Bailment and Pledge
By
Asok Nadhani
Contracts
of bailment and pledge are a special class of contracts. The Contract Act deals
with the general principles underlying contracts of Bailment. Further, there
are separate Acts like the Carriers Act, Railways Act, Carriage of Goods by Sea
Act to deal with specific types of Bailment.
12.1
Bailment (sec.148)
i. Bailment
means delivery of goods (only movable property) by one person (called
Bailor) to another (called Bailee) for some purpose. When the purpose is
accomplished, the bailed goods are to be returned or otherwise disposed
of according to the directions of the Bailor. Ex.12.1
ii. Sometimes
bailment may arise even without a contract. For example, when a person finds
goods belonging to another, the original owner is bailor and the finder is bailee.
(Ref 12.7), [Basavva K.D. Patil v.
state of Mysore
12.1.1
Requisites of Bailment
i.
Contract. A
bailment is created by agreement between the bailor and the bailee, (sometimes
the agreement is implied).
ii. Delivery of possession.
a. A
bailment involves delivery of possession of goods by bailor to bailee. Possession
implies control and an intention to exclude others. Mere physical
custody of goods does not amount to bailment. For example, an item delivered to
servant by his master to take to a third party does not amount to bailment. [Basava K D Patil vs State of Mysore], [Kaliperumal
Pillai vs Visalakshmi] Ex.12.2
b. Delivery
of possession may be actual or constructive. (sec. 149) Actual delivery may
be made by physically handing over the goods to bailee (like delivery of a sack
of rice). Constructive or symbolic delivery may be made by doing some thing
which puts the goods in the possession of the bailee (e.g delivery of key of a
Car, delivery of a Railway receipt of goods).
iii. Purpose. The
delivery of goods from bailor to bailee must be for some purpose. If goods are
delivered by mistake to a person, there is no bailment.
iv. Return of specific goods. The
goods shall be returned or disposed of according to the directions of the
bailor. If the goods are not to be returned, there is no bailment (in some
case, the goods may be altered, a piece of cloth is stitched into a garment).
v. No
transfer of ownership : Only possession passes from
the bailor to the bailee and not ownership. Thus if the property in
goods is transferred for money consideration, it is a sale and not a bailment.
Similarly where money is deposited in a banking' account (not in a safe deposit
vault), the relationship of debtor and creditor is created, there is no
bailment.
Some typical examples
of Bailment
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Hire Purchase contract. It has two
components 1. Bailment - till the property is transferred, 2. Sale
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Seizure of goods by Govt Authorities. After
seizure, the authority becomes bailee.
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Goods held by carrier for transportation.
12.1.2
Classification of Bailments
According
to the purpose, bailment may be classified as follows:
i.
Gratuitous Bailment :
Where no consideration passes between bailor & bailee. This type of
bailment can be terminated by the bailor at any time even though the bailment
was for a specified time or purpose. Ex.12.3
a. Exclusive
benefit of the bailor, e.g, delivery of some valuables to a neighbour for
safe custody, without charge.
b. Exclusive
benefit of the bailee, e.g, lending of a bicycle to a friend for his use,
without charge.
ii. Non-gratuitous
Bailment : The bailment is for benefit of bailor, bailee or both like giving a car on hire, giving watch for repair. The consideration
passes between the bailor and the bailee.
12.1.3
Termination of Bailment
A
contract of bailment is terminated in the following cases :
1. On the expiry of the period. When
the bailment is for a specific period, it terminates on the expiry of that
period.
2. On the achievement of the object. When
the bailment is for a specific purpose, it terminates as soon as the purpose is
achieved.
3. Inconsistent use of goods. When
the bailee uses the goods in a manner inconsistent with the terms of the
contract, the bailment terminates. (sec.154)
4. Destruction of the subject-matter. A
bailment is terminated when the subject-matter of the bailment (a) is
destroyed, (b) becomes incapable of use for the purpose of the bailment due to
change in its nature.
5. Gratuitous bailment. It
can be terminated any time.
6. Death of the bailor or bailee. A gratuitous bailment is terminated
by the death either of the bailor or of the bailee (Sec. 162).
