duties of Bailor ......................................................................................................11
Duties of Bailee .......................................................................................................13
Finders .....................................................................................................................15
Rights of a bailee ....................................................................................................15
1. Right to Compensation ....................................................................................15
2. Right to remunerations or expenses...............................................................15
3. Right of Lien .....................................................................................................16
4. Right to sue .......................................................................................................16

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 Abstract

This project explains about the contract of “Bailment”. Bailment is one of the Specific Contracts
mentioned in Section- 148 to 171, 180 and 181 in the Indian Contract Act, 1872. Bailment is a
kind of relation between persons where the personal property of a person is temporarily given to
the possession of another person. Here, the ownership remains with the giving person but the
possession is with the taking person. For example, giving a bike for servicing, giving a car for
valet parking, etc.
The definition of Bailment is given in Section 148 of the Indian Contract Act, 1872- “A bailment
is a delivery of goods by one person to another for some purpose, upon a contract that they shall,
when the purpose is accomplished, be returned or otherwise disposed of according to the
directions of the person delivering them. The person delivering the goods is called the “bailor”.
The person to whom they are delivered is called the “bailee”.
Essential elements of Bailment- (1) Delivery of possession: This is the first important element of
a bailment. This can be well explained with the case- Ultzen v. Nicols, (1894) 1 QB 92.
(2) Delivery should be upon contract: The delivery of goods by the bailor to the bailee should be
made through a proper contract and a purpose. If there is no contract, there can be no question of
Bailment- Ram Gulam v. Govt. of U.P.(AIR 1950 All 206).
(3) Delivery should be upon some purpose- There should be some purpose for a bailment. It is
subject to the condition that when it is accomplished, the goods will be returned to the bailor or
otherwise. – Secy of State v. Sheo Singh Rai, (1875-80) 2 AII 756.
Apart from these, there are some duties of Bailor and Bailee. There are two types of Bailors- (1)
Gratuitous Bailor and (2) Bailor for Reward. These can be well explained with the cases-
Blakemore v. Bristol and Exeter Rly Co, (1859) 8 EI&BI 1035, 1051:120 ER 385.;
Reed v. Dean (1949 1 KB 188).
The duties of Bailee are- (1) Reasonable Care; (2) Not to make unauthorized use; (3) Duty not to
mix; (4) Duty to return; (5) Duty not to set up jus tertii; (6) Duty to return increase. Apart from
these, the “finders” are also considered as Bailees- Sections 168 and 169. These two sections
protect the interests of the finders of goods.
The rights of the Bailee could be- (1) Right to Compensation; (2) Right to expenses or
remuneration; (3) Right of lien; (4) Right to sue. Karnataka Electricity Board v. Halappa (1987
1 TAC 451).
Cases:
Ultzen v. Nicols (1894) l QB 92; Ram Gulam v. Govt. of U.P. (AIR 1950 All 206); Secy of State
v. Sheo Singh Rai (1875-80 2 All 756); Blakemore v. Bristol & Exeter Rly Co, (1859) 8 El &
Bl 1035, 1051:120 ER 385; Karnataka Electricity Board v. Halappa (1987 1 TAC 451).

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 Introduction

We all come across situations where we tend to give our personal property to the other person for
various reasons. For example, giving a car for servicing, giving clothes for dry-cleaning, giving a
vehicle for valet parking, handing books to keep them in a cloakroom, etc. That means we give
our personal property’s possession to some other person for a temporary time period. This
process is called “Bailment”.
However, the ownership status doesn’t change in the cases of Bailment. Ownership remains with
the original owner, only the possession will be with the other person. The person who gives the
goods is called “Bailor”. The person who takes the goods is called “Bailee”. Bailment is
temporary in nature.

