Duties of Bailee

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Page 1 Monday, April 29, 2024

Printed For: pranita prakash midigeshi, Symbiosis Law School
SCC Online Web Edition: http://www.scconline.com
© 2024 EBC Publishing Pvt. Ltd., Lucknow.
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3.1 JCLJ (2022) 824
Critical Analysis of the Duties of Bailor and Bailee
CRITICAL ANALYSIS OF THE DUTIES OF BAILOR AND BAILEE

by
Punreesh Dikshita
Received 11 September 2022; Accepted 19 September 2022; Published
27 September 2022
Indian Contract Act1 is filled with different aspects of a contract. One
such aspect is the bailor and Bailee. The Indian Contract Act has
defined some of the terms in very vague language, thus causing them
difficult to understand and interpret. This results in a lot of confusion.
Moreover, this Act dates long back and someone of its provisions has
been obsolete, and therefore some changes are very much necessary.
This article aims at the merits, demerits, and drawbacks of the Act.2
With the help of this article, the author aims to draw the reader's
attention to what are the possible positives of this Act, what are the
drawbacks/shortcomings of this Act. This article also does the cross
sectional analysis, which helps in making the readers understand how
these provisions can be read along with other provisions of this Act.
Keywords: contract, bailor, bailee.
INTRODUCTION
A bailment is the legally binding transfer of commodities from one
person to another. Section 148 of the Indian Contract Act of 18723
clarifies this. The “bailor” is the one who hands the things over,
whereas the “bailee” is the person who receives the commodities.
Because the bailed items
Page: 825
are transferred from the bailor to the bailee for a stated purpose,
custody of the goods is transferred under a bailment contract.4 Hence it
is a contract, which means all the essentials of a valid contract are
applicable to contracts of bailment.
From section 1505 through Section 1816 of the Indian Contract Act
(hereinafter referred to as the act), 1872, the bailor's responsibilities
and privileges are detailed rather exhaustively. Some of these rights
and responsibilities are clearly defined, while others are unclear,
resulting in misunderstanding and the need for judicial interpretation.
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Bailment can be classified as either gratuitous or non-gratuitous based

on the existence or lack of consideration. When there is no
consideration, it is gratuitous and may be for the exclusive benefit of
either party. A non-gratuitous bailment, on the other hand, entails the
payment of consideration and the parties' mutual benefit. This article
looks at the merits, demerits, and shortcomings of bailor and bailee
through case laws, and legislation and lists the merits, demerits, and
shortcomings of bailor and bailee's rights and duties.
DUTIES OF BAILOR
Duty to give instructions regarding disposal when the bailor
doesn't receive them : The bailor must either accept the objects or
give directions for their disposal when the purpose and duration of
bailment have been fulfilled. In the scenarios where the bailor fails to
do so, the bailee is entitled to be paid for the safekeeping of the
property7 .
Duty to pay for the expenses : The bailor is responsible for any
charges and expenditures spent by the bailee in connection with the
bailment8 . In the event of non-gratuitous bailment, the bailor is
responsible for all reasonable and ordinary charges,9 but in the case of
gratuitous bailment, the bailor is responsible for all expenditures spent
by the bailee10 . A bailee who is required by
Page: 826
the bailment requirements to retain goods/move them/perform labour

on them may recover from the bailor the necessary expenditures made
for the bailment's purposes.11 The same was also held in American
President Lines Ltd. v. Board of Trustees of the Port of Bombay12 where
the court said that even though the port trust received the goods but it
will still be liable to take reimbursement for the costs either by the
shipping company13 or as held in F.F. Campbell & Co. v. Board of
Trustees of Port of Bombay14 , from the agent who provided the
consignment.15
Duty to disclose any flaw in the goods : Regardless of the kind of