7. Premature termination
by a bailor (Section 159). In case of gratuitous bailment the bailor can terminate
the bailment even before the expiry of such specified period. However, if the loss caused to the bailee due to such
premature termination of bailment exceeds the benefits accrued
to the bailee under the contract of bailment, then the bailor shall be
liable to indemnify the bailee.
12.1.4 Distinction
between Gratuitous Bailment & Non-Gratuitous Bailment
The distinction between gratuitous and non- gratuitous bailment are as
follows:
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Gratuitous bailment
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Non- gratuitous bailment
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1.
Consideration
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No consideration exists.
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Consideration is always present.
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2.
Termination
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The bailor can terminate the contract
of bailment at any time.
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Unilateral termination
of contract by the Bailor may amount to
Breach of Contract.
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3.
Liability
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The bailor must
disclose all faults known to him which are
material or may expose to extraordinary risk.
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The bailor must disclose all faults, whether known to him or not.
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4.
Damages
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Bailor shall be
liable for damages for non-disclosure of fault,
only if such faults were known to the bailor.
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Bailor shall be liable for damages for non-disclosure of faults whether known to him or not.
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5.
Expenses
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Bailor is liable to
reimburse all necessary as well as extraordinary expenses
relating to bailment.
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Bailor is liable to reimburse only extraordinary expenses.
Bailee should bear expenses which are necessary.
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6.
Death
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Bailment comes to an end by death of bailor or bailee.
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The contract continues irrespective of the death of bailor or bailee.
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12.1.5
Distinction between Sale
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Bailment
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a. The
contract is between buyer and seller.
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a. Contract
is between bailor and bailee
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b. The
ownership of goods is transferred from the seller to buyer.
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b.
No transfer of ownership takes place.
Only delivery of goods take place for some purpose.
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c. The
goods are not required by returned to seller.
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c.
After the purpose is accomplished,
the goods must be returned to Bailor or
disposed off as per his direction
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d. Goods
are covered under the Sale of Goods Act,1930.
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d. Goods are covered under Contract Act
1872
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e. The possession of
goods is generally transferred in case of sale, but
sale may take place without transfer of possession of goods, in some cases
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e.
Bailment is not possible without transfer of possession of goods.
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f. Consideration is a must for sale of goods.
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f.
In some cases, Bailment of goods may be made without any consideration (i.e., gratuitous bailment)
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12.2 Duties and rights of Bailor and Bailee
In a
bailment, both bailor & bailee have some obligations & rights, as
summarized below
12.2.1
Duties of Bailor
i. Disclosure of faults. (sec. 150) In case of
gratuitous bailment, the bailor should disclose the known faults about the
goods bailed to the bailee, else he becomes responsible for any damage caused
to the bailee directly from such faults. In case of non-gratuitous bailment,
(e.g. hire) the bailor is responsible
even for those faults which are not known to him, [Read
v. Dean], Ex.12.4
ii.
Expenses of
bailment. The bailee is bound to bear ordinary
and reasonable expenses of the bailment. For any extraordinary expenses the
bailor is responsible. Ex.12.5, Ex.12.6.
In case of a
gratuitous bailment, the bailor must reimburse to the bailee all the necessary
expenses incurred by him for the purpose of the bailment. (sec. 158) Ex.12.7
iii. To indemnify bailee for loss in gratuitous bailment (sec.159). A gratuitous bailment can be
terminated by the bailor at any time even though the bailment was for a
specified time or purpose and the bailor must indemnify the bailee of any loss
incurred by him out of the bailment.
iv. To receive back the goods. It
is the duty of the bailor to receive back the goods when the bailee returns
them when the purpose of bailment is accomplished. If the bailor refuses to
receive back the goods, the bailee is entitled to receive compensation from the
bailor for the necessary expenses of custody.
