RIGHTS AND DUTIES OF THE BAILOR AND THE BAILEE

Table of Contents

Introduction

In India, the concept of bailment is governed by the Indian Contract Act, of 1872. Bailment refers to a contractual relationship between two parties, the bailor and the bailee, where the bailor delivers goods to the bailee for a specific purpose and for a particular period of time.

What is Bailment?

Contract of bailment, according to Section 148 of the Indian Contract Act, 1872, is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is complete, be returned or otherwise disposed of according to the directions of the person delivering them.

Bailment is one of the types of special contracts under the Indian Contracts Act, of 1872. It is dealt with under Chapter IX which extends from Article 148 to Article 181. Bailment is originally derived from a French word that means to deliver.

The transfer of the possession of goods by the owner (the bailor) to another (the bailee) for a specific purpose.

There are two people in the relationship of bailment

Bailor:
A person with whom the ownership of the goods generally lies. However, it is not compulsory for him/her to be the owner. He/ She for a specific purpose temporarily delivers the goods
Bailee:
A person who has the temporary possession of the goods of others for a specific purpose

Rights and Duties of Bailor

Right to Compensation for Damages: The bailor has the right to claim compensation for any damages or loss suffered to the goods during the bailment period. If the bailee fails to take proper care of the goods or breaches the terms of the bailment, the bailor can seek compensation for the resulting damages
Right to Demand Return of Goods: The bailor has the right to demand the return of the goods from the bailee once the purpose of the bailment is accomplished or when the agreed-upon time period for the bailment expires. The bailee is bound to return the goods to the bailor or dispose of them as per the bailor’s instructions
Right to Terminate Bailment: The bailor has the right to terminate the bailment at any time before the purpose of the bailment is accomplished. However, the bailor must compensate the bailee for any loss incurred due to the premature termination of the bailment
Right to Sue for Breach of Bailment Contract: If the bailee fails to fulfill the terms of the bailment contract, the bailor has the right to sue for breach of contract and seek appropriate legal remedies, including damages for any loss suffered.
Termination of bailment by Bailee’s act inconsistent with conditions: A contract of bailment is voidable at the option of the bailor if the bailee does any act with regard to the goods bailed, inconsistent with the conditions of the bailment.

Duties of Bailor

Duty to Disclose Known Defects: The bailor has a duty to disclose any known defects or dangers associated with the goods to the bailee. This duty arises when the bailor is aware of any hidden defects in the goods that may pose a risk to the bailee or third parties, and the bailor must disclose such defects to the bailee.
Duty to Provide Clear Instructions: The bailor has a duty to provide clear instructions to the bailee regarding the purpose of the bailment, the intended use of the goods, and any specific conditions or limitations associated with the bailment. It is the bailor’s responsibility to communicate the purpose and scope of the bailment arrangement to the bailee.
Duty to Pay Necessary Expenses: The bailor has a duty to pay for the necessary expenses incurred by the bailee in the ordinary course of the bailment. This includes expenses such as storage charges, transportation costs, and reasonable costs for preserving the goods during the bailment period.
Duty to Indemnify the Bailee: The bailor has a duty to indemnify the bailee for any loss or damage suffered by the bailee due to defects in the goods that were not disclosed by the bailor, or due to the bailor’s failure to provide clear instructions regarding the bailment.
Duty to Allow Inspection: The bailor has a duty to allow the bailee to inspect the goods before accepting the bailment. This includes a duty to disclose any defects or damages in the goods that may not be apparent upon inspection. Failure to allow inspection or disclose defects may render the bailment voidable at the option of the bailee.
Duty to Bear Extraordinary Expenses: If the bailor requires the bailee to incur extraordinary expenses for the preservation of the goods, the bailor has a duty to reimburse the bailee for such expenses.
Duty to Take Back the Goods: If the bailment is for a specific time period or purpose, and the purpose is accomplished or the time period expires, the bailor has a duty to take back the goods from the bailee. Failure to do so may result in the bailor being liable for any damages or losses suffered by the bailee.
Duty to Compensate for Premature Termination: If the bailor terminates the bailment before the purpose is accomplished, the bailor has a duty to compensate the bailee for any loss suffered due to the premature termination of the bailment.

Rights of Bailee

Right of Possession: The bailee has the right to possess the goods that are the subject matter of the bailment. However, this right is limited to the extent of the purpose for which the goods were entrusted to the bailee. The bailee must use the goods only for the specific purpose for which they were delivered, and not for any other purpose without the consent of the bailor.
Right of Compensation for Expenses: The bailee is entitled to be reimbursed for any expenses incurred in the ordinary course of bailment. For example, if the bailee incurs expenses for the preservation or maintenance of the goods, the bailor is obligated to compensate the bailee for such expenses.
Right to Claim Compensation for Damages: If the goods are damaged due to any fault of the bailor or a third party, the bailee has the right to claim compensation for such damages. The bailee must take reasonable care of the goods, and if any damage occurs despite exercising due diligence, the bailee is not liable for such damages.
Right to Lien: The bailee has the right of lien, which means that the bailee can retain possession of the goods until the bailor pays the charges or remunerations due to the bailee for the services rendered in respect of the goods. However, the right of lien can only be exercised if the bailee has possession of the goods lawfully, and not if the goods were obtained through theft, fraud, or any other illegal means.
Right to Recover Compensation for Fault of Bailor: If the bailor does not disclose any faults in the goods that may affect the bailee’s possession or use of the goods, and the bailee suffers damages as a result, the bailee has the right to recover compensation for such damages from the bailor.

Duties of Bailee

Duty to Take Reasonable Care: The bailee is duty-bound to take reasonable care of the goods entrusted to him/her. The bailee must exercise the same level of care in preserving the goods as a person of ordinary prudence would exercise in similar circumstances. The bailee must take necessary precautions to prevent any damage or loss to the goods and must use them only for the specific purpose for which they were entrusted.
Duty to Return the Goods: The bailee has a duty to return the goods to the bailor or dispose of them as per the bailor’s directions once the purpose of the bailment is accomplished. The bailee must not keep the goods beyond the period of bailment or use them for any other purpose without the consent of the bailor.
Duty to Render Accounts: The bailee is required to render true accounts of all transactions related to the bailment and provide the bailor with information about the state and condition of the goods if requested by the bailor. The bailee must maintain proper records and be transparent in all dealings related to the bailment.
Duty not to Mix Goods: If the bailee has been entrusted with specific goods that are to be kept separate from the bailee’s own goods, the bailee has a duty not to mix those goods with his/her own goods. Mixing of goods may result in confusion and may make it difficult to identify and return the goods to the bailor.
Duty not to Make Unauthorized Use: The bailee is prohibited from making any unauthorized use of the goods that are the subject matter of the bailment. The bailee must use the goods only for the specific purpose for which they were entrusted and must not use them for personal gain or for any purpose without the consent of the bailor.
Duty to Compensate for Loss: If the bailee suffers any loss or damage to the goods due to his/her negligence, the bailee is liable to compensate the bailor for such loss or damage. The bailee must exercise due diligence and take necessary precautions to prevent any loss or damage to the goods.
Duty not to Deny Bailor’s Title: The bailee cannot deny the bailor’s title to the goods. The bailee must recognize and acknowledge the bailor’s ownership rights in the goods and must not claim any right or interest in the goods that is inconsistent with the bailor’s title.