Bailor and Bailee: Rights, Duties, and Legal Protections in Contracts

Theoretical overview 

Bailment: under Section 148 of Indian contract act 1872, a bailment is delivery of good by one person to another for some purpose.

The person who deliver the goods is called the ‘Bailor’

The person whom they are delivered is called the ‘Bailee’

For example when you give your suit for dry-clean or watch for repair.

Bailment is delivery of good by one person to another for some purpose when the purpose is accomplished be return or dispose according to the direction of the person delivering them.

Essentials of bailment

1. Delivery of goods for some purpose.
2. Return the goods after the completion of purpose or dispose according to the direction of the bailor.

For example: Suman delivers a piece of cloth to tailor to be stitched into a court. Here there is a contract of bailment between suman and tailor ,suman is the bailor and tailor is the bailee and the purpose of delivering the cloth into a coat , the tailor will return the cloth to Suman after stitching.

Numbers of parties to the contract of bailment is two i.e bailor and bailee.

Characteristics of bailment

1. Bailment is a contract: A bailment is a contract by an agreement between the bailor and bailee which implies that there is a proposal by one party and is acceptance by the other,it must have all the essential element of a valid contract.
2. Bailment is of movable good: A contract of bailment can only be made for movable good such contact can not be made for an immovable property like land or building.
3. Bailment involves transfer of possession of goods
4. The transfer under bailment is temporary: after completion of purpose the good will transfer to the owner  for example if u give your T.V for repair after repair you will get your T.V back.
5. The good must be delivered to the other person: it is imp that the goods are delivered to the bailee.
6. The bailor has right to the return of goods:- the bailor has right to the return of goods if the goods are not return it is not a contract of bailment.

Right of the bailor

1. Right to Claim Compensation Against the Unauthorized Use of Goods:– If any of the third person, does some injury to the goods bailed or deprive (stop) the bailee to use bailed goods, in such a case bailor has right to file the suit against the wrong-doer and to get compensation from him.

2. Right to Claim Compensation:-In the case of bailment, bailor has the right to claim the compensation if any damage is done to the goods bailed due the bailee’s negligence or misconduct.
3. Right to Demand the Return of the Goods:– The bailor has the right to get his goods back in a safe and good condition after the expiry of the bailment time period or the achievement of the purpose for which the goods were bailed.
4. Right to Enforce Bailee’s Performance:– The bailor deliver his goods to the bailee for some specific purpose and in the case of the non-gratuitous bailment, the bailor has the right to achieve that purpose or to get benefits through the same.

Duties of the bailor

1. Duty to take reasonable care (section 151-152): – It is the duty of the bailee to take reasonable care of the bailed goods and he is bound to take as much care of the goods as an ordinary prudent person of sound mind takes.
2. Duty not to make Unauthorized use of goods (section153-154): in the bailment agreement while using the bailed goods. If he illegally use the goods, the bailment agreement will become voidable at the option of the Bailor.
3. Duty to not to mix the bailed Goods with his personal goods (section155-157): – The bailee must keep the bailed goods separated from his own personal goods. He cannot mix the goods without the prior permission of the bailor.
4. Duty to return goods (section159-161,165-1670): – It is the duty of the bailee to return the goods to the bailor in safe and good condition after the expiry of the time period of bailment or achievement of purpose for the goods were bailed. The goods must be returned according to the directions given by the bailor. If he failed to do so, he will be responsible for the losses done to bailor even without his negligence.
5. Duty to deliver the bailor increased or profit on the goods bailed (section 163):- in the absence of any contract to the contrary the bailee is bound to deliver to the bailor or acc to his direction any increased or profit which may have accrued from the goods bailed. For eg. 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.

Rights of bailee

1. Right to compensation (section 164): – Bailee has the right to claim compensation from the bailor in respect to any damages done to him by the act of the bailor.
2. Right to recover expenses or remuneration(section 158): – Bailor is bound to repay all the expenses which were incurred by him for the work done on the goods received in the bailment.
3. Right of Lien(section170-171)): – If the bailee charges are not paid by the bailor, he has the right to retain the goods. So, the right to retain the property on which the charges are due is called right to lien. 

Meaning of Lien

A lien is a claim or legal right against assets that are typically used as collateral to satisfy a debt. A lien could be established by a creditor or a legal judgement. A lien serves to guarantee an underlying obligation, such as the repayment of a loan. If the underlying obligation is not satisfied, the creditor may be able to seize the asset that is the subject of the lien. There are many types of liens that are used to secure assets.

1. A lien is a claim or legal right against assets that are typically used as collateral to satisfy a debt.
2. If the underlying obligation is not satisfied, the creditor may be able to seize the asset that is the subject of the lien.
3. Various types of liens can be established including by a creditor, legal judgement, or tax authority.

