Businees Law Asgnment # 2

Define bailment and pledge, distinguish their features and also explain how an agency created and
terminated?
Bailment refers to delivery of goods by one person to another for some purpose upon a
contract,that they shall ,when the purpose is accomplished ,be returned according to the
directions of person delivering them. It is only applicable to movable property.
Example;
Asif delivers a piece of cloth to Bilal to make a suit. There is a contract of bailment between Asif
and Bilal. Asif becomes a bailee and Bilal becomes a bailor.
The bailment of goods as security for payment of a debt or performance of a promise is called
pledge. Only movable property may be pledged and that too for just limited interest.
Features of bailment;
 Contract;
A bailment is based on a contract between bailor and bailee. The delivery of goods
should be made for some purpose and when the purpose is accomplished, the goods
shall be returned to the bailor. If the goods are delivered without any contract i.e by
mistake, there is no bailment. For example, A gives a piece of cloth to T. There is a
contract of bailment between A and T.
 Delivery of goods;
Bailment is the delivery of movable goods from one person to another, mere custody
does not create relationship of bailor and baliee. A servant who receives goods from his
or her master to take to a third person has only custody. The possession remains with
master, so the servant cannot be called bailee.
 Specific purpose;
There should be some purpose for bailment of goods. There is no contract when the
goods are delivered by mistaken. When the purpose is accomplished, the goods will be
returned to the bailor or disposed off according to the instructions of the bailor. The
purposes could for carriage, use, safe custody, security and work.
 No change of ownership;
In bailment, the possession of goods can be changed but not the ownership. Mere
custody without possession is not bailment. If there is a change in ownership the
transaction may be a sale or exchange but not bailment.
 Return of same goods;
When the purpose is accomplished, the goods must be returned in original form or
disposed off according to the directions of bailor. If the bailee has an option of paying
money or of returning different property, there is no bailment. The deposit of money
with a bank is not a bailment because, there is no obligation to return the same money.
However, notes or things deposited in a locker are a bailment.
Rights of bailor;
 To claim damages;
The bailor can recover damages from the bailee if any damage to the goods bailed is
caused due to the bailee’s negligence.
 To demand returns of goods;
The bailor can demand the return of the goods bailed as soon as the purpose of
bailment is accomplished. if the bailee makes default in returning the goods at the
proper time and place, the bailor is entitled to compensation arising from such situation
 To claim increase;
The bailor is entitled to claim any increase in profit, which may have accrued from the
goods bailed.
 To terminate bailment;
The bailor has the right to terminate the bailment if the bailee does any act, which is
against the terms of the contract through the term of bailment has not and expired or
the purpose of bailment has not been accomplished.
 To sue;
The bailor may sue the bailee for breach of contract if the goods are not returned or
disposed off as directed by the bailor. He can take action for negligence, destruction etc.
when the bailee is guilty of such conduct. The bailor may also sue third party who
damaged or took the bailed property from the bailee’s possession.
Duties of bailor;
 To disclose fault;.
 To pay expenses;
 To indemnify for demanding back
 To indemnify for defective title
 To receive back goods
Rights of bailee;
 To claim damages;
It is a duty of bailor to receive goods back from the bailee after the purpose is
completed. If the bailor don’t receive the goods back, then the bailee can clain the
compensation for all expenses that incurred for safe custody.
 To demand return of goods;
The bailee can ask for all expenses that incurred by him or her for the purpose of the
bailment from the bailor.
 To compensation;
If the bailor has no right to bail the goods or to receive them back or to give directions
regarding them and as a result, the bailee suffers a loss, the bailee is entitled to receive
such loss from bailor.
 To sue;
If the 3rd person wrongfully deprives the bailee of the use or possession of the goods
bailed or causes the injury to the goods, bailee is entitled to sue such person. The bailor
can also bring an action against such 3rd person in respect of such goods bailed.
Duties of baliee;
 To take reasonable care

 Not to make unauthorized use
 Not to mix goods
 To return goods
 To return increase
Rights of pledgor;
 To redeem
 To claim damages
 To claim increase/benefit
 To redeem to debt
Duties of pledgor;
 To compensate and pay for expenses

 To complete and comply with terms and conditions
Rights of pledgee;
 To retain
 To retain for other debts
 To claim expenses
 To sue and sell
Duties of pledgee;
 Reasonable care
 No unauthorized use
 No mixing of goods
 Not inconsistent with terms and conditions
 Returns of goods
 Give increase
An agency connotes a relation existing where one person has authority or capacity to create a legal
relation between the principle and third party.

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Businees Law Asgnment # 2

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Define bailment and pledge, distinguish their features and also explain how an agency created and

 To take reasonable care

 To compensate and pay for expenses

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