Definition

The definition of Bailment is given in Section 148 of the Indian Contracts Act, 1872. It says-
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, be returned or otherwise
disposed of according to the directions of the person delivering them. The person delivering
the goods is called “Bailor”. The person to whom they are delivered is called the “Bailee”.1
“Bailment” etymologically means ‘handing over’. It is actually a legal technical term used in
Common Law. The changing of possession from one to another takes place in the case of
Bailment. But the mere transfer of possession does not form a contract of bailment. Once the
owner transfers the possession of his goods to another for some purpose or the other, another
person should return the goods to the owner after serving the purpose or should dispose of the
goods, if instructed by the owner.
Thus the relationship between two persons as in the contract of bailment forms, i.e., “Bailor” and
the “Bailee”. The one who gives possession of his or her goods to the other is called Bailor and
the one who takes possession of the goods is called the Bailee. The relationship between them is
generally referred to as the Bailment.
Bailment is one of the Special Contracts mentioned in the Indian Contract Act, 1872. The
contracts of Bailment is well explained from Section- 148 to 171, 180 and 181 in the Indian
Contract Act, 1872.
There are 3 main essential elements to form a contract of Bailment and there are duties of the
bailor, and rights & duties of the bailee. These are explained elaborately with case laws in this
project.

1
See Anirudh Wadhwa, Mulla: The Indian Contract Act 281(2016).

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 Essential Elements of Bailment

1. Delivery of Possession
The first and one of the important essential features of the bailment is the “Delivery of
possession”.2 Without the transfer of possession by the bailor to the bailee, the contract of
bailment cannot be formed. However, there is a difference between “delivery of possession” and
“custody”.3 Giving the goods by one person to another just for a mere “custody” doesn’t form a
bailment contract. Like for example, giving a good to the custody of a servant just to look after it
for a temporary time period will not be called a bailment.
The meaning of “delivery of possession” is well explained in Section- 149 of the Indian Contract
Act, 1872. It states that-
“The delivery to the bailee may be made by doing anything which has the effect of putting
the goods in the possession of the intended bailee of any person authorized to hold them on
his behalf.”4
This can be explained with the following case-
Ultzen v. Nicols 5
Facts of the Case: The Plaintiff was a customer at the Respondent’s restaurant. The plaintiff has
gone to the respondent’s restaurant to dine. Plaintiff claimed that as soon as he entered the
restaurant, the waiter took the plaintiff’s coat without him being asked, and hung the coat of the
plaintiff to the hook which is placed with 2 feet upwards to the table on which the plaintiff was
seated. But when the plaintiff stood up to leave, the coat was gone. The plaintiff made a
complaint claiming that the plaintiff and the defendant has a bailor and bailee relationship.
The issue here was- whether the defendant could be considered as a bailee in this case.
The contention of the parties:
The Plaintiff claims that the defendant owed a duty of care but acted negligently and that he had
a duty of returning it carefully as a bailee.
The defendant claims that there was an established custom of placing the coats on the chair side
of the customers. He claimed that the coats were hung up on to the hook above the customers
only on the request of the customers. Anything that was said about the loss of an overcoat was
denied thereon.

2
See Avtar Singh, Contract & Specific Relief 671 Edn.12(2017).
3
See Pollock and Mulla, Indian Contract And Specific Relief Acts 560(1957).
4
See Anirudh Wadhwa, Mulla: The Indian Contract Act 284(2016).
5
Ultzen v. Nicols, (1894) 1 QB 92.

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Judgment :
No evidence was seen to be there regarding the bailment of the Plaintiff’s coat, and that the coat
was in the exact custody of the defendant. There wasn’t even any proof that the theft was
committed by the defendant or his servants. But it clearly appears that the act of the waiter was
more than that of a mere courtesy towards the plaintiff.
In the case of Holder v. Soulby6 , it was held that there was evidence of the bailment of the coat.
Here, the waiter did the same, he took the coat of the plaintiff without him being asked to do so
and hung it up. The jury opined that the waiter did the act as in the position of a servant to the
defendant and that he owned a duty. So, there exists a bailment.
If we take Richards v. London, Brighton, and South Coast Ry. Co.7 case, the small luggage of
the passenger was taken into charge by a porter of the Railways. Here, it clearly appears that
there was a duty of the porter to assist the passengers and so he took charge of their luggage,
relieving them from the duty of care. Which means that there exists a bailment between the
passenger and the porter. So thereby, the defendant can be considered as a Bailee.
Conclusion: The waiter, as his duty says so, acted in the way of courtesy with the plaintiff. But
the Plaintiff did not ask him to do so, but he voluntarily relieved the plaintiff from the duty of
care. So, the waiter took the position of a Bailee in this case. And, the waiter himself hung the
coat on to the hook without him being asked to hang there only. So, in this case, there existed a
bailment between the plaintiff and the defendant and the bailee (Defendant) was held liable for
failing to return the coat.
Furthermore, in accordance with the judgment of the case the waiter had merely acted in
courtesy to a customer of the restaurant. However, once the waiter took the coat in his
possession, he had relieved the customer of its care. Thus, the waiter took on the responsibility of
a bailee. Further, it was the waiter who selected the place where the coat was to be hung without
any direction from the gentleman. Therefore, the restaurant keeper was held liable for the loss of
the coat.
If the customer had instructed the waiter where and how the coat should be put, the result,
perhaps, would have been otherwise.
To create a bailment, the bailee must intend to possess and in some way physically possess or
control the bailed goods or property. In a situation where a person keeps the goods in possession
of another person but in fact, continues to have control over such goods, there is no delivery for
the purpose of bailment.

