BAILMENT
The
rightful possession of goods by one who is not the owner
Delivery of
goods by one person to another
For some
purpose
Upon a
contract that they
shall be returned or disposed off according to the directions of the person
delivering them
Delivery
of possession
(not mere custody)
Actual
delivery
Reaves V Capper (1838)
Coat taken
by waiter without being asked
Kalliaperumal Pillai V Visalakshmi (1938)
Melting of
jewels-half made jewels handed over to lady every evening-kept in box in the
goldsmiths room-key of box in possession of lady-jewels stolen one night.
Constructive
delivery
N R Srinivas Iyer V New India Insurance Company (1983)
Car
involved in accident-delivered on behalf of insurers to garage for
repairs-Insurance company is bailee and garage is sub-bailee-both held
responsible for the loss of car in a fire on the premises.
Atul Mehra Vs. Bank of
Maharashtra: (2003)
In this case, the locker room was robbed. The robbers had
used gas torches to open the lockers. The customer claimed that the bank had
been negligent in the construction of the strong room & while taking care
of the goods. The bank contended that it is not a bailee of the goods. The bank
does not maintain a record of the things stored in the locker.
Commissioner, Corporation
of Madras Vs. S. Alagaraj: (1995)
A person parked his scooter alongside the road in a space
earmarked by the corporation for parking, and paid Re. 1 to an attendant. The
scooter was stolen. Held that this was not a case of bailment. The person
collecting the fee, which is nominal, provides a facility of parking space. He
is not undertaking to ensure the safety of the vehicle.
Mahesh Enterprises Vs. Arun
Kumar Gumber: (2000)
A car was stolen from the car park of Delhi airport in 1993.
The contractor managing the car park had charged Rs. 10. The park had one entry
and an exit. It was held that this was a case of bailment. The basis for this
decision was that the contractor, under the agreement with the AAIA, was
supposed to provide for the safety of the parked vehicles.
Delivery
upon contract
In the
Indian context, delivery of goods should be made for some purpose and upon a
contract that when the purpose is accomplished the goods shall be returned to
the bailor.
It follows
that if a person’s goods go into the possession of another without contract,
there is no bailment
Ram Gulam V Government of UP (1950)
Theft-recovery
of ornaments by police – disappearance from police custody- State not
responsible
English law
recognises bailment without contract
This view
has been accepted by the Supreme Court
Basava K D Patil V State of Mysore (1977)
Theft-recovery
of ornaments by police – disappearance from police custody- State held
responsible
Goods to be
returned to the bailor (or a third party if bailor so directs)
Bailment of
goods is always made for some purpose and is subject to the condition
that when the purpose is accomplished the goods will be returned
to the bailor or disposed of according to his mandate.
DUTIES OF A
BAILOR
Duty
of Gratuitous Bailor
The bailor
is bound to disclose to the bailee faults in the goods bailed, of which
the bailor is aware.
Duty
of Bailor for reward
The bailor
is responsible for such damage, whether he was or was not aware of the
existence of such faults in the goods bailed.
Reed V Dean (1949)
Plaintiff
hired motor-launch from defendant for picnic on the river Thames-caught
fire-fire fighting equipment on board was out of order-defendant held liable
for injury and loss.
DUTIES OF A BAILEE
Duty
of reasonable care*:
In all
cases of bailment**, the bailee
is bound to take as much care of the goods bailed to him as a man of
ordinary prudence would, under similar circumstances take, of his own goods
of the same bulk, quality and value as the goods bailed.
*Care which the nature and quality of
the articles requires
**Whether gratuitous or for reward
R. S. Deboo v M. V. Hindlekar, (1995).
The Hindelkar’s clothes sent for dry
cleaning-liability in case of loss: 20 times laundering charges or half of the
value of unreturned articles-expensive clothes destroyed in fire-Questions:
·
whether
terms & conditions on the reverse of a receipt form part of the
contract ?
·
whether
non return of the article entrusted is prima facie proof of negligence?
·
Can
bailee insure goods as well as claim from insurer?
Deboo, the dry cleaner, had an insurance policy
for the factory, and he got the insurance amount. However, the dry-cleaner
refused to reveal the details to Hindlekar, even after the latter served legal
notices on him. Held that the bailee was merely a trustee for the insurance
amount obtained in respect of goods belonging to the bailors. No bailee is
entitled to unjustly enrich himself by retaining the insurance amount recovered
by the bailee in respect of the bailors articles. Lower courts estimate of
damages of Rs.3,560 was upheld.
N R Srinivas Iyer V New India
Insurance Company (1983)
Questions: Whether garage was repairing car on
behalf of Iyer & Insurance company was reimbursing on behalf of Iyer? If
not, was the garage sub bailee? When the
car was in the custody of sub bailee did he take reasonable care? Garage owner
failed to establish that it had taken care.
The courts have recognised the right of the
owner against the sub-bailee.