v. To indemnify the bailee (sec.164). Where the title of
the bailor to the goods is defective and the bailee suffers any loss as a
consequence, the bailor is responsible to the bailee for such loss. Ex.12.7
vi. Duties to bear the loss (Sec. 152). It is duty of the bailor to
bear the loss of goods, if the goods are destroyed or lost while in the
possession of the bailee, without any fault of the bailee. [Read vs Dean]
12.2.2
Duties of Bailee
i. To
take reasonable care of the goods bailed. (sec. 151 & 152). The
bailee is bound to take care of the goods bailed to him like his own goods. If the bailee fails to return the goods in
good condition, the onus of proof is on the bailee to show that there
has been no negligence on his part. If he exercises such care, he shall not be
responsible even if the goods are lost or damaged. [Coldman
v. Hill], [Ultzen v. Nicols], [Coldman vs Hil], [Ulzen vs Nicols], Ex.12.8,
Ex.12.9, Ex.12.10, Ex.12.11, Ex.12.12
ii. Not
to make any unauthorised use of goods.
a. If
the bailee uses the goods bailed in a manner inconsistent with the terms of the
contract, he shall be liable for any loss even though he is not guilty of negligence,
even if the damage is the result of an accident. (sec.154), Ex. 12.13, Ex.12.14.
b. The
bailor may prematurely terminate the bailment (without making himself liable for
premature
termination of bailment).
iii. Not
to mix bailed goods with his own goods. The
bailee must keep the bailed goods separate from his own goods.
a. If
he mixes the bailor's goods with his own goods with the bailor's consent, both
shall have a proportionate interest in the mixture thus produced. (sec. 155)
b. If
he mixes without the bailor's consent :
i. if
the goods can be separated or divided, the bailee is bound to bear the expenses
of separation or division, as well as damage arising from the mixture.(sec. 156) Ex.12.15,
ii. if the
mixture is beyond separation, the bailor is entitled to be compensated by the
bailee for the loss of the goods. (sec. 157), Ex.12.16.
c. If
the goods of the bailor get mixed up with the like goods of the bailee, by
inadvertence, accident, act of God or by
act of an unauthorised third party, the mixture belongs to the bailor and the
bailee in proportion to their shares but the cost of separation will have to be
borne by the bailee.
iv. To return any accretion to the
goods. In the absence of any contract
to the contrary, the bailee is bound to deliver to the bailor, any increase or
profit which may have accrued from the goods bailed (sec. 163). Ex.12.17
v. To
return the goods. The bailee must
return the goods bailed as per bailor's directions, by the promised date or
when the purpose of bailment has been accomplished. (sec. 160). On failure to do so, the
bailee is responsible to the bailor for any loss caused to him. (sec. 161) Ex.12.18
12.2.3
Rights of Bailor
i. Right to file a suit
for enforcement of duties of bailee. If the bailee fails to perform
any of his duties, the bailor has a right to file a suit to enforce such
duties, as under:
a.
Right to claim damages for loss caused to the goods
bailed due to bailee's negligence (Sec. 152).
b.
Right to claim compensation for any damage arising from
or during unauthorised use of the goods bailed (Sec. 154).
c.
Right to claim separation of goods or to claim
compensation for any loss caused by unauthorised mixing of goods bailed with his own goods (Sec. 156 and 157).
d.
Right to demand back the goods on expiry of time of
bailment, or the purpose of bailment accomplished (Sec.
160). If the goods are wrongfully retained by the bailee, the bailor has a
right to claim compensation for any loss, destruction or deterioration of
goods (Sec. 161).
e.
Right to claim any natural accretion to the goods bailed
(Sec. 163).
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ii.
Right of pre-mature termination of bailment. If bailment is made for a specified period:
a.
The bailor cannot terminate the bailment before expiry of
such specified period in a non-gratuitous bailment.
b.
In a gratuitous bailment, the bailor can terminate the
bailment even before the expiry of such specified period.
c.