6
Holder v. Soulby 8 C.B. (N.S.) 251; 29 L.J.
7
Richards v. London, Brighton and South Coast Ry. Co. 7C.B. 839; 18 L.J. (C.P.) 251.

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 2. Delivery should be made upon contract
In any bailment, the delivery of goods to the other party should be made for some purpose. No
bailment exists without a specific purpose. The bailment should be made upon a contract of
bailment as prescribed in the definition given in Section 148 of the Indian Contract Act, 1872.
There should be a contract between the bailee and the bailor that, when the said purpose is
fulfilled, the goods should be returned to the bailor. If there exists no contract between the
parties, there exists no bailment.8
This element can be well explained in the case of –
Ram Gulam v. Government of Uttar Pradesh9
Facts of the case :
The ornaments of the plaintiff were stolen. Upon search by the police, they were recovered and
were kept in Collectorate Malkhana in Allahabad as per Code of Criminal Procedure.
Meanwhile, the ornaments kept in Malkhana were again stolen. The plaintiff sued the
government of Uttar Pradesh for Vicarious liability and claimed that there existed a bailor and
bailee relationship between the police and the plaintiff.
The plaintiff filed a case before Magistrate, but then it was dismissed stating that the
Government is not liable for the stolen ornaments. Then the plaintiff approached Allahabad
Highcourt praying for the obvious reliefs.
Issues of the case:

 Whether the Government was liable to indemnify the plaintiffs since it was in the
position of a bailee and the ornaments were lost through its negligence or that of its
servants?

 Whether the Government was liable to indemnify the plaintiffs in accordance with the
rule that a master is liable for the tortious acts of his servants?

Judgment :
The court held that the government was not vicariously liable for the stolen ornaments from
Malkhana and that the police were not holding those ornaments in the capacity of bailees. Thus
the suit was dismissed.
The reasoning by Justice Seth :
As far as the first issue is concerned, Hon’ble justice opined that the bailment exists only upon a
contract of bailment. Since there was no contract of bailment between the plaintiff and the
government as far as the possession of ornaments was concerned, there exists no bailment.

8
See Avtar Singh, Contract and Specific Relief 674 Edn.12(2017).
9
Ram Gulam v. Govt. of U.P. AIR 1950 All 206.

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Therefore, the Government was not in the position of a bailee. So, the Government is not liable
as there is no contract of bailment.
Justice Seth said- “…the obligation of a bailee is a contractual obligation and springs only from
the contract of bailment. It cannot arise independently of a contract. In this case, the ornaments
were not made over to the Government under any contract whatsoever… The Government,
therefore, never occupied the position of bailee and is not liable as such to indemnify the
plaintiffs.”10
And regarding the second issue, Justice Seth opined that the Government was merely discharging
the duty imposed on it by law. So, the tortious act which was done by the servant of the
Government was done upon the duty imposed by law. So, the government was not held liable for
the same.
Conclusion: Hence, through this case, it was established that the bailee and bailor relationship
only exists upon a Contract of Bailment and, if there is no Contract, there exists no Bailment.
Even though in English law non-contractual bailments exist, Indian law only recognizes the
bailments through contracts.
Furthermore, We can also observe that in the present case, certain ornaments of the plaintiff were
stolen. When police made a search then ornaments were found in another house and it seized the
ornaments as stolen property as per the powers conferred by the code of civil procedure. The
seized property was produced as evidence at the time of the trial of the person who was alleged
to be a thief. Then the property was kept in collectorate Malkhana but from there also the
ornaments got stolen and were untraceable. A suit was instituted by the plaintiff against the
government of U.P for the restoration of the ornaments and an alternative remedy as
compensation.
The suit was dismissed on the ground that government is not liable to compensate for the loss of
the ornaments. Therefore, the ratio of the Judgment could be observed as the government was
holding the property not as a bailee, but for the fulfillment of the duty imposed by law. The duty
of bailee is a contractual duty but there was no such contract between the parties. Hence the
government is not liable to indemnify the plaintiff for the loss caused.
Considering the second issue, the government was only discharging the duty imposed by law,
therefore it is not liable for the act, alleging to be tortuous. Thus the suit was dismissed on the
ground that government is not liable for the act of its servant because the act was just the
performance of the obligation imposed by the law and, therefore, not liable to compensate for the
loss of ornaments.