bailment, Section 150 requires the bailor to declare all flaws in the
commodities bailed by him if the bailor is aware of them. Another
requirement is that the fault must be of such a character that it
prevents the bailee from using the goods or exposes him to specific
hazards. Since bailment is considered, a contract hiding any flaw also
calls for section 19 of the Indian Contract Act. The bailor similarly could
be held accountable for faults that are not known to him if the
commodities are bailed non-gratuitously. In the case of Hyman &
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Wife v. Nye & Sons,16 the court held the defendant liable for a defective
horse carriage even though he was unaware of the same.17
Duty where termination of the contract is beforehand : The
bailor can anytime ask the bailee to return the goods, however, if the
bailee suffers any damage due to termination of the contract
beforehand the bailor shall be held liable to compensate the bailee for
the same18 .
Duty to indemnify in cases where the title is flawed : When the
bailor was not authorized to make the bailment, but yet receives the
goods, or gives any instructions concerning them, and if the bailee as a
result of such instructions resulted in any loss then he is required to
compensate for the same19 . In the case of Singer Mfg Co. v. Clark,20 the
court held that the bailor makes a
Page: 827
presumed assurance that the thing bailed is his own or that he has the
owner's permission to bail it, or that it can be securely returned to
him.21
DUTIES OF BAILEE
Duty of reasonable care : The bailee has the primary responsibility
for the bailed goods in both types of bailments. The bailee is required
to provide a minimal level of care, as that a reasonable/ordinary and
prudent man would show towards his goods22 . However, in the
circumstances where bailey took reasonable care, even after that, the
goods got damaged then he shall not be held liable23 . However, in such
a scenario the bailee could plead that he took care as much as he would
do of his goods, and yet his goods got damaged.24 The same cannot be
pleaded by the bailee the same was also held by Supreme Court in Ram
Gopal v. Gourishankar25 . Moreover, in such contracts where bailee is set
free from his duty of reasonable care, all such contracts are void, the
same was also held in Sheikh Mohamed v. The British Indian Steam
Navigation Co. Ltd.26
Duty to act within the scope of authority : The bailee is not
allowed to do anything that is not by the bailment contract's terms.
Furthermore, if the bailee uses the commodities for a purpose other
than that for which they were leased, the bailor may be entitled to
damages as a result of the bailee's unlawful use of his authority.
Duty to return the goods : When the bailment's goal is met or the
time restriction expires, the bailee must return or dispose of the goods
whichever is following the instructions of the bailor. If the bailee fails to
do so, he or she will be held liable for damages. In any case, the bailee
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is liable to pay the damages if the loss happens due to the improper
acts of the bailee27 .
Page: 828
Duty to mix the goods with those of his own : A bailee has a
responsibility to take reasonable precautions of that of an ordinarily
prudent man to avoid mixing bailed goods with his own. If the bailee,
on the other hand, mixes the goods, the outcome will be determined by
whether the mixture was done with or without the bailor's approval. If
the bailor consented to the combination, both parties will have a
proportionate share of the mixture or as decided by the contract28 .
When goods are mixed without consent, the outcome is determined by
whether they are separable or not.29 When the commodities are
separable, the bailee is responsible for the cost of separation as well as
any harm done because of it. If the commodities cannot be separated,
the bailee must reimburse the bailor for his or her loss30 .
Duty to return the goods with (if) any profits made using the
goods thereof : Under circumstances where any profits were made by
the goods of the bailor, such profits must be given back to the bailor, at
the time of returning the goods,31 unless there is a contract contrary to
it.32 And where there is no contrary contract, such profits solely belong
to the bailor, and bailee has no rights over them, the same was also
held in M.R. Dhawan v. Madan Mohan33 .
INTERPRETATIVE EXERCISE OF THE DUTIES OF BAILOR AND
BAILEE
Section 148 and 149 : Bailment is defined by two important
criteria : possession and ownership. A bailment just transfers the
custody of commodities to the bailee; the bailee does not obtain
ownership of the goods, as previously stated. As a result, even after
relinquishing possession of the goods, the bailor retains ownership
rights. The core of bailment is the transfer of property ownership. If the
bailee does not receive custody of the items, there is no bailment. The
same was also held in Ashby v. Tolhurst.34 Even after the bailor has
transferred possession of the goods to the bailee, the bailor retains
ownership of the goods. A sale of goods contract differs from a
Page: 829
bailment in that the buyer receives both ownership and custody of the
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goods in a sale of goods contract, but the bailee does not acquire
ownership in a bailment.35
Section 151 and 152 : Section 151 creates a “Uniform standard of

