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DAMODARAM SANJIVAYYA

NATIONAL LAW UNIVERSITY

Contracts II Project

TERMINATION OF BAILMENT

Submitted To:- Submitted By:-


Dr. C.H Lakshmi Maam Anshu Singh

(2014015)

1
ACKNOWLEDGEMENT

I would like to show sincere gratitude to all academic and administrative


staff of DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY
who extended their help in completion of project work.
Secondly I would also like to thank my parents and friends who helped me
a lot in finishing this project within the limited time.

CONTENTS

2
S.no. Chapters Pages
1 CHAPTER-1 5
Introduction

2 CHAPTER-2 6
Elements of Bailment
3 CHAPTER-3 8
Creation of Bailment
4 CHAPTER-4 9
Rights and Duties of Bailor

5 CHAPTER-5 12
Rights and Duties of Bailee
6 CHAPTER-6 15
Termination of Bailment

7 CHAPTER-7 18
Conclusion

8 CHAPTER-8 19
Bibliography

AIMS AND OBJECTIVE

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The researcher will try to review the rights of a bailor and bailee in case of termination of
bailment and on what grounds the bailment can be terminated. The researcher will also try
include relevant case laws.

SIGNIFICANCE OF THE STUDY

While doing this project. The researcher will come to know the grounds on which the contract of
bailment can be terminated and what are the remedies available to the bailor after the termination
of bailment.

RESEARCH METHODOLOGY

The research will be doctrinal in nature. The researcher will critically analyze the concept of
termination of bailment. The researcher will be referring to partnership Act and articles from
books and websites.

HYPOTHESIS

Bailment can terminated when bailee does an act which is inconsisitent with the terms of
bailment or at the desire of the bailor in case of gratuitous bailment. It can also be terminated on
the expiry of contract bailment or at the death of the bailor or bailee.

CHAPTER-1

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INTRODUCTION
BAILMENT
According to the Section 148 of Indian Contract Act, bailment is the delivery of goods by one
person to another. It is done for a specific purpose. The person to whom goods are given is called
the Bailee and the person who gives the goods is called bailor. To understand bailment imagine
that you are going to shift from an apartment to a house. Your lease will expires in three days,
and your new house will not be ready to move into for two weeks. As a result you need to
temporarily find a place to store your belongings. You ask a friend to store your items for two
weeks, and your friend agrees to do so. This arrangement is known as a bailment. The purpose of
the bailment depends upon the particular circumstances of the transaction. Generally, a bailment
occurs in order to either provide a benefit to the bailor or the bailee, though sometimes a benefits
provided to both parties. In the initial example, you would benefit from the bailment of your
possessions.1

Bailment is defined by the Section 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. The Explanation to the above Section
points out that delivery of possession is not necessary, where one person, already in possession
of goods, contracts to hold them as bailee.

Examples:-
(1) Safe-deposit, i.e., a bailment of goods by one person with another for safe custody. But,
however, if the key of the box or locker in which the goods are kept is retained by the depositor
in his own possession, the deal or transaction shall not be called a bailment.

CHAPTER-2

1 https://www.academia.edu/8751653/Contracts_Project

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ELEMENTS OF BAILMENT

The essential elements of a bailment are:

1. The bailor owns personal property or holds the right to possess it.

2. The bailor delivers exclusive possession of and control over the personal property to the
Bailee. 3. The Bailee knowingly accepts the personal property with the understanding that he
owes a duty to return the property, or to dispose of it, as directed by the bailor.2

POSSESSION: PHYSICAL CONTROL

In most cases, physical control is proven easily enough. A car delivered to a parking garage is
obviously within the physical control of the garage. But in some instances, physical control is
difficult to conceptualize. For example, you can rent a safe-deposit box in a bank to store
valuable papers, stock certificates, jewelry, and the like. The box is usually housed in the banks
vault. To gain access, you sign a register and insert your key after a bank employee inserts the
banks key. You may then inspect, add to, or remove contents of the box in the privacy of a small
room maintained in the vault for the purpose. Because the bank cannot gain access to the box
without your key and does not know what is in the box, it might be said to have no physical
control. Nevertheless, the rental of a safe-deposit box is a bailment. In so holding, a New York
court pointed out that if the bank was not in possession of the box renters property it is difficult
to know who was. Certainly [the renter] was not, because she could not obtain access to the
property without the consent and active participation of the defendant. She could not go into her
safe unless the defendant used its key first, and then allowed her to open the box with her own
key; thus absolutely controlling [her] access to that which she had deposited within the safe. The
vault was the [companys] and was in its custody, and its contents were under the same
conditions.Lockwood v. Manhattan Storage & Warehouse Co., 50 N.Y.S. 974 (N.Y.
1898). Statutes in some states, however, provide that the relationship is not a bailment but that of
a landlord and tenant, and many of these statutes limit the banks liability for losses.