10
See Avtar Singh, Contract and Speific Relief 674 Edn.12(2017).

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 3. Delivery should be upon some purpose
There should be some purpose for a bailment. The bailment is subject to the condition that when
the purpose is accomplished, the goods shall be returned to the bailor or otherwise, disposed of
by the bailee on the order of the bailor. When there is no purpose, no promise to return the
goods, there can be no bailment.
This can be well explained with the following case-
Secy of State v. Sheo Singh Rai 11
Facts of the case:
The Plaintiff delivered 9 Government Promissory notes to the Treasury officer at Meerut. This
was done for the purpose of cancellation and consolidation of the promissory notes into a single
promissory note of Rs. 48,000. However, at the Treasury Office, the government servants
misappropriated the promissory notes which led to the misplacing of them. The plaintiff sued the
Government for the same claiming that the defendants were in the position of bailees.
Issue of the case :
Whether the State is in the position of bailee and therefore liable for the misappropriation of the
plaintiff’s promissory notes.
Judgment:
The Government was held not liable for the misappropriation of the promissory notes and was
declared not in the capacity of the bailee to the plaintiff.
Reason for the judgment:
The court opined that since the plaintiff delivered the promissory notes for making them as a
single note and there existed no contract which states about the ‘return of the promissory notes or
the disposition,’ there existed no bailment between the plaintiff and the state. There is no
“promise to return” in this action between the plaintiff and the state. So, there exists no contract
of bailment and hence the Government is not responsible or liable for the same.
Conclusion:
Hence, through this case, it is held that there can be no contract of bailment if there is no purpose
for the bailment, i.e. if there is no Promise of returning the goods to the bailor by the bailee or if
there is no order by the bailor to the bailee to dispose the goods of. So, in this case, the appeal
was dismissed and the government was held not liable and held that there is no relationship of
bailor and bailee between the plaintiff and the state.
Hence, these three elements are the essential elements to constitute the Contract of Bailment.
Without these elements, there can be no Contract of Bailment.

11
Secy of State v. Sheo Singh Rai, (1875-80) 2 All 756.

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Apart from these essential elements, there are some duties of Bailor and Bailee. These are
explained as follows:

Duties of Bailor

Section 150 of the Indian Contract Act, 1872 explains the duties of a Bailor. It states that-
“The bailor is bound to disclose to the bailee faults in the goods bailed, of which the bailor
is aware, and which materially interfere with the use of them, or expose the bailee to the
extraordinary risks; and, if he does not make such disclosure, he is responsible for damage
arising to the bailee directly from such faults.
If such goods are bailed for hire, the bailor is responsible for such damage, whether he was
or was not aware of the existence of such faults in the goods bailed.”12
For example, if A bails his motor to B which he knows that breaks of the motor are failed but
does not disclose it. As a result, B sustains injuries. A was held liable for the same. Even though
if A is not aware of the failure of breaks, he will be held liable for the injuries sustained by B.
According to this section, there are two types of Bailors. They are:
1. Gratuitous Bailor
2. Bailor for reward
Gratuitous Bailor- A gratuitous bailor is a bailor who bails(read lends) his goods without
charging anything in return. According to Section 150 of the Indian Contract Act, 1872, a bailor
has a duty to disclose the faults in the goods which are bailed, if any as explained above.
This duty can be well explained with the following case-
Blakemore v. Bristol and Exeter Rly Co. 13
Facts of the Case: A railway company transfers goods from one place to another and kept a crane
for the unloading of goods of consignees at a station. The consignees, who are plaintiffs, with the
help of their servants unloaded their goods by using the crane. The consignees required the help
of B, who was related to neither the company nor the consignee. However, even though there is
knowledge regarding the bad condition of the crane to the company, it did not disclose that.
While unloading by using the crane, it broke injuring B followed by his death. The plaintiffs
sued the railway company claiming the duty of Bailor.
Issue:
Whether the company is liable for breaching the duty of bailor which resulted in the death of B
who could be considered as a bailee.