care” in bailment situations. As a result, whether the bailee is given
voluntary or involuntary bail, the bailee must exercise the same level of
care and precaution. However, this stance hasn't always been
consistent. Under English law, bailee liability was first absolute. This
law put the bailee in a difficult position since even if reasonable care
was taken to preserve the items, there would be no redress. The first
consideration was given to a free bailee. The court stated, “If money is
handed to one to retain generally without regard and the person is
robbed, he is discharged.”36
With time, English law established a distinction between two
categories of bailee : unpaid bailee and paid bailee. The Indian Contract
Act distinguishes between gratuitous and bailee for payment in the
same way. However, there is a contrast between the duty of care due
by a gratuitous bailee and a bailee for a fee. In all bailment scenarios,
Section 151 provides a uniform standard of care, i.e., the level of care
that a prudent person would take with his commodities of the same
type and under similar conditions. If the bailee's care falls short of this
standard, the items will be lost or damaged, and he will be held liable.
This level of care is where the English and Indian legal systems
diverge.
Sections 151-152 of the Indian Contract Act provide a bailee's duty
of care in all bailment situations. In India, the nature and quality of the
items determine the duty of care. If the bailor is not negligent, as in
Shanti Lal v. Tara Chand37 , where the bailor's possessions were lost due
to floods, the bailee is not held accountable. The Allahabad High Court
ruled in the same case that “no hard and fast rule” can be applied to
the level of care required of him, and that “the form and amount of care
must vary with the circumstances of each incident.”38
Page: 830
The bailee could not allege that others would have acted similarly in
the case of Gour Chandra Mukherjee v. Andrew Yales Co-Op Credit
Society Ltd.39 the chairman of a cooperative organization was entrusted
with money, which was typically kept in a safe. The court, on the other
hand, found the traditional practice to be absurd and held the bailee
accountable for carelessness.40
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Section 154 : A custodial bailment prohibits the bailee from using

the goods for any other purpose. When the defendant was assigned a
car as a bailee and evidence showed that he was using it for personal
reasons in contravention of his agreement with the plaintiff, the bailor,
he was held liable for the damages caused by such usage41 . Even
though the bailment is for the bailee's use, he cannot give the items to
a third party without the bailor's agreement. The borrower has limited
delegated authority where the borrower's lawful enjoyment of the
commodities necessitates the employment of a third party.42 Thus, if A
loans his bike to B for a single ride, only B may ride it; yet, if A lends
his bike to B for a month, B's family may presume that A meant it for
them to use. Renting a machine, on the other hand, may include
monitoring and usage by someone other than the real and responsible
borrower.
Section 156 and 157 : The bailee is in charge of keeping the
bailor's possessions safe. He should not combine his commodities with
the bailor without the bailor's authorization. The bailor will receive an
equal share of the completed product if he or she agrees to the mixing.
Assume that the commodities are blended without the bailor's consent,
despite his approval. If this is the case, the bailee is responsible for the
separation fees as well as any injury caused by the combination. If the
mixture cannot be separated, the bailee is responsible for paying the
bailor.
Section 160, 161, and 164 : If the goods were lost or destroyed
accidentally and without the fault of the bailee, the bailee's refusal to
restore them may be justified. A bailment comprises an implied
promise to return the objects in a reasonable time after the purpose
has been completed,
Page: 831
even if no deadline is specified for return.43 According to the ruling in

