Introduction
Bailment is a legal relationship where one person (the bailor) delivers goods to another person (the bailee) for a specific purpose, upon an agreement that the goods will be returned or disposed of as per the bailor’s instructions once the purpose is fulfilled. Let’s delve deeper into the creation, types, and legal aspects of bailment.
Manner of Creation of Contract of Bailment
According to Section 148 of the Indian Contract Act, of 1872, a bailment occurs when:
- There is delivery of goods by one person to another.
- The delivery is for a specific purpose.
- There is an agreement that the goods will be returned or disposed of according to the bailor’s instructions.
Bailment can be created through an express agreement between the parties or can be implied based on the circumstances.
Delivery of Goods
Delivery of goods is essential to establish bailment. It involves the transfer of possession and control of the goods from the bailor to the bailee. Mere custody of goods without the right to possession does not constitute bailment. For instance, if A leaves his coat with a restaurant’s waiter, the waiter becomes a bailee as he assumes control over the coat on A’s behalf.
Types of Bailment
Gratuitous Bailment
This type of bailment occurs without any consideration between the parties. The bailee agrees to take care of the goods but does not receive any payment in return.
Non-Gratuitous Bailment
In this type, the bailee receives some form of compensation or benefit for holding the goods. It could involve payment for storage, transportation, or other services related to the goods.
Legal Essentials of Bailment
Agreement
There must be a mutual agreement between the bailor and the bailee regarding the terms of bailment.
Delivery
The delivery of goods must be voluntary and in accordance with the terms agreed upon.
Possession
The possession of the goods remains with the bailor, and the bailee only gains the right to use them as agreed.
Purpose
Goods must be delivered for a specific purpose, whether it’s safekeeping, transportation, repair, or another designated use.
Martin v. London County Council (1947)
In this case, jewellery was stolen from a hospital patient who had entrusted it to the hospital’s authority. The court held the hospital liable as a bailee for failing to take reasonable care of the jewellery.
Kaliaperumal v. Visalakshmi (2010)
The court emphasized that the bailor must ensure proper possession of goods by the bailee. Failure to do so can absolve the bailee of liability.
Conclusion
Understanding bailment is crucial for both individuals and businesses involved in temporary transfers of goods. Whether it’s for safekeeping, transportation, or other purposes, knowing the legal framework helps protect the interests of both bailors and bailees. By adhering to legal principles and understanding their rights and duties, parties can avoid disputes and ensure smooth transactions under bailment agreements.
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FAQs About Bailment
1. What are the key differences between bailment and sale?
Answer: Bailment involves the temporary transfer of goods from one party (bailor) to another (bailee) for a specific purpose, with the understanding that the goods will be returned. In contrast, a sale is a permanent transfer of ownership of goods in exchange for consideration.
2. What are the duties of a bailee towards the goods bailed?
Answer: A bailee has several duties:
- To take reasonable care of the goods as a prudent person would with their own property.
- Not to make unauthorized use of the goods.
- Not to mix the bailed goods with their own.
- To return the goods to the bailor or dispose of them as instructed after the purpose of bailment is fulfilled.
3. Can a bailor terminate a bailment agreement before the agreed-upon time or purpose is completed?
Answer: Yes, a bailor can terminate a bailment agreement prematurely. In gratuitous bailments (without consideration), the bailor can demand the return of goods at any time. However, in non-gratuitous bailments (with consideration), the bailor may need to compensate the bailee for any losses incurred due to early termination, depending on the terms agreed upon.
Also Read: Types of Guarantees
Reference: Investopedia
