Chapter 24: Bailment Legal Aspects of Business, 3 rd Edition

1. Chapter 24: BailmentLegal Aspects of Business, 3rd Edition

2. Bailment

3. Case: Goods and Contracts A person gives his furniture to a person to transport to his new house in another town. A person gives his jacket to a drycleaner. A company hires out public address system to a person organising a music function. What is common to the contracts?

4. … Cond A person gives his furniture to a person to transport to his new house in another town. (Carriage) A person gives his jacket to a drycleaner. (Service) A company hires out public address system to a person organising a music function. (hire)

5. Bailment Owner gives the custody and possession of his goods to another person as a part of the contract. The goods would need to be returned back to him.

6. Case: Lost Baggage An airlines had put up the terms to the intending passengers that in the case of loss of baggage, the airlines would compensate the passengers for the baggage at a standard rate of Rs. 300 per Kg. The passengers were advised to buy an insurance to cover additional loss. A passenger lost his baggage which weighed 15 Kgs. The Airlines gave him Rs. 4500. The passenger is demanding Rs. 12, 000, the full value of the lost baggage.

7. Case: Drycleaner A person gives his jacket to a dry cleaner. Would it be acceptable to the customer if the drycleaner did not return back the jacket by just saying, “Sorry, it is lost” or “It must have gone to another customer” or “It is misplaced”?

8. Summary The person to whom goods are given is responsible and must take care of the goods and return it back to the owner.

9. Case: Washing for Repair A person gave his washing machine for repairing to a shop. As the shop did not have space inside, it left the washing machine outside in its corridor. There was no security or attendant for guarding the premises. The washing machine was stolen. Is the shop responsible for the loss of the washing machine to the owner?

10. … Cond A person gave his washing machine for repairing. The shop had stored it properly and safely. However, an unprecedented rain created a deluge and all the washing machines in the shop as well as all the expensive testing equipment of the shop got damaged. Is the person responsible for the loss of the washing machine?

11. Summary The owner who gives his goods in called Bailor The person receiving the goods is called Bailee The giving of goods is called Bailment If the parties have provided on loss or damage to the goods, the terms would apply. In other cases, the bailee is responsible but not absolutely.

12. Section 148: Bailment 148. Bailment bailor and bailee defined.- A "bailment" is the delivery of goods by one person to another 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. …

13. … Cond … The person delivering the goods is called the "bailor". The person to whom they are delivered is called the "bailee ".

14. Section 152: Liability of Bailee Section 152. Bailee when not liable for loss, etc., of thing bailed.- The bailee, in the absence of any special contract, is not responsible for the loss, destruction or deterioration of the thing bailed, if he has taken the amount of care of it described in section 151.

15. Section 151: Degree of Care Section 151. Care to be taken by bailee.- 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.

16. Section 152 and 151 The bailee, in the absence of any special contract, is not responsible for the loss, destruction or deterioration of the thing bailed, if he has taken … (as much care of the goods … as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality and value…)

17. Summary of the Provisions 1. Is there any ‘special contract’? That is, have the parties provided on the bailment aspect itself. If yes, the terms will apply. If not 2. Was the extent of care adequate? Test: An owner of ordinary prudence would take care of his own goods, of the same bulk, quality and value as the goods bailed.

18. Case: Lost Courier Packet Ramesh sent a courier containing an expensive book. The courier company lost the packet. Ramesh had signed the customer’s request. The signed sheet had several terms. The terms were as follows: Relevant Terms 4. City Express will not provide any insurance coverage for any consignments sent, even if the value of the consignment is declared by the sender or required to be declared by City Express.

19. … Cond 5. The liability of City Express for any loss or damage to the shipment is limited to Rs. 100/- for each consignment. Further, City Express will not be responsible for any consequential losses.

20. R.S. Deboo v. M.V. Hindlekar

21. Facts R. S. Deboo: Drycleaner- M/s Leach and WaBomy Customer: Hindlekar and family There was a fire in the factory and the clothes got destroyed. The drycleaner offered to pay 20 times the drycleaning charges as this was stipulated on the back of the receipt limiting the liability of the drycleaner.

22. Judgement: High Court Terms and conditions printed on the reverse of a receipt issued by the owner of the laundry or any other bailee do not necessarily form part of the contract of bailment in absence of the signature of the bailer on the document relied upon. In absence of signature of the bailer on the document relied upon, the onus is on the bailee to prove that the attention of the bailer was drawn by the bailee to the alleged special conditions before the contract was concluded and the bailee had consented thereto expressly or by necessary implication as a contractual term.

23. … Cond It cannot be just assumed that the printed conditions appearing on the reverse of the receipt automatically become a contractual term or part of the contract of bailment. It is to be found on evidence in each case as to whether the alleged printed condition on the reverse of the receipt formed a part of the contract of bailment or not depending upon the conduct of the parties. ….

24. … Cond It is necessary for the Court to consider in each case as to whether 'the alleged special term' was reasonably and properly communicated by the bailee to the bailer and as to whether the bailer in fact assented thereto expressly or by necessary implication. (The Court did not consider this to be a ‘special contract’)

25. … Cond: On Reasonable Case The burden of proof is always on the bailee (dry cleaner) to prove that the bailee took reasonable care of the goods entrusted to him as a man of ordinary prudence would have exercised. … it is for the bailee to prove that the suit articles were in fact lost as a result of fire and there was no negligence on the part of the defendants (dry cleaner) which resulted in the goods being destroyed by fire. The question of negligence is always a question of fact or at the most a mixed question of fact and law.

