Bailment (in terms of Business)

A bailment is the delivery of the 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 off according to the directions of the person delivering them.

The person delivering the goods is called the bailor. The person to whom they are delivered is called the bailee. The transaction is called bailment (Sec 148).

Bailment means to deliver or to hand over. Change of possession of goods for some specific purpose is the essence of delivery. Bailment constitutes delivery of possession of goods for some specific purpose. Custody of goods without possession does not constitute bailment, for instance, a servant is not a bailee.

Illustrations:

1. A delivers cloth to B, a tailor, to be stitched into a suit. This is bailment.
2. A delivers his TV to B for repairs. This is bailment.

If a person already in possession of the goods of another contracts to hold them as a bailee, he thereby becomes the bailee and the owner becomes the bailor of such goods although they may not have been delivered by way of bailment (Expln to Sec 148)

This involves constructive delivery as distinguished from actual of goods for specific purpose. Constructive delivery also creates relation of bailor and bailee.

Essentials:

Contract: Delivery of goods is upon a contract between the bailor and the bailee. However, a person already in possession of the goods may become a bailee by a subsequent agreement, express or implied. Where Government has recovered stolen property, it does not constitute the Government as bailee. Supreme Court has held that it is not correct to say that there cannot be a bailment without an enforceable contract. A finder of goods has been held to be a bailee irrespective of any contract. Therefore, an obligation of a bailee also arises without a contract.

Delivery of goods and change of possession: Change of possession of goods by delivery by one person to another must be for a temporary period. Mere custody of goods without parting with its possession does not constitute bailment, for example, a servant is a custodian of his master’s goods. He is not a bailee. It constitutes rather of possession of goods for temporary period and not transfer of ownership thereof. Bailment involves change of possession.

Mode of delivery: Delivery of goods may be actual or constructive. Actual delivery may be made by handing over something physically to the bailee. For example, delivery of watch for repairs.

Constructive and symbolic delivery may be made by doing anything which has the effect of putting the goods in the possession of the intended bailee or of any person authorized to hold them on his behalf (Sec 149) for example, delivery of documents, delivery of bill of exchange, delivery of railways receipt. There is transfer of possession of goods, but without actual physical delivery of the goods. Something is done which has the effect of putting them in the possession of the bailee.

When the Port Trust is required to store the imported goods, the relationship of bailor and bailee comes into existence.

For specific purposes: Delivery of goods must be for some specific purpose. When the purpose is accomplished, they shall be returned or otherwise disposed off according to the directions of the bailor. There is no bailment if the thing delivered is not to be specifically returned or accounted for.

Movable goods: The bailment can be only of movable goods. Money is not included in movable goods.

Return of specific goods: The bailee must return the specific goods either to the bailor or to somebody according to the directions of the bailor as soon as the specific purposes for which goods were bailed is accomplished. Even if the goods are altered in form, there is bailment. If several joint owners of the goods bail them, then in the absence of any agreement to the contrary, the bailee may deliver the goods back to or according to the directions of one joint owner, without the consent of all (Sec 165). In such an event, the bailee may deliver the goods, but he is not bound to do so. Bailment is delivery or transfer of possession of a chattel with a specific mandate that identical res would be returned to, or dealt with in a particular way by the bailee as per the directions of the bailor. In bailment, bailee does not represent the bailor as in agency. Bailee exercises certain power of the bailor within his leave, but has no power to contract on behalf of the bailor.