Ebrahim Ahmed Mehter v. Samuel Balthazar44 , the bailee's heirs are
liable for the bailor's loss if the bailee dies. If the executor of a
deceased bailee fails to return the goods by the required date, the
executor is personally accountable for the property.45
The following elements must be followed for the bailee to be

obligated to reimburse the bailor for the loss, destruction, or
degradation of the commodities bailed or to keep the goods after the
time for which they were bailed:
• The bailee must be at fault;
• The commodities were not recovered, delivered, or tendered when
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they were supposed to be; and

• The items should have been lost, destroyed, or damaged. Each
element must be present to submit a claim for damages.
SHORTCOMINGS
The interpretation of sections 151 and 152 is substantially greater
than the text of the provisions, resulting in a great deal of ambiguity.
The parts also don't explain who bears the burden of proof, what
constitutes a reasonable standard of care, and what is and isn't covered
by a reasonable standard of care. To interpret the same, one must look
for court clarifications. Section 151's phrase “which materially interferes
with their usage” appears to encompass the scenario of a bailment for
an heir. The item is discovered to be unfit for the purpose for which it
was rented. A bailee is usually obligated to return the rented item at
the end of the term for which it was rented. The Indian Contract Act of
1872, on the other hand, is mute on what to do if the items are found
to be unfit for their intended use.
The defendants in Isufalli Hassanlly v. Ibrahim Dajibhai46 did not
return or pay rent after renting a grass press that did not work and
could not be repaired. The bailee's sole responsibility,
Page: 832
according to the court, is to deliver a breach of warranty notification.47

In the same section, illustration (b) raises the question of whether the
rule applies when A leases a specific carriage from B rather than one
chosen by B. Rental decisions are based on questions of implicit
guarantee or unstated contract requirements, and broad guidelines
should be developed with extreme caution. Any such exemption under
the Contract Act does not appear to qualify the rather positive phrasing
of the second paragraph of this section.
The bailee's obligation when the goods are combined by accident is

not addressed under section 154 of the Indian Contract Act. In Spence
v. Union Marine Insurance Co.48 ., there was no issue of bailment, and
the case did not otherwise resemble any of those discussed in the
present set of sections, which do not address unintentional mixing at
all.49 When goods are found to be inappropriate for the reason for which
they were leased, and the purpose for which they were bailed is not
met, Section 160 of the Indian Contract act is silent about the same.
If the products do not arrive, the bailor's remedies are not specified
under Section 161 of the Indian Contract Act. In both contract and
tort, he has the right to sue the bailee for damages. Additionally, the
bailor has equitable rights. If the bailee sells the bailed objects, the
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bailor has the right to pursue the proceeds in equity and follow them
wherever they may be distinguished as being held separately or mixed
up with other money.50
CONCLUSION
In conclusion, the legislative framework must embrace such a key
legal and economic idea, even though the concept has evolved via
judicial rulings. This article shows the withstanding issues at hand,
which show the drawbacks of this legislation. With outdated legislation
come tons of problems. The parties at the disadvantage will forever be
at a loss if this legislation is not updated. To include the
aforementioned recommendations, the Indian Contract Act requires
amendments and the addition of new parts and clauses. It is to be
understood with changing
Page: 833
times everything needs to update and with the issue at hand; it is time
that this legislation is amended.
———
a Symbiosis International University, Pune, India
1 Indian Contract Act, 1872
2 Ibid
3 Contract Act, 1872, s. 148
4 Ibid
9 Ibid
10 Forbes Campbell & Co. Ltd. v. The Board of Trustees of the Port of Bombay & Metal Fabs
India Pvt. Ltd., AIR 2006 Bom 162
11 Ibid
12 American President Lines Ltd. v. Board of Trustees of the Port of Bombay, AIR 2004 Bom
162
13 Ibid
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14
FF Campbell & Co. v. Board of Trustees of Port of Bombay, AIR 2006 Bom 162
15 Ibid
16 Hyman & Wife v. Nye & Sons, [L.R.] 6 Q.B.D. 685
17
Ibid
19
Contract Act, 1872, s. 164
20
Singer Mfg Co. v. Clark, (1879) 5 Ex D 37 at 42
21 Ibid
23
24 Ibid
25 Ram Gopal v. Gourishankar, 1950 SCC 702 : AIR 1951 SC 139
26
Sheikh Mohamed v. The British Indian Steam Navigation Co., (1908) 32 Mad 95
27 Shaw & Co. v. Symmons & Sons, [1917] 1 K.B. 799
28
29
Ibid
32
Ibid
33 MR Dhawan v. Madan Mohan, AIR 1969 Del 313
34 Ashby v. Tolhurst, [1937] 2 All ER 837
35
Ibid
36 R v. Viscount Hertford, 1681 Shower 172 : 39 ER 870
37 Shanti Lal v. Tara Chand, 1933 All 158
38
Ibid
39
Gour Chandra Mukherjee v. Andrew Yales Co-Op Credit Society Ltd., AIR 1977 Cal 336
40 Ibid
41
Hafiz Ullah v. G Montague, 156 IC 354
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42 Ibid
43 Chaturgun v. Shahzady, AIR 1930 Oudh 395
44
Ebrahim Ahmed Mehter v. Samuel Balthazar, AIR 1916 MB 93
45 Ibid
46 Isufalli Hassanlly v. Ibrahim Dajibhai, AIR 1921 Bom 191
47
Ibid
48 Spence v. Union Marine Insurance Co., (1868) LR 3 CP 427 at 437-38
49
Ibid
50
Kalyan Mal v. Kishen Chand, AIR 1919 All 102
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SCC Online Web Edition, © 2024 EBC Publishing Pvt. Ltd.