12
See Anirudh Wadhwa, Mulla: The Indian Contract Act 284(2016).
13
Blakemore v. Bristol and Exeter Rly Co, (1858) 8 El&Bl 1035, 1051: 120 ER 385.

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Judgment:
The company was held liable as it breached the duty of bailor which resulted in the death of B. It
was held that even though there was no direct contract between B and the Company, the crane
was kept for the purpose of using it to unload goods. And so, it is lending the crane gratuitously
and thus can be considered as a gratuitous bailor.
Reason for the judgment:
The bench opined that-
“Would it not be monstrous to hold that if the owner of a horse, knowing it to be vicious and
unmanageable, should lend it to one who is ignorant of its bad qualities and conceal them from
him, and the rider, using ordinary care and skill, is thrown from it and injured, he should not be
responsible? By the necessarily implied purpose of the loan a duty is contracted towards the
borrower not to conceal from him those defects known to the lender which may make the loan
perilous or unprofitable to him.”14
By this, it justified that the company has got a duty of gratuitous bailor to disclose the bad
condition of the crane to the consignees. So, it was held liable for the breach of that duty.
Conclusion:
Hence, it can be concluded that a gratuitous bailor has a duty under section 150 of the Indian
Contract Act, 1872 to disclose the faults with the bailed goods to the bailee, of any. He will be
held liable if he doesn’t disclose the same to the bailee if he has knowledge regarding it.
Furthermore, We can also find out that it was established in Blakemnore v. Bristol & Exeter Ry.
Co.5 that a bailor, though he derive no benefit from the hailment, "must be responsible for
defects in the chattel with reference to the use for which he knows the loan is accepted, of which
he is aware, and owing to which directly the borrower is injured." In examining the basis and
extent of this liability, it is clear that according to the Blakemore decision the duty is contractual.
Though it is generally held that a contract does exist " in such cases of gratuitous bailments, the
better view is otherwise. Even under the view that a contract is present, the duty does not
necessarily depend upon the contract, but rather upon the relation of the parties. The function of
the contract being merely to establish such relation, where the claim goes further to aver a breach
of duty arising out of that relationship the action is one of tort. However, it is not necessary for a
contract to establish the relation from which the duty to disclose known defects arises. Where a
person consents to another's conming into contact with his property, knowing that the other is
unaware of its dangers, his conduct is essentially misfeasance rather than nonfeasance. That a
contract was regarded necessary arose out of the tendency of the times to re- fer obligation to
consent yet it is clear that the same duty would exist in cases of gifts where no contract could be
alleged. The posi- tion of a donee is closely analogous to that of a bailee in a bailment which is
gratuitous or for his sole benefit; the declaration of Cole- ridge, J., in the Blakemore case, that
the duty "is so consonant to reason and justice that it cannot but be part oif our law," is equally
applicable. The conclusion is further sustained by analogy to the rights of a mere licensee on the
14
See Avtar Singh, Contract and Specific Relief 678, 679 Edn. 12(2017).

