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THE NATURE, CONCEPT AND EPISTEMOLOGICAL DEVELOPMENT OF THE LAW


OF BAILMENT: A PROLEGOMENON THE NATURE OF THE LAW OF BAILMENT

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CHAPTER 25

THE NATURE, CONCEPT AND EPISTEMOLOGICAL


DEVELOPMENT OF THE LAW OF BAILMENT: A
PROLEGOMENON

by
MD. ABDUL JALIL*
&
MD NANNU MIAN**

The law of bailment is very important topic in the law of contract. Basically bailment can be a
formal or an implied contract where there are two parties, such as the bailor and the bailee. The
person who delivers the goods to another person under contract or for some other reasons is
called the „bailor‟ and the person whom the goods are delivered is called the „bailee‟.1 In this
chapter, the authors discuss the nature of bailment, duties of the bailee, classification of bailment,
rights and liabilities of a bailee, spiritual aspects of the bailee and finally they put concluding
remarks. In this chapter descriptive and analytical research methodology has been applied to
critically analyze the concept of the law of bailment.

THE NATURE OF THE LAW OF BAILMENT


Bailment is a technical term of common law; etymologically it might mean any kind of handing
of goods. Generally, it is a delivery of goods by a person (known as the bailor) to another person
(known as the bailee) for a specific purpose on condition of their return or disposal, when
purpose is served. The term „bailment‟ derived from the French word „bailler‟ which means „to
deliver or handover‟. 2 The person delivering the goods is called the bailor and the person to
whom the goods are delivered is called the bailee.3 Bailment is limited to tangible goods only and
does not apply to immovable property such as freehold land, building, lake, factory building etc. 4
Section 101 of the Contracts Act 1950 ( CA 1950) has defined bailment as:

*
Dr. Md. Abdul Jalil is an Associate Professor of Law in the Faculty of Economics and Management of
International Islamic University Malaysia (IIUM). E-mail: abd_jalil2@yahoo.com; abduljalil@iium.edu.my.
**
LL. B. (Hons.), LL.M. (SEU), PhD Candidate in the Ahmad Ibrahim Kulliyyah of Laws, International Islamic
University Malaysia (IIUM), Lecturer, Department of Law, Uttara University, Bangladesh.
1
Section 101 of the Contracts Act 1950.
2
Krishnan Arjunan & Abdul Majid bin Nabi Baksh, Contract Law in Malaysia, (LexisNexis, Malaysia, 2008), at p.
587.
3
See Section 101 of the CA 1950.
4
See the observation of the judge in Gilchrist Watt & Sanderson Pty Ltd v York Products Pty Ltd [1970] 3 All ER
825 at 831.
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. The person
delivering the goods is called the „bailor‟. The person to whom they are delivered is
called the „bailee‟.

Explanation — If a person is already in possession of the goods of another person under a


contract to hold them as a bailee, he thereby becomes the bailee, and the owner becomes the
bailor of such goods. Bailor and bailee relation may exist in circumstances although where the
goods in question may not have been delivered by way of formal bailment.
Bailment has two key terms such as possession and ownership. As stated above in bailment only
possession of goods is transferred to the bailee; the ownership of the goods is not transferred to
the bailee. As a result, after transferring the possession of the goods still the bailor retains the
ownership right. That is why in Ashby v Tolhurst 5 the British court held that at common law, the
essence of bailment is the transfer of possession of goods. If possession of goods does not pass to
the bailee, there is no bailment happens.
In fact, the bailment in the law of contract is the creation of the common law. Under common
law when one person (the bailor) transfers his tangible goods or chattels to another person (the
bailee) for a specific period of time with the condition that the bailee must return the goods to the
bailor after the expiry of the fixed period, it is known as bailment. 6 Another example of common
law bailment is that when one person (the bailor) passes the possession of his goods for a
specific purpose, for example for safe keeping of valuable goods to another person (the bailee)
and the purpose is satisfied, it is the duty of the bailee to return the goods to the bailor
immediately after the purpose is satisfied. This is bailment of goods.
As said above in bailment, we have to remember that, the ownership in the goods does not pass
to the bailee; only the possession of the goods is transferred. The bailor still remains as the owner
of the goods even after transferring the possession of the goods to the bailee. 7 The difference
between sale of goods contract and bailment is that in sale of goods the ownership as well as the
possession of the goods are transferred to the buyer but in case of bailment the ownership is not
transferred to the bailee. 8 So, the position of a buyer of the goods and the bailee can be
compared and contrasted for better understanding the difference between a sale contract and a
bailment. In an online article the author argued that the bailee is generally not entitled to the use