However, if the loss caused to the bailee due to such
premature termination of bailment exceeds the benefits accrued
to the bailee under the contract of bailment, the bailor shall be liable to
indemnify the bailee.
iii. Termination of contract. The
bailor can terminate the bailment if the bailee does any act inconsistent with
the terms of the bailment. (Sec. 153)
Ex. 12.19
iv. Return of goods lent gratuitously (Sec.159). When the goods are
lent gratuitously, the bailor can demand their return at any time even it was
bailed for a specified time or purpose. But if the bailee suffers any loss
exceeding the benefit actually derived by use of such goods because of
premature return of goods, the bailor shall have to indemnify the bailee.
v. Action against wrong-doer. A person shall be
called as wrongdoer if he prevents or deprives the bailee from using the goods
or injures or damages the goods. If a
third person wrongfully deprives the bailee of the use or possession of the
goods bailed, or causes any injury to the bailee, the bailor or the bailee may
bring a suit against the third person for such deprivation or injury. (Sec.180)
If anyone wrongfully
deprives the bailee of the use or possession of the goods bailed, or causes
injury to the goods retained for a charge for labour employed or expenses
incurred upon the goods, the bailee or bailor may resort to remedies like owner
of the goods.
The relief or
compensation received in any such suit be dealt with according to their
respective interests. (Sec.181)
12.2.4
Rights of Bailee
The
duties of the bailor are the rights of the bailee. The bailee can, by suit,
enforce such duties of the bailor. [Purushottam Das
Banarasi Das vs Union of India
1.
Delivery of
goods to Joint bailors. (sec. 165) In case of goods bailed
belonging to joint owners, the bailee may return the goods to any Joint owner
without the consent of other joint owners, as per terms of bailment, unless
there is any agreement to the contrary.
2.
Delivery of
goods to bailor without
title. (sec. 166) If the bailor has no title to the goods,
and the bailee returns them in good faith, or according to the directions of
the bailor, the bailee is not responsible to the owner for such delivery.
3.
Right to
apply to Court to stop delivery. If a person
other than the bailor claims the goods bailed, the bailee may apply to the
Court to stop the delivery of the goods to the bailor and to decide the title
to the goods. (sec.167)
4.
Bailee's
lien. Where the lawful charges of the bailee
are not paid, he may retain the goods (called 'particular lien').
12.3
Lien
i. 'Lien'
is right of a person to retain possession of some goods belonging to another until
some debt or claim of the person in possession is satisfied. The lien can be
exercised only when there is a rightful possession. [Hatton
v. car Maintenance Co. Ltd.], Ex.12.20
ii. Right
of lien may arise (a) by Statute, or (b) by express or implied contract, or (c)
by a general course of dealing between the parties in a particular trade.
iii. A
lien is extinguished or lost by:
a. Abandonment,
b. payment
or tender of the amount due,
c. loss
or surrender of possession of the goods.
12.3.1 General
Lien (sec.171)
i. A
General lien is a right to retain all the
goods or any property of another person held, until all the claims of the
holder are satisfied. This is a right to retain the property of another for a
general balance of account. Ex.12.21
ii. General
lien is available to bankers, factors, wharfingers (loading or unloading
vessels), attorneys of High Court and policy brokers. These persons are
normally entitled to retain possession of the goods bailed to them as security
until their claims are fully satisfied (unless there is a contract to the
contrary).
12.3.2 Particular Lien
Particular lien means
the right to retain only such goods in respect of which charges due remain
unpaid. Particular lien can be exercised only when some labour or skill has
been expended on the goods, resulting in an increase in value of goods. (s.170)
12.3.3
Distinction between particular lien and general lien
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Particular
lien
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General lien
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Right
available to a bailee against only those goods in respect of which skill and
labour have been applied.
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Retain any
property in the possession of the person exercising the right (belonging to
the other party) in respect of any payment lawfully due.
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Right
to retain the goods only for a charge for labour employed or expenses
incurred upon the goods.
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Right
to retain any property belonging to the other party for a general balance of
account.
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Particular lien can
be exercised only when some labour or skill has been expended on the goods,
resulting in an increase in value of goods.
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General lien may be
exercised even though no labour or skill has been expended on the goods.
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Every bailee is
entitled to particular lien.
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General lien can be
exercised by only by persons specified under section 171, e.g., bankers,
factors, wharfingers, Attomeys of High Court, policy brokers. Other bailee
may exercise general lien if there is an agreement to this effect.
