Contract of bailment and its essential elements

Table of Contents

BAILMENT AND ITS ELEMENTS

In common language we may understand bailment as an act in which, good is transferred for a certain period. The word bailment came from a French word ‘Bailer’ which means to deliver. It basically changes in possession and not in ownership. Blackstone dictionary defined Bailment as a contract in trust which can be either express or implied. Section 148 of the Indian Contract Act, 1872 defines the word bailment. When the purpose of transfer is accomplished, the good needs to be returned or disposed of according to the directions. The person who delivers the good is known as bailor and who receives the good is known as bailee. Bailment is different from sale.

In Bailment there is transfer of possession but not of ownership and in Sale there is transfer of both possession and ownership.
Bailment is concerned only with movable property but Sale deals with both movable and immovable property[1].
In Bailment, bailee must return the good or disposed as required but in Sale, buyer need not return the good as he/she bought it.
The object in Bailment is temporary but in Sale it is permanent.

Commercial Credit Corporation … vs Deputy Commercial Tax Officer[2], it was noted that in such cases, the property of the vehicle would remain with the petitioners and the bailment aspect alone would constitute the transaction, the option to buy would not be exercised; and in such cases there would definitely be no sale, even though there was an agreement granting an option to but which alone would not constitute a sale; and transactions in that from could not made within the meaning of the agreement. In passing, we can note that we read section 2(h) clarification (1) as referring to those hire purchase agreements that require a sale and in which this aspect of sale has been fruitful.

There are five essential elements of bailment. Section 149 of the Indian Contract Act, 1872 it states about how delivery is made to bailee.

MOVABLE PROPERTY

It is the first element of bailment. Goods in bailment involves every type of movable good. Now the question arises whether money can be considered as movable property. Money or legal tender are not to be bailed. The money deposited cannot be bailed as money doesn’t come under ‘goods’[3] and the same money is not returned to the client. Bailor should own the property or must be in possession.

TRANSFER OF GOODS/ DELIVERY OF POSSESSION

It is the second element of bailment. It is central to bailment. The goods are delivered by bailor to bailee for a specific period. The method of transfer of possession is immaterial. It means that it may be through lending, safe custody, or hire. The transfer of possession contract can be either express or implied. Bailee is entitled to Possessory Remedies against strangers including the bailor not only in contract but also in tort and criminal law. A custodian cannot be a bailee, he is merely a custodian. He only has a duty to take care of the good and not use it.

In Kaliaperumal Pillai v. Visalalakshmi Achi[4], Varadachariar, J stated that the provisions of sections 148 and 149 of the Contract Act to constitute a bailment, delivery is required. It is true that delivery can be made by doing something that has the effect of placing the goods in the hands of the intended bailee; but since the plaintiff herself takes away the key from that space, the mere leaving of the box in a room in the defendant’s house cannot amount to delivery within the scope of the provisions in section 149.

SPECIFIC PURPOSE

In a bailment contract purpose is important and the purpose should be lawful. Example X leaves a piece of cloth with Y, a tailor, without mentioning its purpose. There is no bailment between X and Y.

POSSESSION TO BE RETURNED

The transfer of possession is temporary only, it needs to be returned or disposed after the period ends. Even where the terms of the contract are silent about return, there is an implied contract in a bailment to return the articles in a reasonable time after the purpose is achieved.

In the State of Gujarat v. Memon Mahomed Haji Hasam [5], bailment is simply possession. The truck’s ownership was turned over to the defendant while the truck was parked in the defendant while the truck was parked in the defendant’s Parking Centre. The defendants received a receipt and paid Rs.3/- for a period of 24 hours for the safe keeping of the car. The defendant as bailee, who failed to deliver the vehicle back to the second plaintiff during the contractual period and have not shown to have exercised any prudent consideration for the safety of the truck, was responsible for their failure immediately at the time a bailment contract came into being.

UNDER THE CONTRACT

Legal responsibility comes from the facts that the chattel is delivered. Bailee’s duty is contractual obligations and originates only from the bailment contract and not independently. Distribution of goods is the consideration for a bailment contract.

Ultzen v. Nichols[6], to dine there the plaintiff went to the defendant’s restaurant. A waiter took the plaintiff’s coat from him when the plaintiff entered the restaurant, without being asked to do so and hung it on a rack behind the plaintiff. He realised that the cost was missing when the plaintiff decided to quit. It was held that as his servant had taken ownership of his coat, the defendant was the bailee of the coat and he was thus responsible for its loss due to his negligence.

[1] Section 12(36) of the General Clause Act, 1847 defines “movable property” as “Movable property shall mean the property of every description except immovable property”. Section 2(26) of the General Clause Act, 1847 defines immovable property as “Immovable property shall include land, benefits to arise out of the land, and things attached to the earth, or permanently fastened to anything attached to the earth”.

[2] Commercial Credit Corporation … vs Deputy Commercial Tax Officer, AIR 1958 Mad 561, (1958) IIMLJ 316, 1958 9 STC 599 Mad

[3] ‘Goods’ is defined as per Section 2 (7) of the ‘Act’ as. “Every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.”

[4] Kaliaperumal Pillai v. Visalalakshmi Achi [AIR 1938 Mad. 32]

[5] In the State of Gujarat v. Memon Mahomed Haji Hasam, AIR 1967 SC 1885

[6] Ultzen v. Nichols [(1894) 1 QB 92]

Author: Yashi Sharma,
Bennett University