Types of lien

1. Bank Lien: – A lien is often granted when an individual takes out a loan from a bank to purchase an asset. For example, if an individual purchases a vehicle, the seller would be paid using the borrowed funds from the bank. In return, the bank would be granted a lien on the vehicle. If the borrower does not repay the loan, the bank may execute the lien, seize the vehicle, and sell it to repay the loan. If the borrower does repay the loan in full, the lien holder (the bank) then releases the lien, and the individual owns the car free and clear of any liens.
2. Judgment Lien: – A judgment lien is a lien placed on assets by the courts, which is usually as a result of a lawsuit. A judgement lien could help a defendant get paid back in a case of nonpayment by liquidating the assets of the accused.
3. Mechanic’s Lien: – A mechanic’s lien can be attached to real property if the property owner fails to pay a contractor for services rendered. If the debtor never pays, the contractor could go to court and get a judgement against the non-paying party whereby property or assets can be auctioned off to pay the lien holder. Many service providers have the option to place a lien to secure payment, including construction companies and dry cleaners. 
4. Real Estate Lien: – A real estate lien is a legal right to seize and sell real estate property if a contract is not fulfilled. Some real estate liens are automatically put in place, such as the case of a mortgage lien. When a party borrows money from a bank to purchase their home, the bank places a lien on the house until the mortgage is paid off. However, some real estate liens are due to non-payment to a creditor or financial institution and as a result, are involuntary and nonconsensual liens.
5. Tax Liens: – There are also several statutory liens, meaning liens created by law, as opposed to those created by a contract. These liens are very common in the field of taxation, where laws often allow tax authorities to put liens on the property of delinquent taxpayers. For example, municipalities can use liens to recover unpaid property taxes. A tax lien also affects the taxpayer’s ability to sell existing assets and to obtain credit. The only way to release a federal tax lien is to fully pay the tax owed or to reach a settlement with the IRS. The IRS has the authority to seize the assets of a taxpayer who ignores a tax lien. Typically, the IRS uses liens for delinquent taxes as a last resort following all other options being exhausted, such as collection, installment repayment plans, and settlement.

Relevant sections

• Section 148 of Indian contract act 1872, a bailment is delivery of good by one person to another for some purpose.
• Section 151-152 -Duty to take reasonable care of bailed good.
• Section 153-154- Duty not to make Unauthorized use of goods.
• Section 155-157 – Duty to not to mix the bailed Goods with his personal goods.
• Section159-161,165-1670 – Duty to return goods.
• Section 163 – Duty to deliver the bailor increased or profit on the goods bailed.
• Section 164 – right to compensation.
• Section 158 – right to remuneration or expenses.
• Section 170-171 right to lien .

Important case laws

Inder Kumar v. state of UP:- in this case person placed his baggage on the roof of the bus and the baggage was lost. The court held that it was not the case of bailment since the baggage was not delivered by one person to another.

Sundar Lal v. Ram Sarup and Anr. AIR 1952 ALL 205:- 

Facts of the case – a wood shop was hired under a written agreement that shop be returned in same condition and the hire would be liable for any loss or damages. The shop was burnet by the mob during communal riots in the city.

Judgement: in this case the court held that the destruction of the shop was not done by  the negligence of the hirer so he was not held liable to compensate the plaintiff.

Ultzen vs. Nicholas

Facts of the case:– The plaintiff went to the defendant’s restaurant for the purpose of dining there. When the plaintiff entered the restaurant, a waiter took the plaintiff’s coat without requesting him to do so, and hung it on a hook behind the plaintiff. When the plaintiff wanted to leave, he found that the coat had been lost.

Judgement of the case: – In this case, the court held that the servant was the bailee of the court and had the possession of the same so he was liable to compensate for the losses done to the plaintiff which was due to his negligence.

Points to remember

• Bailment: under Section 148 of Indian contract act 1872, a bailment is delivery of good by one person to another for some purpose.
• The person who deliver the goods is called the ‘Bailor’
• The person whom they are delivered is called the ‘Bailee’
• Bailment is of movable good.
•  A lien is a claim or legal right against assets that are typically used as collateral to satisfy a debt. A lien could be established by a creditor or a legal judgement. A lien serves to guarantee an underlying obligation, such as the repayment of a loan. If the underlying obligation is not satisfied, the creditor may be able to seize the asset that is the subject of the lien. There are many types of liens that are used to secure assets.
• There are 5 types of lien- a) bank lien b)judgement lien c) real estate lien d) tax lien e) mechanic lien.
• Bailor and bailee have different rights and duties which they have to perform.