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12.4 Finder of Goods
When a person finds
some goods, he is not duly bound to take possession of them, he can ignore the
goods and pass by. However, if he takes the possession of goods, he becomes a
finder of goods.
12.4.1
Rights of finder of goods
i.
Duties of finder of goods
The finder of goods shall have
duties of bailee (Section 71), like:
a.
Duty to take reasonable care of the goods.
b.
Duty not to use the goods for his own purpose.
c.
Duty not to mix the goods with his own goods.
ii.
Additional duties of a finder of goods : In addition to the
duties of bailee, a finder of goods has the following duties:
a.
Duty to find the true owner. A finder of goods must
take all reasonable steps for searching the true owner of goods.
b.
Duty to preserve the goods. A finder of goods must
take all reasonable steps for preservation of goods (i.e., preventing
the loss or destruction of goods).
iii.
Additional rights of a finder of goods : A finder of goods has
all the rights available to a bailee. In addition, he has the following
rights:
a.
Right to recover expenses (Section 168)
i.
A finder of goods has a right to recover the expenses
voluntarily incurred by him for the purpose of finding the true owner and preservation
of goods.
ii.
Until the finder of goods is paid such expenses, he can
retain the goods found by him. He cannot sue for recovery of expenses.
b.
Right to recover the reward (Section 168)
i.
In case the true owner of goods has declared a
reward for anyone who returns the goods to the true owner, the finder of goods
can recover such reward, provided the announcement of reward came to his
knowledge before the goods were found by him.
ii.
Until the finder of goods is paid the reward, he
can retain the goods found by him and sue the true owner of goods
for recovery of the reward.
c.
Right to sell the goods
(Section 169). The finder of goods has a right to sell the goods
found by him in the following circumstances:
i.
The true owner cannot, with reasonable diligence, be
found (or if found, he refuses to pay the lawful charges incurred by the finder
of goods).
ii.
The goods are in danger of perishing or losing the
greater part of its value.
iii.
The lawful charges of the finder, in respect of
the goods found, amounts to 2/3rd of
value of goods.
d.
Right to keep the goods. A finder of goods has a right to keep the
goods found by him against the whole world except the true owner.
12.4.2 Position of
Finder of Goods vs. Bailee
a.
The position of finder of goods is similar to bailee, but
there are subtle differences as follows:
i.
The bailee can sue bailor for any defective title of the
goods or for any extraordinary charges, whereas the finder of goods cannot sue
the owner for expenses incurred for finding him (i.e. the owner). He can,
however retain the goods unless he is reimbursed such expenses incurred.
ii.
The finder can sell the goods if, it is in danger of
perishing or if the lawful charges of the finder, amounting up to 2/3rd of the
value of the article found remains unpaid, where as the bailee has no right to
sell the goods bailed.
iii.
It becomes the responsibility of the finder to find the
owner of the goods, but the bailee before hand knows the bailor and so, no such
responsibility arises.
b.
Both bailee and the finder of goods can retain the goods
until expenses incurred by them are reimbursed, but they do not share the same
position.
12.5
Pledge
i. Pledge
is a special kind of bailment of goods (movable property) for the
purpose of security for payment of a debt or performance of a promise. In
pledge, the bailor is called the 'pledger’ or 'pawnor' and the
bailee is called the 'pledgee' or 'pawnee'. (sec. 172) Ex.12.22
ii. The
goods must be delivered in a pledge. Any kind of movable property (goods,
documents, valuables, or even Savings Bank Pass Book) may be pledged. The
delivery may be actual, constructive or symbolic (like delivery of key of a
car), amounting to transfer of possession. [Revenue
Authority v. Sudarshan Pictures], Ex.12.23
iii. The contract must
provide the pawnee that shall return or dispose off the goods according to the
directions of the pawnor, when the debt is paid, or the promise performed.
12.5.1
Pledge by non-owners
Normally,
only the owner of the goods can pledge. However, in certain cases even a
non-owner can create a valid pledge, like :
1. Mercantile agent (sec.178). A mercantile agent,
acting in the ordinary course of business of a mercantile agent and in possession
of goods or the documents of title to goods through the consent of the
owner, may make a pledge.
