Discussing Contract of Bailment and Rights of the Bailee

INTRODUCTION

A contract of bailment is a legal agreement in which the owner of goods, known as the bailor, temporarily transfers possession of those goods to another person, the bailee, for a specific purpose. This transfer is made under the condition that the goods will either be returned to the bailor or disposed of according to their instructions once the purpose is completed. The key elements of a bailment include the delivery of possession of goods, the purpose for which the goods are transferred, and the bailee's obligation to return the goods or act as instructed by the bailor after the purpose is achieved. The contract of bailment can be either express or implied, depending on the circumstances. Common examples of bailment agreements include leaving a car with a valet, storing goods in a warehouse, or giving a vehicle to a repair shop for servicing. It is important to note that bailment involves the transfer of possession only, not ownership, of the goods.

FINDER

A finder of goods is a bailee thereof and as such bound by the duty of reasonable care.[i] He does not have the right to sue the owner for compensation for trouble and expense voluntarily incurred by him to preserve the goods and to find out the owner, as per Section 168 which states that “the finder of goods has no right to sue the owner for compensation for trouble and expense voluntarily incurred by him to preserve the goods and to find out the owner, but he may retain the goods against the owner until he receives such compensation; and where the owner has offered a specific reward for the return of goods lost, the finder may sue for such reward, and may retain the goods until he receives it.” Sections 168 and 169, however, protect the interest of a finder in two ways. Section 168 allows the finder to retain the goods against the owner until he receives compensation for trouble and expense. Further, where the owner has offered a specific reward for the return of the goods lost, the finder may sue for such reward, and may retain the goods until he receives it. Furthermore, as per Section 169, when a thing which is commonly the subject of sale is lost, if the owner cannot with reasonable diligence be found, or if he refuses upon demand, to pay the lawful charges of the finder, the finder may sell it—

1. when the thing is in danger of perishing or of losing the greater part of its value, or
2. when the lawful charges of the finder, in respect of the thing found, amount to two-thirds of its value.

RIGHTS OF BAILEE

1. Right to compensation [Section 164]

If the bailor has no right to bail the goods, or to receive them back or to give directions respecting them and consequently the bailee is exposed to some loss, the bailor is responsible for the same. This is provided under Section 164 which states that “the bailor is responsible to the bailee for any loss which the bailee may sustain by reason that the bailor was not entitled to make the bailment, or to receive back the goods, or to give directions respecting them.”

2. Right to expenses or remuneration [Section 158]

A bailee is entitled to recover his agreed charges. But where there is no such agreement at all, Section 158 comes into play. The section states that where, by the conditions of the bailment, the goods are to be kept or to be carried, or to have work done upon them by the bailee for the bailor, and the bailee is to receive no remuneration, the bailor shall repay to the bailee the necessary expenses incurred by him for the purpose of the bailment. The American law is also the same wherein if the bailment is gratuitous and the bailee is in no way benefited, the bailor has to bear the expenses, if any, of the bailee for keeping the chattel. It is akin to the lien of warehouseman for claiming charges for the preservation of the goods.[ii]

3. Right of lien [Sections 170 – 171]

If the bailee’s lawful charges are not paid he may retain the goods. The right to retain any property until the charges due in respect of the property are paid, is called the right of lien. Lien is in its primary sense a right in one man to retain that which is in his possession belonging to another until certain demands of the person in possession are satisfied. In this primary sense it is given by law and not by contract. Lien is of two kinds, namely:

1. Particular Lien [Section 170]

As a general rule a bailee is entitled only to particular lien, which means the right to retain only that particular property in respect of which the charge is due. This right is provided for in Section 170 of the Act which states that where the bailee has, in accordance with the purpose of the bailment, rendered any service involving the exercise of labour or skill in respect of the goods bailed, he has, in the absence of a contract to the contrary, a right to retain such goods until he receives due remuneration for the services he has rendered in respect of them. Thus, the right is available subject to certain important conditions. The foremost among them is that the bailee must have rendered some service involving the exercise of labour or skill in respect of the goods bailed.[iii] Further, it has been frequently pointed out that the labour or skill exercised by the bailee must be such as improves the goods. Secondly, the labour or skill must have been exercised in accordance with the purpose of the bailment and the terms of the contract.[iv] Thirdly, only such goods can be retained on which the bailee has bestowed trouble and expense, he cannot retain any other goods belonging to the bailor which are in his custody.[v] It is this element of ‘particular lien’ which distinguishes it from ‘general lien’.

1. General Lien [Section 171]

The right of ‘general lien’, as provided for in Section 171, means the right to hold the goods bailed as security for a general balance of account. The right of particular lien entitles a bailee to detain only that particular property in respect of which charges are due. But general lien entitled the bailee to detain any goods bailed to him for any amount due to him whether in respect of those goods or any other goods. Section 171 states that “Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect.”

4. Right to Sue

Section 180 enables a bailee to sue any person who has wrongfully deprived him of the use or possession of the goods bailed or has done them any injury.[vi] The bailee’s rights and remedies against the wrongdoer are just the same as those of the owner. An action may, therefore, be brought by the bailee or the bailor. “Whatever is obtained by way of relief or compensation in any such suit shall, as between the bailor and the bailee, be dealt with according to their respective interests.”[vii] Section 181 provides that “whatever is obtained by way of relief or compensation in any such suit shall, as between the bailor and the bailee, be dealt with according to their respective interests.”

CONCLUSION

The contract of bailment is a fundamental legal concept that establishes the transfer of possession of goods from the bailor to the bailee for a specific purpose, with the condition that the goods will either be returned or disposed of as instructed. The legal framework governing bailment includes key rights and obligations for both parties involved. The rights of a bailee include the right to compensation, recovery of necessary expenses, a lien (both particular and general), and the ability to sue if their possession is wrongfully deprived. Additionally, the laws surrounding finders of goods protect their interests while ensuring fairness and clarity between the finder, bailor, and owner. Understanding these legal provisions provides clarity on the responsibilities and protections available under a bailment agreement, ensuring that the contractual relationship is fair and equitable for all parties involved. [i] Isaack v. Clark, (1615) 2 Bulstr 306. [ii] Willington on Contracts, as cited in Ramachandran, The Law of Contract in India, (vol. III), 2266. [iii] Bevan v. Waters, (1828) 3 C & P 520. [iv] Eduljee v. Café John Bros, ILR 1944 Nag 37. [v] Chase v. Westmore, (1816) 15 M&S 180. [vi] Karnataka Electricity Board v. Halappa, (1987) 1 TAC 451. [vii] Morvi Mercantile Bank Ltd. v. Union of India, AIR 1965 SC 1954.