Bailment

&
pledge
MANISH SHARMA
• A delivers a piece of cloth to the tailor to be
stitched into a suit.
• A lends a book to B to be returned after
examination.
• A sells certain goods to B who leaves them in A ‘s
possession.
• An insurance company places a damaged insured
car of A in possession of R, a repairer .
• E’s ornaments having been stolen and recovered
lying in Police custody.
 Bailment and Pledge
What is Bailment?
• Section 148 defines Bailment as:
“The delivery of goods by one to another
person for some purpose, upon a contract
that they shall, when the purpose is
accomplished, be returned or otherwise
disposed of according to the directions of
the person delivering them.” The person
delivering the goods is called the ‘Bailor’,
and the person to whom goods are
delivered is called the ‘Bailee’.
 Bailment & pledge
• Section 148 of indian contract act 1872
• Delivery of goods by 1 person to another for
some purpose
• Contract to return after use or to dispose as
asked by the person who delivered the goods
• Bailor: who gives
• Bailee : who takes
• Bailment: transaction
 Examples
• Hiring a bicycle
• Giving cloth to a tailor
• Delivering watch for repair
 Essentials of Bailment
1. Goods: Bailment can be effected only with
respect to goods.
2. Delivery: Delivery of goods by one person to
another is essential.
– ‘Delivery’ includes:
– Physical delivery
– Constructive delivery
– Symbolic delivery
 Essentials of Bailment
3. To be returned
– Without demand unless agreed otherwise.
4. In specie
– i.e., the same goods are to be returned and
not the equivalent.
– including any accretion, e.g., bonus shares,
calf born to a cow.
 Kinds of bailment
Kinds of bailment Based on benefit:
Bailment for the exclusive benefit of :
1] bailor: leaving goods in safe custody without
paying
2] bailee :a loan of some article like a pen
3] mutual benefit: contracts for hiring, repair
,etc
 Kinds of bailment:
• Based on reward:
1] Gratuitous bailment: neither bailor nor bailee
is entitled for remuneration, example: lending a
book to a friend
2] Non-gratuitous bailment: bailment of reward:
either bailee or bailor is entitled to a
remuneration , example: hire, tailor, etc
 Duties of bailor
• To Disclose faults in goods bailed [S.150]
• To repay the necessary expenses [S.158]
• To indemnify the bailee [S.164]
• Liability on premature breach of
bailment[S.159]
 Duties of Bailor
1. To disclose faults in goods
– Only known faults where bailment is
gratuitous.
– All faults including not known but
existing at the time of bailment in case
of non-gratuitous bailment.
 Duties of Bailor
2. To bear expenses
– Gratuitous Bailment: All expenses – ordinary
or extra-ordinary.
– Non-Gratuitous Bailment: Only extra-ordinary
expenses.
3. To indemnify for loss caused because of
defective title.
 Duties of bailee:
• Take reasonable care of goods[S.151]
• Not to make unauthorized use of goods[S.154]
• Not to mix goods with his own goods[S.155-
157]
• Duty to return goods[S.160&161]
• Not doing any act inconistent with terms of
bailment[S.153]
• Returning any profit [S.163]
 Duties of Bailee
1. To take care of the goods bailed
– As much care as a man of ordinary
prudence will take in respect of his
own goods of the same nature and
value.
2. Not to make unauthorized use of
goods
 Duties of Bailee
3. Not to mix bailor’s goods with his
own/other bailor’s.
• If does, then:
– Where goods can be separated
• Bailee to bear cost of separation.
– Where goods can not be separated
• Bailor to be compensated for loss.
4. To return the goods in specie
 Difference between sale & bailment
• Ownership transferred?
• Buyer under no obligation to return goods?
 Rights of bailee
• Right to compensation for loss on account of fault
in goods bailed[S.150]
• Right to receive necessary expenses[S.158]
• Right against premature termination of
bailment[S.159]
• Right to compensation in case of defective
title[S.164]
• Delivery of goods to one of the joint
owners[S.165]
• Right against third parties
 Rights of bailor
• Right of indemnity for losses due to negligence by
bailee[S.152]
• Termination of bailment on inconsistent use by
the bailee[S.153]
• Compensation for unauthorised use by the
bailee[S.154]
• Compensation when the bailee mixes the goods
bailed with own goods [S.155]
• Right of return of goods back[S.160]
• Right to profit from goods bailed[S.163]
 Termination of bailment
• Doing an act inconsistent with terms of
bailment[S.153]
• At desire of the bailor in case of gratuitous
bailment[S.159]
• On expiry of period[S.160]
• On accomplishment of object[S.160]
• Death of the bailor or bailee [S.162]
• Section 172

“Pledge is the bailment of

goods as security for
payment of debt or
performance of a
promise.”
 PLEDGE OR PAWN :
• Bailment of goods as security for payment of
debt or performance of a promise :PLEDGE
• Bailor: PAWNER
• Bailee: PAWNEE
Example: A borrows Rs.100 from B & keeps his
watch
as security : pledge
 Difference between bailment &
pledge:
• PURPOSE: security? ; repairs?
• RIGHT OF SALE:
sale on default?
no right to sale?
• RIGHT OF USING THE GOODS: no right?
 Rights of Pawnee:
• Right of retainer{S.173}: right to retain goods
until dues paid
• Right of transfer for subsequent
advances:{S.174}: on lending money to same
debtor without further security
• right to retain earlier goods extends Right to
extraordinary expenses {S.175} Right to use
the pawner or sell the goods on default.
 Rights of Pawner
Rights of Pawner:
Enforcement of pawnee’s duties Defaulting
pawnor’s right to redeem