2. Pawnor having limited interest. (sec. 179) Where
a person pledges goods in which he has only a limited interest, the pledge is
valid to the extent of that interest. Ex.12.24
3. Co-owner. Any
of the co-owners of goods in possession of the goods may create a valid pledge
with the consent of the other co-owners.
4. Possessor of
goods under voidable contract. (sec.
178A) A person holding possession
of goods under a voidable contract may create a valid pledge if the contract
has not been rescinded before the contract of pledge and the pawnee acts in
good faith and without notice of the pawnor's defect of title.
12.5.2
Distinction between Pledge and Bailment
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Pledge
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Bailment
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1.
Delivery of goods as security for payment of a debt or
performance of a promise.
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Delivery of goods by one person
to another for some purpose, upon a contract that after the purpose is
accomplished, the goods be returned or otherwise disposed of according to
the directions of the person
delivering them.
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2. Pledge
is a special kind of Bailment.
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So, every bailment
is not a pledge, but every pledge is a bailment.
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3. Pledge
is bailment of goods as a security for the performance of a specific promise,
i.e., the payment of a debt or performance of a promise.
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Bailment is
for a purpose of any kind.
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4.
In case of default by the pawnor to
repay the debt, the pawnee may, after giving notice to the pawnor, sell the
goods pledged.
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The
bailee may either retain the goods or sue for his charges.
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5. The
pawnee has no right to use the goods pledged.
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The bailee may
do so if the terms of bailment so provide.
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6.
Pledge is made for the mutual benefit of pawnor and
pawnee. Thus, consideration is always present in case of pledge.
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The bailment may be for the
mutual of bailor or bailee. Thus, bailment may be made without consideration.
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12.6
Rights and duties of pawnor and pawnee
The
rights and duties of pawnor and pawnee are similar to those of bailor
and bailee. The salient features are summarized below :
12.6.1
Rights of Pawnee
i. Lien on goods. The
pawnee may retain the goods pledged not only for debt or the performance of the
promise, but also for interest due and other expenses incurred by him for
possession / preservation of the goods pledged, until his dues are paid. He can however exercise only a particular
lien over the goods (sec. 173).
ii. Right of retainer for subsequent advances. When
the pawnee lends money to the same pawnor after the date of the pledge, the
pledge extends to subsequent advances also (unless any contract to the
contrary). (sec.174)
iii. Right to extraordinary expenses. (sec. 175) The
pawnee is entitled to receive from the pawnor extraordinary expenses incurred
by him for preservation of the goods (but no right to retain the goods). He can
only sue to recover them.
iv. Right against true owner, when the pawnor's title
is defective. When the pawnor has obtained possession
of the goods pledged by him under a voidable contract (by fraud, undue
influence, coercion, etc.) but the contract has not been rescinded at the time
of the pledge, the pawnee acquires a good title to the goods, if he acted in
good faith and without knowledge of the pawnor's defective title.
v. Pawnee's rights where pawnor makes default.
(sec. 176) Where the pawnor
fails to redeem his pledge, the pawnee can exercise the following rights :
a. He
may file a suit against the pawnor upon the debt or promise (including interest
and all related examples) and may retain the goods pledged as a collateral
security.
b. He
may sell the goods pledged after giving the pawnor a reasonable notice of the
sale.
The pawnee
cannot exercise the right to retain or sell simultaneously, he may sue and at
the same time retain the goods as security or sell them after giving reasonable
notice of the sale to the pawnor. [Haridas Mundra
v. National & Grindlays Bank Ltd.].
vi.
On sale, he can recover any deficiency
arising on the sale of the pledged goods from the pawnor. Similarly, he should
hand over the surplus, if any, to the pawnor.
