Duties and Rights of Bailor and Bailee in a Contract of Bailment

A contract of bailment establishes a relationship between two parties when a person entrusts one’s property temporarily to another without intending to give up the ownership over the property. The person who is entrusting one’s property is called the Bailor and another person who is at the receiving end is called the Bailee. Definition of Bailment is given under Section 148 of the Indian Contract Act 1872[1]. The bailor and bailee in a Bailment contract have certain rights and duties.  

Duties of Bailor

  • The bailor in all the circumstances has to disclose all the faults and issues of the goods bailed to the bailee and if they aren’t disclosed then the bailor will be held liable for any liability arising out of such undisclosed faults. In non-gratuitous bailments[2], a bailor also can be held liable for such faults he was not aware of. Section 150 of the ICA[3] describes the same.    

Duties of Bailee

  • The most important duty of the bailee is to take reasonable care of the goods. Bailee has an obligation to protect the goods in all the circumstances as if the owner would do and cannot be held liable when damage takes place even after the due care taken by the bailee. This is called as the ‘Uniform Standard of Care’ mentioned under Section 151 and 152 of ICA.
  •  A bailee cannot use the goods in such a way for which he has no authorisation or is inconsistent according to the conditions of the bailment agreed upon. If he does so, then he will be held strictly liable for any damage arising out of such use and such bailment becomes voidable. The same is mentioned in Section 154 and 153 of the ICA.
  • The bailee has a duty to not mix the goods bailed with any other goods or else he would be held liable for the expenses or losses arising out of such act under Section 156 and Section 157 of ICA. But the same can be done with the consent of the bailor where both of them have a proportionate interest in such mixture as mentioned in Section 157 of ICA.
  • As per Section 163 of ICA, unless there is any condition otherwise in the contract, the bailee has the duty to return any increase or any profit arising out of the goods bailed to the bailor.   
  • After the completion of the purpose of bailment, the bailee has the duty to return or deal with the bailed goods according to the directions of the bailor.

Rights of Bailor

  • If a bailee acts in a way which is inconsistent or deviates from the conditions of the bailment, then the bailor can terminate the contract
  • In a gratuitous bailment, the bailor has the right to claim for the return of the bailed goods whenever he wants to even when there is a time period in the bailment, but if his demand is costing the bailee over the benefits received from the bailed goods, then the bailor has to protect him from such a damage and the same is given in Section 159 of ICA.
  • If a third party interferes with the possession of the bailed goods of the bailee and injured or damages the goods then the bailor can sue the wrongdoer.

Rights of Bailee

  • According to Section 166 of ICA, if the bailor has no title to the bailed chattel then in good faith, the bailee is allowed to deliver it to the bailor. And Section 167 says that a bailee can stop the delivery of the bailed goods back to the bailor when a third party comes to claim the title to the goods and the bailee can approach the court for deciding the title of the goods.
  • According to section 180 of ICA, a bailee has the right to sue a third party if he deprives the bailee of the bailed goods. The possessor of the goods, as if he was the owner, can sue any third person if he takes away the bailed goods from the bailee’s possession or inflicts a wrong upon the goods.
  •  The bailee has the right to retain the possession of a good, when the bailor defaults the payment of any compensation, remuneration or expenses incurred to the bailee while improving or maintaining such good and that is called ‘particular lien’ and when more than one good is detained by the bailee for receiving any amount from the bailor then that is called as general lien. Particular lien can be availed by any bailor but general lien can only be used by few kinds of bailors as per the statute. The principle is mentioned under Section 170 and 171 of the Indian Contract Act 1872.

[1] Indian Contract Act, 1872, No. 9, Acts of Parliament, 1872 (India).

[2] In a non-gratuitous bailment, there is a consideration of benefit between both the bailor and bailee.

[3] Short form for Indian Contract Act, 1872.

Aishwarya Says:

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