2 http://legal-dictionary.thefreedictionary.com/bailment

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POSSESSION: INTENT TO POSSESS

In addition to physical control, the bailee must have had an intent to possess the goods; that is, to
exercise control over them. This mental condition is difficult to prove; it almost always turns on
the specific circumstances and, as a fact question, is left to the jury to determine. To illustrate the
difficulty, suppose that one crisp fall day, Mimi goes to Sally Janes Boutique to try on a jacket.
The sales clerk hands Mimi a jacket and watches while Mimi takes off her coat and places it on a
nearby table. A few minutes later, when Mimi is finished inspecting herself in the mirror, she
goes to retrieve her coat, only to discover it is missing. Who is responsible for the loss? The
answer depends on whether the store is a bailee. In some sense the boutique had physical control,
but did it intend to exercise that control? In a leading case, the court held that it did, even though
no one said anything about guarding the coat, because a store invites its patrons to come in.
Implicit in the act of trying on a garment is the removal of the garment being worn. When the
customer places it in a logical place, with the knowledge of and without objection from the
salesperson, the store must exercise some care in its safekeeping. Bunnell v. Stern, 25 N.E. 910
(N.Y. 1890).

Now suppose that when Mimi walked in, the salesperson told her to look around, to try on some
clothes, and to put her coat on the table. When the salesperson was finished with her present
customer, she said, she would be glad to help Mimi. So Mimi tried on a jacket and minutes later
discovered her coat gone. Is this a bailment? Many courts, including the New York courts, would
say no. The difference? The salesperson was helping another customer. Therefore, Mimi had a
better opportunity to watch over her own coat and knew that the salesperson would not be
looking out for it. This is a subtle distinction, but it has been sufficient in many cases to change
the ruling. Wamser v. Browning, King & Co., 79 N.E. 861 (N.Y. 1907).

CHAPTER-3

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CREATION OF BAILMENT

A bailment is created by an express or implied contract. Whether the elements of a bailment have
been fulfilled is determined by examining all the facts and circumstances of the particular
situation. For example, a patron goes into a restaurant and hangs his hat and coat on an
unattended rack. It is unlikely that this created a bailment, because the restaurant owner never
assumed exclusive control over the hat and coat.

However, if there is a checkroom and the hat and coat are checked with the
attendant, a bailment will arise. If a customer parks her car in a parking lot, keeps the keys, and
may drive the car out herself whenever she wishes, a bailment has not been created. The courts
treat this situation as a lease of space. Suppose, however, that she takes her car to a parking
garage where an attendant, after giving her a claim check, parks the car. There is a bailment of
the car because the parking garage has accepted delivery and possession of the car. However, a
distinction is made between the car and packages locked in the trunk. If the parking garage was
not aware of the packages, it probably would not be a Bailee of them as it did not knowingly
accept possession of them. 34

CHAPTER-4
3 http://legal-dictionary.thefreedictionary.com/bailment

4 http://www.lawteacher.net/free-law-essays/criminal-law/the-concept-of-bailment-
generally.php

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DUTIES OF BAILOR

1. TO DISCLOSE FAULTS IN THE GOODS


The bailor is bound to disclose to the Bailee faults in the goods bailed, of which the bailor is
aware and which materially interfere with the use of them or expose the Bailee to extraordinary
risks. If he does not make such disclosure, he is responsible for damage arising to the
Bailee directly from such faults.
If the goods are bailed for hire, the bailor is responsible for such damage whether he was or was
not aware of the existence of such faults in goods bailed.5

Examples
(1) A lends a horse, which he knows to be vicious, to B. He does not disclose the fact that the
horse is vicious. The horse runs away. B is thrown and injured. A is responsible to B for
damage sustained.