26. … Cond In a case governed by Sections 151 and 152 of the Contract Act, the non-return of article … by itself is prima facie proof of negligence of the bailee. It is not for the bailer to lead positive evidence proving the negligence of the bailee in respect of unreturned articles entrusted by the bailer to the bailee. It is for the bailer to prove that the bailee is duly exempted from his liability to pay the reasonable amount of compensation for the value of the articles not returned or that his liability is restricted or reduced one and that the alleged stipulation is binding on the bailer under the law of the land.

27. … Cond: Insurance and Bailment If a bailee receives an insurance amount in respect of value of the goods bailed to him, the bailee is bound to account for the said insurance amount to the bailor as all such cases, the bailee is merely a trustee for the insurance amount obtained in respect of goods belonging to bailers. No bailee is entitled to unjustly enrich himself by retaining the insurance amount recovered by the bailee in respect of his customer's articles.

28. N.R. Srinivasa Iyer v. New India Assurance Co. Ltd. Madras

29. Facts Mr. Iyer’s car was insured by the New India Insurance. The car met an accident and was taken to P. S. N. Motors Ltd., Trichur for repairing. The insuarance company was intimated of the accident and that the car was given to the P. S. N. Motors for repair with a request to discharge its obligation under the policy of insurance. The P. S. N. Motors submitted an estimate to the insurance company.

30. … Cond After a several correspondence, the two settled on an estimate. Mr. Iyer was thus, informed: We have pleasure to inform you that the revised estimate of M/s. P. S. N. Motors Ltd., Trichur has been approved by our head office, and they have been advised to proceed with the repairs and send us their final bill together with the discharge voucher duly filled in and signed by you for making the payment.

31. … Cond Before the car could be delivered to Mr. Iyer, a fire occurred in the workshop of the PSN Motors and the car was destroyed. The garage was not insured. Is the insurance company bailee of Mr. Iyer’s car, on whose behalf the car has been sent to the garage?

32. Judgement: Supreme Court In a contract of insurance, there are mutual rights and obligations both of the Insurer and the Insured. Once the motor car is damaged it is the duty of the car owner to take it to nearest repair shop. This is done on behalf of the insurance company which pays for such removal as well as the repairs. … the Insurer took charge of the damaged car from the scene of accident and got it moved to the nearest repairer. The car virtually came into the custody of the Insurer and the repairer took the custody for and on behalf of the Insurer.

33. … Cond When the Insurer has the option to replace the Motor Car, it can take over the damaged car and the Insured is bound to submit to the same. If the Insurer on the other hand, exercised the option of repairing the car, it is entitled not merely to choose the repairer but also to determine the charges for repairs to be negotiated and settled between the Insurer and the repairer and the Insured has hardly anything to do with it.

34. … Cond: Sub-Bailee The Insurer became the bailee and the repairer may have been initially pointed out by the bailor but with whom the Insurer entered into negotiation, arrived at a contract and agreed to get the car repaired in discharge of an obligation under the contract of insurance. Therefore, for this additional reason the custody of the repairer is that of a sub-bailee.

35. … Cond: Morris Case "Once a man has taken charge of goods as a bailee for reward, it is his duty to take reasonable care; to keep them safe; and he cannot escape that duty by delegating it to his servant. If the goods are lost or damaged, whilst they are in his possession, he is liable unless he can show - and the burden is on him to show - that the loss or damage occurred without any neglect or default or misconduct of himself or of any of the servants to whom he delegated his duty."

36. … Cond When the car was in the custody of the sub-bailee, it was destroyed by fire that occurred in the repairer's workshop. The sub-bailee was bound to take the same care as a man of ordinary prudence would take in regard to his own goods of the same quality and value as was expected of the bailee. Now no evidence has been led by the defendants to explain what amount of care the bailee or the sub-bailee took in respect of the car. When the custody is of the bailee or the sub-bailee, the burden is on them to show how they handled the car.

37. State of Gujarat v. Memon Mahomed Haji Hasan

38. Facts Custom authorities had seized a truck and left it unattended for a long time in an open space while the case was pending. The parts of the car got pilfered.

39. Judgement: Supreme Court Bailment is dealt with by the Contract Act only in cases where it arises from a contract but it is not correct to say that there cannot be a bailment without an enforceable contract. … it is not necessary to incorporate it into the law of contract and to prove a consideration.

40. … Cond There can, therefore, be bailment and the relationship of a bailor and a bailee in respect of specific property without there being an enforceable contract. Nor is consent indispensable for such a relationship to arise. A finder of goods of another has been held to be a bailee in certain circumstances.

41. Trustees of the Port of Bombay v. Premier Automobiles Ltd.

42. Facts Premier Automobiles Ltd. imported machinery from Italy to Bombay. The Bombay Port Trust, under the Bombay Port Trust Act took charge of the goods on landing and took it to its warehouses from where the goods could be collected. While the machinery was being carried on a trolley by the employees of the Board, it fell down and got damaged. There was no contract between the Port Trust and Premier Ltd. The Board was performing a function vested in it by the law.

43. Judgement: Supreme Court It is well settled that the essence of bailment is possession. It is equally well settled that a bailment may arise, as in this case, even when the owner of the goods has not consented to their possession by the bailee at all…

44. … Cond A bailment is not therefore technically and essentially subject to the limitations of an agreement, and the notion of privity used cannot be introduced in an area where it is unnecessary, for bailment, as we have said, arises out of possession, and essentially connotes the relationship between a person and the thing in his charge. It is sufficient if that possession is within the knowledge of the person concerned. It follows that a bailment may very well exist without the creation of a contract between the parties and it essentially gives rise to remedies which, in truth and substance, cannot be said to be contractual.