12
land oif another."Thus, the relation to which the law attaches the obligation to refrain from
leading another into known danger is not that of bailor and bailee, but rather that of supplier and
user, whether the transfer be by gift, license or sale.
Bailor for Reward
The duty of this type of bailor is much more than those of gratuitous bailor. This type of bailor
bails his goods for the purpose of earning profits. He lends the goods for money. Bailing is his
source of income. This type of Bailor cannot claim the defense of ignorance in the case of non-
disclosure of any faults of the goods delivered to the bailee. Section 150 of the Indian Contract
act, 1872 clearly states this duty of the bailor for a reward.15
In the case of Reed v. Dean16, the plaintiffs hired a motor launch from the defendant and while
riding, it caught fire. When they tried to extinguish the fire, the fire extinguishing equipment in
the launch was found to be out of order. This resulted in heavy losses and injuries of the
plaintiffs. The court held the defendant liable for the losses and the injuries suffered by the
plaintiffs and that the defendant cannot claim the defense of ignorance of the fault in the fire
extinguishing equipment. There is an implied duty on the part of the defendant to make sure that
the equipment is in order and take reasonable care while bailing it to the plaintiffs.

Duties of Bailee

As there are duties of the Bailor, there are certain duties of a bailee as well. There are 6 duties of
a Bailee:
1. Duty of Reasonable Care
There is a duty of bailee to take reasonable care of the goods delivered by the bailor. This is the
first and important duty of any bailee. Section 151 of the Indian Contract Act, 1872 states about
this duty-
“In all cases of bailment the bailee is bound to take as much care of the goods bailed to him
as a man of ordinary prudence would, under similar circumstances take, of his own goods
of the same bulk, quality and value as the goods bailed.”17
Even if the bailee is gratuitous or involuntary bailee, then also he has a duty to take reasonable
care of the goods delivered to him by the bailor. No bailee can be exempted from this basic duty.
In one of the English cases, where the plaintiff was allowed to store his silver plates in a strong-
room in the house of the war office. Though he locked it, due to poor control of the room, some

15
See Anirudh Wadhwa, Mulla: The Indian Contract Act 284(2016).
16
Reed v. Dean (1881) L R 6 QBD 685.
17
See Avtar Singh, Contract and Specific Relief 680 Edn.12(2017).

13
thieves broke into the room and stole a certain quantity of plates. The plaintiff sued the War
office and consequently, the War Office was held liable for not taking reasonable care.18
2. The duty not to make any unauthorized use
There is a duty upon the bailee not to make any unauthorized use of the goods which were bailed
to him by the bailor. As the Bailee has lesser rights upon the bailed goods than the bailor, he is
not subject to use those bailed goods in any unauthorized manner. A bailee can only use the
bailed goods up to the extent of the authorization given to him by the bailor.
Section 154 of the Indian Contract Act, 1872 states about this duty of a bailee-
“If the bailee makes any use of the goods bailed which is not according to the conditions of
the bailment, he is liable to make compensation to the bailor for any damage arising to the
goods from or during such use of them.”19
For example, A lends his car to B only for him to ride. But B allows his nephew who is still a
learner and consequently, his nephew gets the car into an accident. In this case, B acted beyond
the authorization given to him by A by giving the car to his nephew resulting in an accident and
loss to A. So, here B is liable to pay for the loss incurred by his Bailor, A.
Section 153 states that- “A contract of Bailment is avoidable at the option of the Bailor if the
bailee does any act with regard to the goods bailed, inconsistent with the conditions of
bailment.” 20
3. Duty not to mix
There is a duty of Bailee to be careful and make sure not to mix the bailed goods with any other
goods. The bailee is entitled to maintain the separate identity of the goods which are bailed to
him. If the goods are mixed by the bailee with the consent of the bailor, both of them will have
the proportionate interest of the goods mixed.
For example, if the Bailee mixes the goods without the consent of the Bailor, the bailee should
incur the expenditure for the separation of the goods and return those bailed goods to the bailor.
This is supported by Section 156 of the Indian Contract Act, 1872.
4. Duty to return
There is a duty of the bailee to return the goods to the bailor in a proper condition unless the
bailor orders the bailee to dispose of the goods bailed. Section 160 of the Indian Contract act,
1872 supports this.

18
Blount v. War Office (1953) 1 WLR 736.
19
See Avtar Singh, Contract and Specific Relief 690 Edn.12(2017).

20
See Avtar Singh, Contract and Specific Relief 690 Edn.12(2017).

14
 5. Duty not to set up “Jus Tertii”
The bailee is not entitled to say that the goods belonged to the third person (Jus tertii). The
Bailee, therefore cannot act against the demand of the bailor as it violates the contract of
bailment. Even if there is a person who could hold a better title than the bailor of the bailed
goods, the bailee is not allowed to do so.
6. Duty to return increase
In case, if there is any natural increases or profits accruing to the goods during the Bailment
period, the bailee is supposed to return all of them to the bailor unless there is a contrary
agreement regarding them between the bailee and the bailor. Section 163 of the Indian Contract
Act, 1872 supports it.