Non
Contractual Cases:
State of Gujarat v Memon Mahomed
Haji Hasan (1965):
Seizing of trucks by customs-trucks left in
open space-parts of truck,tyres & wheels pilfered-customs raise contention
that as seizure was lawful there could be no liabilities on law enforcement
agency-bailment only under contract-contention was that the siezure wasn’t
final -Whether owner had the right to demand the property siezed or its value?
Govt became liable to return the goods, the owner had the right either to
demand property siezed or its value....
Trustee of the Port of Bombay v
Premier Automobiles Ltd (1981):
Imported machinery-port trust employees
negligent while landing & transfering to warehouse-machine falls of trolley
& is damaged-Port Trust Act had given immunity to the Board & its
employees from liability in torts-Board contented that it had no contract with
PAL; Board was performing a function vested in it by law-can bailment arise out
of possession?
Duty
not to make unauthorised use:
If the
bailee makes any use of the goods bailed which is not according to the
conditions of bailment, he is liable to make compensation to the bailor for any
damage arising to the goods from or during such use of them
A contract
of bailment is avoidable at the option of the bailor, if the bailee does
any act with regard to the goods bailed, inconsistent with the condition of the
bailment.
Duty
not to mix:
Bailee
should maintain the separate identity of the bailor’s goods.
Duty
to return:
Return or
deliver the goods according to the bailor’s direction, without demand, as soon
as the term for which they were bailed has expired, or the purpose for which
they are bailed has been accomplished.
Duty
not to set up the defence of jus tertii:
That is
to say, that the goods belong to a third person.
(Even if
there is a person who has a better title than that of the bailor)
The third
person may apply to the court to prevent the bailee from returning the goods to
the bailor & to have the question of title decided.
Exception:
Juggilal Kamalapat Oil Mills V
Union of India (1976)
Oil consigned with Railways Kanpur to
Calcutta-Reaches Calcutta intact-Sender instructs railways to bring it back to
Kanpur-Before formalities are completed oil seized by Food Inspector-found
adulterated-destroyed under orders of High Court-Bailee not liable where
subject matter is taken away from him by authority of law.
Duty
to return increase:
Bailee is
bound to return to the bailor the natural increases or profits accruing to the
goods during the period of bailment.
Finder of Goods:
Finder may
sue for specific reward offered.
Finder
may retain the goods until he receives the reward
Finder has no
right to sue the owner for compensation of trouble and expense
voluntarily incurred by him to preserve the goods & to find the owner.
But he
may retain the goods against the owner until he receives such compensation
Finder
of thing commonly on sale may sell it:
If the
owner cannot with reasonable diligence be found,
Or if he
refuses, upon demand, to pay the lawful charges of the finder:
·
When the thing is in danger of perishing or of losing a greater part of
its value
·
When the lawful charges of the finder, in respect of the thing found,
amount to two-thirds of its value
Right
to compensation:
If the bailor has no right to bail the goods,
or to receive them back or to give directions respecting them and the bailee is
exposed to some loss
Right
to necessary expenses or remuneration
Right
of lien:
Particular
Lien
General
Lien (exercised by Bankers, Factors, Wharfingers, Attorneys of High Court, Policy Brokers)
Right
to sue
If a third
person wrongfully deprives the bailee of the use or possession of the goods
bailed
PLEDGE
The bailment of goods as security for payment of debt or
performance of a promise.
Pledge is a special kind of bailment
The chief basis of distinction is the object of the contract
Bailment is to provide a security for a loan or for the
fulfillment of an obligation
Bailor is called the pawnor
Bailee is called the pawnee
Delivery of possession is a necessary element in the
making of a pawn
Delivery may be actual or constructive
Delivery of documents of title is equally effective to
create a pledge
Morvi
Mercantile Bank V Union of India (1965)
Goods consigned with
railways-consignor endorsed railway receipts to bank against advance of
20000-goods lost in transit-bank sues railways for actual worth 35500-trial
court rejects-High Court allows 20000-Supreme court held that endorsing railway
receipt is a pledge-Pledgee will have the same remedies as the owner of goods.
Pledge by hypothecation
Bank
of Chittor V Narasimbulu (1966)
Cinema projector &
accessories pledged with bank-bank allowed property to remain with pledgers
since they formed the equipment of a running cinema-pledgers sold the
machinery-held there was constructive delivery.
Pledge is a conveyance pursuant to a contract
Delivery and advance need not be simultaneous
Pledge may be perfected by delivery after the advance is
made
Delivery may be made before or in contemplation of an
advance
Rights of the
Pawnee
Right of retainer:
Until dues are paid (interest & expenses)
Right to extraordinary expenses:
Expenses incurred for the preservation of the goods
No right of retainer, he can only sue to recover
Right of sale when pawnor defaults:
After giving pawnor reasonable notice of sale
If proceeds are less than the amount due, pawnor is still
liable to pay the balance & if proceeds are greater than the amount due,
the pawnee shall pay over the surplus to the pawnor