2. LIABILITY FOR BREACH OF WARRANTY AS TO TITLE.

The bailer is responsible to the Bailee for any loss which the Bailee may sustain by reason that
the bailer was not entitled to make the bailment, or to receive back the goods or to give direction
respecting them. (Section 164).
Example A gives Bs horse to C without Bs knowledge and permission. B sues C and receives
compensation. A, the bailer, is responsible to make good this loss to C, the Bailee.6

5
http://www.academia.edu/3986974/THE_LIABILITY_OF_BAILEES_IN_CONTRACTS_OF_
BAILMENT

6 http://hanumant.com/Bailment.html

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1. TO BEAR EXPENSES IN CASE OF GRATUITOUS BAILMENTS.

Regarding bailments under which Bailee is to receive no remuneration, (Section 158) provides
that in the absence of contract to the contrary, the bailer must repay to the Bailee all necessary
expenses incurred by him for the purpose of the bailment.
Example:-

A horse is lent for a journey. The ordinary expenses like feeding the horse etc., shall be borne by
the Bailee but in case horse falls ill, the money spent in his treatment will be regarded as
an extraordinary expenditure and borne by the bailer.
1. In case of non-gratuitous bailments, the bailer is held responsible to bear only extraordinary
expenses.

LIEN
(Section 170-171). Another right of Bailee is the right of lien. Lien is right of one person to retain
that which is in his possession, belonging to another, until some debtor claim is paid. Lien, thus,
presupposes two things:
(1) The person vested with the right of lien is in possession of goods or securities in the ordinary
course of business;
(2) The owner (bailer in this case) has a lawful debt due or obligation to discharge to the person
in possession of the said goods or securities (Bailee in this case). Since, lien is available only
until the debt or claim is satisfied, once the debt is satisfied or obligation discharged, the
right of lien is extinguished. The property so retained has, then, to be returned to or kept
at the disposal of the owner (i.e., bailer).Lien may be of two types:7
1. General Lien.
2. Particular Lien.

1. GENERAL LIEN

7 http://www.legalservicesindia.com/articles/lien.htm

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It means the right to retain goods not only for demands arising out of the goods retained but for a
general balance of account in favor of certain persons.

2. PARTICULAR LIEN
On the other hand, means the right to retain the particular goods in respect of which the claim is
due.

Bailees Lien.
Bailees right of lien is particular in certain cases whereas general in o t h e r c a s e s .
Particular lien is conferred upon a Bailee by virtue of the provisions
o f (Section170). It reads 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 contract to the contrary, a right to retain such goods
until he receives due remuneration for the service he has rendered in respect of them.8
Examples:-
Some of the examples of Bailees particular lien are:
(1)A delivers a rough diamond to B, a jeweller, to be cut and polished, which is accordingly
done. B is entitled to retain the stone till he is paid for the services he has rendered;(2)A gives
cloth to B, a tailor, to make into a coat. B promises A to deliver the coat as soon as it is finished,
and to give a three months credit for the price. B is not entitled to retain the coat until he is paid.

Bailees General Lien.


The provisions of Section 171 empower certain categories of bailees to exercise a general lien.
These include: bankers, factors, wharfingers, attorney so f High Court and policy brokers. These
bailees can retain all goods of the bailor so long as anything is due to them, unless there is
contract to the contrary.

8 https://www.scribd.com/doc/58567062/9/TERMINATION-OF-BAILMENT

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CHAPTER-5
DUTIES OF THE BAILEE