Finders
Apart from the bailees, there are also “finders” of the goods. These finders are generally
considered to be bailees. Section 168 and 169 of the Act mention the finders. These sections
protect the interests of the finders of goods.21
Section 168 states about the right of the finder to receive any reward from the bailor, if
announced. Section 169 states about the selling right of the finder in certain circumstances:
1. When the thing is in danger of perishing or losing a greater part of its value.
2. When the lawful charges of the finder, in respect of the thing found, amount of two-thirds
of its value.22

Rights of a bailee

Along with the duties, there are certain rights of the bailee. The following are the rights of the
bailee:

1. Right to Compensation

It is the responsibility of the bailor to the bailee in case the bailee incurs any loss due to the
bailed goods. In case if the bailor loses right to bail the goods, or to receive them back, but he
does so, consequently the bailee incurs some loss. Bailor is supposed to bear that loss.
This is supported by Section 164 of the Indian Contract Act- Bailor’s responsibility to Bailee.

2. Right to remunerations or expenses

21
See Avtar Singh, Contract and Specific Relief 696 Edn.12(2017).
22
See Avtar Singh, Contract and Specific Relief 695 Edn.12(2017).

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During the bailment, according to the contract between the bailor and the bailee, the bailee has to
keep the goods or carry them, or to have to work upon them for the bailor, the bailor should pay
for the necessary expenses incurred by the bailee. This is supported by Section 158 of the Indian
Contract Act, 1872- Repayment by bailor of necessary expenses.

3. Right of Lien

If the required compensation is not paid to the bailee, he has a right to retain the goods with
himself. This right to retain any property in case of non-payment until the payment is done is
called the right of lien. This is well supported by Section 170- Bailee’s particular lien and
Section 171- General Lien, Section 173&174- Lien of pledge or pawnee, Section 221- Lien of
agents.

4. Right to sue

The bailee has the right to sue the wrongdoer. Even though the goods are just ‘bailed’ to him and
he is not the owner of the goods, he has the right to sue the wrongdoer is he/she wrongfully takes
or destroys the bailed goods. Both the bailor and bailee has this right. This is supported by
Section 180 of the Indian Contract Act, 1872-
“If a third person wrongfully deprives the bailee of the use or possession of the goods
bailed, or does them any injury, the bailee is entitled to use such remedies as the owner
might have used in the like case if no bailment had been made; and either the bailor or the
bailee may bring a suit against a third person for such deprivation or injury. —If a third
person wrongfully deprives the bailee of the use or possession of the goods bailed, or does
them any injury, the bailee is entitled to use such remedies as the owner might have used in
the like case if no bailment had been made; and either the bailor or the bailee may bring a
suit against a third person for such deprivation or injury.”23
This can be well explained with the case-
Karnataka Electricity Board v. Halappa24
Facts of the Case-
The plaintiff was a transport carrier. At the time of the incident, the plaintiff was carrying 32
Dorcas of cotton belonging to different cotton growers. Due to the short circuit by touching the
electric wire lines over-head, the cotton got spiled on the way. These electric wire lines were
belonging to the Karnataka Electricity Board. So, the plaintiff has sued the Board and claimed
for the compensation for the losses he incurred due to the accident.

23
See Avtar Singh, Contract and Specific Relief 710 Edn.12(2017).
24
Karnataka Electricity Board v. Halappa, (1987) 1 TAC 451.