12.6.2
Rights of Pawnor
i. Right to get back goods. On
the performance of promise or repayment of loan with interest, if any, the
pawnor is entitled to get back the goods pledged.
ii. Right to redeem debt (sec.177): Where pawnor makes default in payment
of the debt or performance of the promise within the stipulated time, he may
still redeem the goods pledged at any subsequent time before the actual sale of
them. In that case, he should also pay any expenses arising out of his default.
iii. Preservation and maintenance of the goods. The
pawnor has a right to ensure that the pawnee, like bailee, properly preserves
the goods pledged.
iv. Rights of an unpaid debtor. The
pawnor has further rights of an unpaid debtor which are conferred on him by
various statutes meant for the protection of debtors.
v. If the pawnee fails to
perform any of his duties, the pawnor has a right to file a suit to enforce
such duties.
a.
Right to redeem the goods pledged. The pawnor has the right to get back the goods by
repaying the debt or performance of the promise. Where the time for repayment of debt or performance of promise is
fixed, the pawnee should redeem the goods before expiry of
the period so fixed. However, he can exercise his right to get back the goods
even after expiry of the time so fixed, until the pawnee has sold the goods.
b.
Right to file a suit for enforcement of pawnee's duties. If the pawnee fails to perform any of his duties, the
pawnor has a right to file a suit to enforce such duties.
12.6.3 Duties of Pawnee
i. Not
to use the goods. It
is the duty of pawnee not to use the goods unless or otherwise specifically
authorized by the pawner, since the purpose of transfer of possession of goods
is to provide security and not to give any facility to pawnee to use the goods.
ii. Return
the goods. When
the pawnor fulfils his obligation (i.e., the pawnor repays the debt or performs
the promise), the pawnee must return the goods to the pawner.
12.6.4 Duties of Pawnor
i. Repay
the loan or perform the promise. It is the most
important duty of the pawnor to fulfill his obligation as specified in the
contract of pledge.
ii. Pay
expenses in case of default (sec.
175). In case of non- fulfillment of his obligation the pawnor must
compensate the pawnee with the expenses incurred by the pawnee for preservation
of goods. Such expenses shall be calculated from the date of default to the
date of actual payment of debt or performance of promise.
Examples:
Bailment
Ex.12.1. An insurance
company gives a damaged insured car of A to R, a repairer, for
repair. A is the bailor, the insurance company is the bailee, and R is
the sub-bailee. [Ref. 12.1(i)].
Delivery of possession
Ex.12.2.:
A lady employed a goldsmith for melting her old jewellery and making new
one out of it. Every evening she received the unfinished jewellery and put it
into a box kept at the goldsmith's premises. She kept the key of that box with
herself. One night the Jewellery was stolen from the box. Held, there
was no bailment as the goldsmith had re-delivered to the lady (the bailor) the
jewellery bailed with him by her. [Ref.
12.1.1{ii(a)}].
Gratuitous Bailment
Ex. 12.3. A lends a book
to a friend. [Ref. 12.1.2(i)].
Disclosure of faults
Ex. 12.4. A hires a car
of B. The car is unsafe as the or brake is malfunctioning, B is not aware of it
and is injured. B is responsible to A for his injury. [Ref.12.2.1(i)].
Expenses of Bailment
Ex. 12.5. A lends his horse to B, a friend,
for two days. The feeding charges are to be paid by B. The horse meets
with an accident, A will have to repay B medical expense,
incurred by B. [Ref. 12.2.1(ii)].
Ex. 12.6. A leaves
his car with B, a friend, for safe custody for two months, B paid Rs.
1000 per month to the night watchman for keeping a watch over the car. A must
pay the amount to B. [Ref. 12.2.1(ii)].
Indemnifying Bailee for loss in
gratuitous bailment
Ex. 12.7. A lends
an old discarded bicycle to B gratuitously for three months. B incurs
Rs. 120 on its repairs. If A asks for the return of the bicycle after one
month, he will have to compensate B for expenses incurred by B in excess of the
benefit derived by him. [Ref. 12.2.1(ii,
v)].
Taking reasonable care of the goods
bailed
Ex. 12.8. Some cattle
belonging to A were given to B for feeding grass (against payment). Without any
negligence on B's part, the cattle were stolen. B did not inform the
owner or the police or make any effort to recover them. B was liable for
the loss. [Ref. 12.2.2(i)].