5
[1937] 2 All ER 837.
6
Halsbury, Halsbury's laws of Malaysia, (Kuala Lumpur: Malaysian Law Journal, 2007).
7
Muhammad Eqramul Haque, Law of Contract, (Dhaka: Law Lyceum, 2007), at p. 208.
8
Krishnan Arjunan et al, supra, at p. 589; See also P.C. Markanda, The Law of contract : (with special emphasis on
law relating to guarantee, agency, bailment, government contracts, general conditions of contract, tenders and
blacklisting, (New Delhi: Wadhwa and Company, 2nd edition, 2008); The bailment can be express or implied. The
implied bailment is also known as constructive or presumptive bailment where no bailment contract exists; however,
from the facts of the case or circumstances we can presume that a presumptive or resulting bailment has occurred:
See, Halsbury‟s Laws of England, 4th edition, Reissue 1991, Vol. 2, para 1801 at p. 830.
of the property while it is in his possession. A bailor can demand to have the property returned to
him at any time. 9

Bailment includes change of possession of the property from the bailor to the bailee. Under
bailment law, a person who has custody without possession, like a servant, or a guest using his
host‟s goods, is not a bailee. However, constructive delivery of goods by one person to another
person may create the relation of the bailor and the bailee, as stated in the explanation above.
The bailee‟s duty to deal with the goods according to the bailor‟s instructions is incidental to the
contract of bailment, and arises on the delivery of goods, although those instructions may have
already been given and accepted in such a manner as to constitute a prior special contract. 10
The phrase „otherwise disposed of‟ in the above mentioned section 101 of the CA 1950 states the
common law position of bailment. On the whole, a bailment may be described as a delivery of
goods on condition in which case the law usually attaches an obligation to redeliver the goods to
the bailor in the identical or altered form, or otherwise deal with them as directed by the bailor.
Nonetheless, there might have particular situations where bailment may happen in the absence of
express or implied contract which is usually known as constructive or presumptive bailment.11
Hence, it has been clear that bailment might be contractual or extra-contractual and they are
determined based on specific situations. The CA 1950 provides certain examples of contractual
as well as extra-contractual bailment such as:

i) Where, under a contract, clothes are sent to a laundry for washing or dry cleaning,
or goods are handed over to a courier for delivery or are stored in the left luggage
facilities of an airport or train station or in a warehouse, a contractual bailment of
the goods occurs. 12
ii) A bailment needs not to be created by or under a contract. A bailor-bailee
relationship may arise independently of a contract in certain circumstances. If I
was lend you my car gratis for a day that would be a gratuitous loan. As no
consideration would move from you to me, the transaction would not be
contractual. A gratuitous loan creates a bailment independent of contract.13 It is an
example of extra-contractual bailment.
iii) The finding of goods lost by the true owner creates a bailment.14 If a lady takes
off her wedding ring and keeps it on the wash basin to wash her hands in a public
bathroom and later forgets to take it back from on the wash basin, the finder of
that ring becomes the bailee (extra-contractually) of the lady who forgot the ring.
Such type of bailment is also known as presumptive or resulting bailment as
stated above and the finder of the ring (bailee) becomes bound under common law
or in equity to return it to the true owner when asked for it.