These include:
1. To take care of the goods bailed
(Section 151). In 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 v a l u e a s t h e g o o d s b a i l e d .
I n c a s e , b a i l e e h a s t a k e n t h e a m o u n t o f c a r e a s d e s c r i b e d above, he shall not
be responsible, in the absence of any special contract, for the loss, destruction or
deterioration of the thing bailed (Section 152).However, the burden of proof is always on the
bailee. The bailee shall have to prove that he took reasonable care of the goods entrusted
to him as a man of ordinary prudence w o u l d h a v e e x e r c i s e d . E v e n i n c a s e o f a n
a s s e r t i o n o n t h e p a r t o f t h e b a i l e e t h a t t h e articles were lost as a result of alleged
fire, it is for him to prove that those articles were in fact lost as a result of fire and there
was no negligence on the part of the defendant which resulted in the goods being
destroyed by fire.
R.S. Deboo vs M.V. Hindleker [AIR 1995 Bom. 68.]. 9
In the aforesaid case, the Bombay High Court also observed that the non-return of
article entrusted by the Bailee to the bailer by itself is a prima facie proof of n e g l i g e n c e o f
the Bailee. The bailer is under no obligation to lead positive evidence
proving the negligence of the bailee in respect of unreturned articles entrusted by
the bailor to the bailee.10

2. Not to make unauthorised use of goods


9 https://www.scribd.com/doc/58567062/9/TERMINATION-OF-BAILMENT

10 http://www.lawyersclubindia.com/forum/Contract-ii-bailment-
50739.asp#.VjEUu7crLIU

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(Section 154). In case the bailee makes u n a u t h o r i s e d u s e o f g o o d s , i . e . , u s e s t h e m
i n a w a y n o t w a r r a n t e d b y t h e t e r m s o f bailment, he is liable to make
compensation to the bailor for any damage arising to the goods from or during such use
of them.

Examples:-
(1)A lends a horse to B for his own riding only. B allows C, his wife, to ride the horse. C rides
with care, but the horse accidentally falls and is injured. A is liable to make compensation to B
for the injury done to the horse.(2)A hires a horse in Kolkata from B expressly to march to
Banaras. A rides with due care, but marches to Cuttack instead. The horse accidentally falls and
is injured. B is liable to make compensation to A for the injury to the horse.11

3. Not to mix Bailors goods with his own


(Section 155-157). If the bailee, without the consent of the bailor, mixes the goods of the bailor, with his own
goods, and the goods can be separated or divided, the bailee shall be bound to bear the expense of separation or
division, and any damage arising from the mixture.
Example:-A bails 100 bales of cotton marked with a particular mark to B. B, without As
consent, mixes the 100 bales with other bales of his own bearing a different mark. But in
case goods are mixed in such a manner that it is impossible to separate the good
sand delivered them back, the bailor is entitled to be compensated by the bailee for
the loss on the goods.

3. To return the goods bailed

(Section 160). It is the duty of the bailee to return, or deliver, according to the bailors directions,
the goods bailed, without demand, as soon as the time for which they were bailed has expired, or
the purpose, for which they were bailed has been accomplished. If the bailee fails to return the
goods at the proper time, he is responsible to the bailor for any loss, destruction or deterioration
of the goods from that time (Section 161).

11 https://www.academia.edu/8751653/Contracts_Project

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4. To return any accretion to the goods bailed

(Section 163). In the absence of any contract to the contrary, the bailee is bound to deliver to
the bailor, or according to his directions, any increase or profit which may have accrued from the
goods bailed.
Example:- A leaves a cow in the custody of B to be taken care of. The cow gives birth to a calf. B is bound to
deliver the cow as well as the calf to A.12

12 http://www.lawteacher.net/free-law-essays/criminal-law/the-concept-of-bailment-
generally.php

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CHAPTER-6

TERMINATION OF BAILMENT
A contract of bailment terminates or comes to an end under the following circumstances:

1. ON THE EXPIRY OF THE STIPULATED PERIOD.


Where bailment is for a specific period, it comes to an end on the expiry of the specified period.

Example
A room cooler is hired by X from Y for a period of 6 months. On the expiry of 6 months X must return the cooler.

2. ON THE ACCOMPLISHMENT OF THE SPECIFIED PURPOSE.


In case, bailment is for as specific purpose it terminates as soon as the purpose is accomplished.
Examples
(1) A suit length is given to a tailor to be stitched into a suit. The tailor is bound to return it as
soon as the cloth is stitched into suit.
(2) A hires from B certain tents and crockery on marriage of his daughter. The same must be
returned as soon as marriage is accomplished.13

3. BY BAILEES ACT INCONSISTENT WITH CONDITIONS.


If the bailee does any act, with regards to the goods bailed, inconsistent with the conditions of
the bailment, the bailor may terminate the bailment (Section 153)., be dealt
Example
A lets to B for hire, a horse for his own riding. B drives the horse in his carriage. A shall have the option to
terminate of the bailment.