Ex. 12.9. M was admitted
to a hospital where her jewellery was handed over to the hospital officials for
safe custody. The jewellery was stolen. Held, the hospital officials
were bailees for reward and were liable for the loss as they had failed to
exercise a care which the nature and quality of the article required. [Ref. 12.2.2(i)].
Ex. 12.10. A entered a
restaurant for dining and hung his coat on a hook behind his seat. When he was
about to leave, he found the Coat stolen. Held, the proprietor of the
restaurant was liable for the loss. [Ref.
12.2.2(i)].
Ex. 12.11. Certain goods
of A were bailed with B. B did not lock up the goods bailed, while he locked up
similar goods of his own. Held, he was liable. [Ref. 12.2.2(i)].
Ex. 12.12. B locked up the
goods belonging to A as he locks up his own. Goods were stolen. B cannot be
held liable for the goods stolen. [Ref.
12.2.2(i)].
Ex. 12.13. A lends
a horse to B for his (B’s) riding only. B allows C, a member of his family to
ride the horse. C rides with care, but the horse accidentally falls and is
injured. B is liable to make compensation to A for
the injury caused to the horse. [Ref.
12.2.2(iia)].
Not to make any unauthorized use of
goods
Ex. 12.14. A hires
a horse in Calcutta Varanasi Cuttack
Bailee mixes the bailed goods without
the Bailor’s consent
Ex. 12.15. A bails
100 bales of cotton marked with a particular mark to B. B, without A's consent,
mixes the 100 bales with other bales of his, own, bearing a different mark. A
is entitled to have his 100 bales returned and B is bound to bear all the
expenses incurred in the separation of the bales, and any other incidental
charges. [Ref. 12.2.2{iii(bi)}].
Ex. 12.16. A bails
a bag of Farm wheat worth Rs. 550 to B. B, without A's consent, mixes
the wheat with imported wheat of his own, worth only Rs. 250 a bag. B must compensate
A for the loss of his wheat. [Ref. 12.2.2{iii(bii)}].
Return of accretion to the goods
Ex. 12.17. A leaves
a cow in the custody of B to be taken care of. The cow has a calf. B is bound
to deliver the calf as well as the cow to A. [Ref. 12.2.2(iv)].
Return of goods
Ex. 12.18. A delivered
some books to B to be bound. He pressed for their return, but B neglected to
return them although long time had elapsed. A fire accidentally broke out on
B's premises, and the books were burnt. Held, B was liable for the loss
because of his failure to deliver the books within a reasonable time. [Ref. 12.2.2(v)].
Termination of Contract
Ex. 12.19. A lets
a horse to B for his own riding only. B uses the horse with a carriage. A
can terminate the bailment. [Ref.
12.2.3(iii)].
Lien
Ex. 12.20. A company agreed
to garage the motor-car of H for three years, for an annual charge. H
was entitled to take the car out of the company's garage as and when she
liked. The annual payment being in arrear, the company detained the car at the
garage and claimed a lien. Held, as H was entitled to take the
car away as and when she pleased, the company had no lien. [Ref. 12.3(i)].
General Lien
Ex. 12.21. Two securities
are given to a banker but a loan is taken only against one of the securities.
The banker may retain both the securities until his claim is satisfied. [Ref. 12.3.1(i)].
Ex. 12.22. A borrows Rs.
200 from B and keeps his watch as security for payment of the debt. The
bailment of watch is a pledge. [Ref.
12.5(i)].
Pledge
Ex. 12.23. The producer
of a film borrowed a sum of money from a financier-distributor and agreed to
deliver the final prints of the film when ready. Held, the agreement was
not a pledge, there being no actual transfer of possession. [Ref. 12.5(ii)].
Pawnor having limited interest
Ex. 12.24. A finds a mobile phone on road, incurs
expenses Rs 100 to get it repaired and pledges it with B for Rs.500. The owner
can get the mobile by paying Rs 100 to B. [Ref.
12.5.1(2)].
For more details, refer
to Business & Corporate Laws, by Asok Nadhani, BPB Publications, www.bpbonline.com,
bpbpublications@gmail.com
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