Page 1 Monday, April 29, 2024

3.1 JCLJ (2022) 824

Critical Analysis of the Duties of Bailor and Bailee

CRITICAL ANALYSIS OF THE DUTIES OF BAILOR AND BAILEE

Bailment can be classified as either gratuitous or non-gratuitous based

the bailment requirements to retain goods/move them/perform labour

Duty to disclose any flaw in the goods : Regardless of the kind of

Section 151 and 152 : Section 151 creates a “Uniform standard of

Section 154 : A custodial bailment prohibits the bailee from using

even if no deadline is specified for return.43 According to the ruling in

The following elements must be followed for the bailee to be

they were supposed to be; and

according to the court, is to deliver a breach of warranty notification.47

The bailee's obligation when the goods are combined by accident is

1 Indian Contract Act, 1872

3 Contract Act, 1872, s. 148

5 Contract Act, 1872, s. 150

6 Contract Act, 1872, s. 181

7 Contract Act, 1872, s. 148

8 Contract Act, 1872, s. 158

16 Hyman & Wife v. Nye & Sons, [L.R.] 6 Q.B.D. 685

18 Contract Act, 1872, s. 159

22 Contract Act, 1872, s. 151

25 Ram Gopal v. Gourishankar, 1950 SCC 702 : AIR 1951 SC 139

27 Shaw & Co. v. Symmons & Sons, [1917] 1 K.B. 799

30 Contract Act, 1872, s. 157

31 Contract Act, 1872, s. 163

33 MR Dhawan v. Madan Mohan, AIR 1969 Del 313

34 Ashby v. Tolhurst, [1937] 2 All ER 837

36 R v. Viscount Hertford, 1681 Shower 172 : 39 ER 870

37 Shanti Lal v. Tara Chand, 1933 All 158

43 Chaturgun v. Shahzady, AIR 1930 Oudh 395

46 Isufalli Hassanlly v. Ibrahim Dajibhai, AIR 1921 Bom 191

48 Spence v. Union Marine Insurance Co., (1868) LR 3 CP 427 at 437-38

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