13 http://indiankanoon.org/search/?formInput=termination%20of%20bailment

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4. TERMINATION OF GRATUITOUS BAILMENT.
A gratuitous bailment may be terminated at any time (Section 159).However, the Section
provides that if premature termination causes any loss to the Bailee exceeding the benefit derived
from the bailment, the bailor must indemnify. Gratuitous bailment terminates by the death of
either the bailor or the bailee (Section162).14

Termination of Bailment
1. on expiry of stipulated period.

2. on accomplishment of the specified purpose.

3. Where bailee does any act inconsistent with the conditions of bailment.

4. A gratuitous bailment may be terminated any time

Law relating to termination of bailment is discussed in Sec. 153 and 162.However, these sections
are not exhaustive. Hence ordinary rules regarding discharge or termination of contracts will also
apply in the following cases:

1.When the period or purpose is over: In case the bailment is for a specific period or purpose, it
is terminated on the expiry of that period or on the completion of the purpose.

2.When the bailee makes unauthorized use of the goods: In case the bailee makes unauthorized
use of the goods bailed, the bailment is voidable at the option of the bailor.

3. When the subject-matter is destroyed or becomes illegal In case the subject-matter is destroyed
or becomes illegal, the bailment is terminated.

14 http://www.preservearticles.com/2012012621556/short-notes-on-the-
termination-of-bailment.html

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4. At the will of the bailor: Where the bailment is gratuitous, it can be terminated merely at the
sweet will of the bailor. However, the termination should not cause loss to the bailee in excess of
the benefit derived by him. In case the loss exceeds thebenefit derived by the bailee, the bailor
must compensate the bailee for such a loss (Sec. 159)

5. When the bailor or bailee dies: A gratuitous bailment is terminated by the death of the bailor
or bailee.

FINDER OF LOST GOODS

Finding is not keeping. A finder of lost goods is treated as the bailee of the goods found as such
and is charged with the responsibilities of a bailee, besides the responsibility of exercising
reasonable efforts in finding the real owner. However, he enjoys certain rights also. His rights are
summed up hereunder

1. Right to retain the goods (Section 168) A finder of lost goods may retain the goods until he
receives the compensation for money spent in preserving the goods and/or amount spent in
finding the true owner. A finder, however, cannot sue for such compensation. But where, a
specific reward has been offered by the owner for the return of goods lost, the finder may sue for
such reward, and may retain the goods until he receives it.

2. Right to Sell (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;(2) When the lawful charges of the finder in respect of the
thing found, amount to 2/3rd of its value.15

15 https://www.academia.edu/8751653/Contracts_Project

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CHAPTER-7

CONCLUSION

So, by this project we understand different kinds and types of bailment their termination and
difference between them. This paper has taken the opportunity to explore the concept of bailment
with their types also. Originally, the standard of care owed by a bailee to a bailor in taking care
of goods depended upon the type of bailment entered into. the liability to act as a bailee of goods
only arise out of a valid contract for entrustment and delivery of property from bailor to bailee
and in case of state liability as a bailee the provision of article 299 apply.16

16 http://www.lawyersclubindia.com/forum/Contract-ii-bailment-
50739.asp#.VjEUu7crLIU

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CHAPTER-8
BIBLIOGRAPHY

1. Books

1. The Indian Partnership Act17


2. The Law of Partnership in India18
3. Lindley on Partnership19

2. Articles

1. Is Partnership a Juristic Person having its own Independent Status?20


2. https://kanwarn.wordpress.com/2010/08/28/indian-partnership-act-1932
3. http://www.yourarticlelibrary.com/firm/joint-hindu-family-firm-merits-limitation-and-
suitability/5192/
4. http://www.archive.india.gov.in/business/growing_business/joint_ventures.php
5. http://www.yourarticlelibrary.com/sole-proprietorship/sole-proprietorship-features-
advantages-and-disadvantages/40806
6. http://indiankanoon.org/doc/107341/

17 7th Edition (Pollock and Mulla) 2nd Edition (P.C. Markanda)

18

19 12th edition, page 28

20 By Vivek Kumar Verma, KMC Law Journal

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