9
Lawyer.com, Bailment. See online: contracts.lawyers.com/contracts/bailment.html.
10
Mulla, The Indian Contract Act, (Bombay: H. S. Pathak, 2003), p. 241.
11
Ibid., 243.
12
Section 101 of the CA 1950.
13
See section 112 of the CA 1950 (Malaysia).
14
Section 72 of the CA 1950.
SOURCES OF THE LAW OF BAILMENT IN MALAYSIA
There is no single legislation relevant to bailment in Malaysia except sections 101 to 134 of the
CA 1950. These sections on bailment enshrined in the Contract Act 1950 are not exhaustive.15
There are many lacunas in these provisions; therefore, an exhaustive law of bailment is necessary
in Malaysia to solve disputes related to bailment effectively.
The CA 1950 was drafted based on the Contract Act 1872 (India) which was not a complete law
on contracts. Therefore, the Contract Act 1872 (India) and the bailment provisions provided in it
were not exhaustive and it was confirmed by the Privy Council in the UK in an Indian case
named Irrawadd Flotilla Co. v Bugwandas.16 In this case the Privy Council observed that:
The Act of 1872 does not profess to be a complete code dealing with the law relating to
contract. It purports to do no more than to define and amend certain parts of that law. No
doubt it treats of bailments in a separate chapter. But there is nothing to show that the
Legislature intended to deal exhaustively with any particular chapter or subdivision of the
law relating to contracts.
As the CA 1950 was drafted based on the Indian Contracts Act 1872 and the bailment provisions
from this Act was incorporated in Malaysian CA 1950 without any change, Krishnan Arjunan
and Abdul M. Baksh, 2008, in their book observed that Part IX which contains bailment
provisions in the CA 1950 Malaysia, „are not an exhaustive statements of the law of bailment in
Malaysia.‟17
As stated above, Malaysia needs a complete and up-to-date legislation on the law of bailment.
The Contracts Act 1872 (India) codified bailment provisions from the then existed common law
on bailment in England which has been drastically changed in different times in different statutes
in England such as the Torts (Interference with Goods) Act 1977; the Supply of Goods and
Services Act 1982; the Unsolicited Goods and Services Act 1971; the Unfair Contracts Terms
Act 1977 and the Consumer Credit Act 1974.

ELEMENTS OF BAILMENT
After analyzing section 101 and 102 of the CA 1950, the following elements are found and these
elements are mandatory to constitute a bailment:

Subject Matter

Only goods can be the subject matter of bailment; real property cannot be the subject matter of
bail agreement.

15
Supra, note 2 at 589.
16
(1891) 18 1A 212 at 129.
17
Supra, note 15.
Delivery

The goods have to be delivered by one person to another. Usually, delivery of goods means the
transferring of the possession of the goods and that delivery may be actual or constructive.

(i) Mode of delivery: The mode of delivery of goods has been mentioned in section
102 which says-

The delivery to the bailee 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.

(ii) When such delivery is not required: This new delivery of goods to the intended
bailee may not be required in one particular exceptional case. This position has
been made clear by adding the following explanation to section 101 of the CA
1950.

Explanation—If a person is already in possession of the goods of another person under contract
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.

Thus, it appears that a bailment may be made based on a previous delivery of possession. So, if a
person keeps anything in possession of another person, subsequently they enter into a contract of
bailment, and then the thing needs to be returned to the original owner of the goods when
demanded. In such a case, delivery of a possession is not required rather a contract of bailment
may be constituted based on that previous delivery.18

Purpose

The delivery of possession of goods must be made with a specific purpose. It can be made in the
form of specific object or in the form of certain instruction. In whatever way this is made, the
law requires that this must be a purposeful act in whatever sense. . It could be for the exclusive
gain of the bailor or bailee or both.19

Contract

There must have a contract, as bailment is nothing but one type of contract between two parties.
However, we should not forget that in specific circumstances bailment may arise out of extra-
contractual relation which is usually known as presumptive bailment or constructive bailment.