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Issue of the case:
Whether the Karnataka Electricity Board liable for the losses incurred in the capacity of him
being the bailee of the goods.
Judgment:
It was held that the Board is liable for the losses incurred and the plaintiff has the right to sue the
board even though he is not the owner of the spoiled goods. As a bailee of the goods, he has a
right to sue the third party if the party does any wrongful act towards the bailed goods.
The reasoning of the judgment:
The bench opined that as per section 180 of the Indian Contract act, 1872, both the bailee and the
bailor has the right to sue the third party if the party indulges in any wrongful act towards the
bailed goods. Here, in this case, the plaintiff was a bailee of the cotton growers who bailed their
cotton. Even though he is not the owner of the cotton, but in the capacity of a bailee, he is
eligible to sue the Electricity Board and claim for the compensation.
Conclusion :
It can be concluded that the bailee has the right to sue the wrongdoer even though he is not the
owner of the bailed goods. This is supported well by Section 180 of the Indian Contract Act,
1872.
Whereas, Section 181 of the Indian Contract Act states about the aftermath of the compensation
received from the wrongdoer. It states that after receiving the compensation from the wrongdoer
for the losses incurred, bailee and bailor could distribute the amount upon their interests and
mutual agreement.
In this way, the Contract of Bailment can be understood. First and foremost, there must be a
contract to form a bailment relationship between two parties. Secondly, there must be a delivery
of goods by the bailor to the bailee and thirdly, the delivery must be upon some purpose. With
these three elements, a contract of bailment can be made. And there are rights as well as duties to
both the bailor and the bailee. Even a finder of goods can be considered as a bailee. Alas, the
contract of bailment is very commonly seen in our day to day life.

Conclusion
The researcher would like to conclude from the above project that we all come across situations
where we tend to give our personal property to the other person for various reasons. For
example, giving a car for servicing, giving clothes for dry-cleaning, giving a vehicle for valet
parking, handing books to keep them in a cloakroom, etc. That means we give our personal
property’s possession to some other person for a temporary time period. This process is called
“Bailment”.

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However, the ownership status doesn’t change in the cases of Bailment. Ownership remains with
the original owner, only the possession will be with the other person. The person who gives the
goods is called “Bailor”. The person who takes the goods is called “Bailee”. Bailment is
temporary in nature.
Furthermore, the researcher has also observed that This project explained about the contract of
“Bailment”. Bailment is one of the Specific Contracts mentioned in Section- 148 to 171, 180 and
181 in the Indian Contract Act, 1872. Bailment is a kind of relation between persons where the
personal property of a person is temporarily given to the possession of another person. Here, the
ownership remains with the giving person but the possession is with the taking person. For
example, giving a bike for servicing, giving a car for valet parking, etc.
The definition of Bailment is given in Section 148 of the Indian Contract Act, 1872- “A bailment
is a delivery of goods by one person to another for some purpose, upon a contract that they shall,
when the purpose is accomplished, be returned or otherwise disposed of according to the
directions of the person delivering them. The person delivering the goods is called the “bailor”.
The person to whom they are delivered is called the “bailee”.
The researcher would also like to conclude the project by reiterating the Essentials of the
Bailment which is as follows:-
Essential elements of Bailment- (1) Delivery of possession: This is the first important element of
a bailment. This can be well explained with the case- Ultzen v. Nicols, (1894) 1 QB 92.
(2) Delivery should be upon contract: The delivery of goods by the bailor to the bailee should be
made through a proper contract and a purpose. If there is no contract, there can be no question of
Bailment- Ram Gulam v. Govt. of U.P.(AIR 1950 All 206).
(3) Delivery should be upon some purpose- There should be some purpose for a bailment. It is
subject to the condition that when it is accomplished, the goods will be returned to the bailor or
otherwise. – Secy of State v. Sheo Singh Rai, (1875-80) 2 AII 756.
Apart from these, there are some duties of Bailor and Bailee. There are two types of Bailors- (1)
Gratuitous Bailor and (2) Bailor for Reward. These can be well explained with the cases-
Blakemore v. Bristol and Exeter Rly Co, (1859) 8 EI&BI 1035, 1051:120 ER 385.;
Reed v. Dean (1949 1 KB 188).
The duties of Bailee are- (1) Reasonable Care; (2) Not to make unauthorized use; (3) Duty not to
mix; (4) Duty to return; (5) Duty not to set up jus tertii; (6) Duty to return increase. Apart from
these, the “finders” are also considered as Bailees- Sections 168 and 169. These two sections
protect the interests of the finders of goods.
The rights of the Bailee could be- (1) Right to Compensation; (2) Right to expenses or
remuneration; (3) Right of lien; (4) Right to sue. Karnataka Electricity Board v. Halappa (1987
1 TAC 451).

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