18
Supra, note 7 at 243.
19
Ibid.
PROVISION ON RETURNING THE GOODS AFTER THE PURPOSE IS
SERVED

The bailment must imply that the goods delivered to someone for a purpose, and the goods must
be returned when the purpose is served. Thus permanent delivery of possession in the goods shall
never amount to bailment. It has been made apparently clear in section 101 that after fulfilling
the purpose, the goods must be returned to the bailee or must be disposed of according to the
direction of the bailor.20 That means, if the bailor requires the bailee to dispose the goods after its
use, then the requirement of returning the goods to the bailor may be waived. Thus, if a person
delivers a television to another by way of bailment for repairing it, then after repairing the
television it must be returned to the owner of the television. However if the owner (bailor) gives
the bailee any other direction regarding disposal of the television, e.g., says to deliver it to any
third person, then the disposal instruction must be followed. 21

CLASSIFICATION OF BAILMENT
There are several types of bailment. Sir John Holt, CJ in Coggs v Bernard22 has stated that there
are six kinds of bailment.
i) Bare Naked Bailment (depositum): The first kind is a bare naked bailment of
goods, delivered by one man to another to keep for the use of the bailor without
reward. This is called a depositum. The bailee is not accountable for loss or
damage to the goods in the absence of gross negligence on his part.

ii) Commodatum Bailment: The second type of bailment is a commodatum, where a


bailor, without recompense, lends a chattel to the bailee for his use. The bailee is
bound to use the strictest care and diligence to keep the goods safe and restore
them to the bailor.

iii) Locatio et Conductio Bailment: The third type of bailment is locatio et conductio
where goods are left with the bailee to be used by him for hire. Here also the
bailee is bound to take the utmost care of the goods and to return them to the
bailor when the time of hiring has expired.

iv) Pawn Bailment: The fourth type of bailment is where goods are delivered to
another as a pawn. The Pawnee must use ordinary care of the goods. Actually, in
common law the goods pledged as security of loan taken is known as pledge.
Pledge is also known as pawn. In pawn, as some goods are pawned as security of
loan taken by the bailor, it is known as pawn bailment. In pawn bailment the
pawnor is known as the pledgor and and the Pawnee is known as pledgee or
bailee. Section 125 of the CA 1950 (Malaysia) provides that:

20
Ibid., 244.
21
Ibid.
22
See 92 ER 107
The bailment of goods as security for payment of a debt or performance of a promise is
called „pledge‟. The bailor is in this case called the „pawnor‟. The bailee is called the
„pawnee‟.

In pawn bailment, the ownership of the goods pledged is not transferred to the bailee, only the
possession of the goods is given. The bailor still retains the owner of the goods pledged as
security for loan taken. Therefore, at common law, the bailee has no right to use the goods
pledged. When the loan is repaid, the goods pledged must be returned to the pledgor (bailor). 23 In
pawn bailment, the bailee has a duty to take reasonable care of the goods pledged so that the
goods are not lost or damaged.

iv) Bailment of Carrier: The fifth type is where goods or chattels are delivered to
person to be carried or have some work done on them. In this case, the bailee has
liability of taking care of the goods as has been required in the case of carriers.

v) Gratuitous Bailment: The sixth type of bailment arises where the bailee does not get
any reward for safe keeping of the goods bailed. If in dealing with the goods the
bailee behaves negligently, an action will lie against him. This type of bailment is
known as gratuitous bailment as no payment or reward is given to the bailee. In an
online article the author said that a bailment may be gratuitous bailment for which
the bailee does not make any payment. A gratuitous bailment occurs when someone
finds lost property and protects it himself or places it in the custody of another, such
as the police, until the lawful owner can be located.24 There are some other types of
bailment. They are as follows:

vi) Constructive Bailment: A constructive bailment occurs when circumstances create


an obligation for the bailee to protect the goods. With a constructive bailment, the
bailment is simply created by law, for example, in the case of a tenant, roommate or
boyfriend or girlfriend abandoning property, an involuntary bailment might be
created. Depending on the laws of the jurisdiction, the landlord or remaining tenants
may have a duty to care for the abandoned property and return it to the abandoning
tenant when he/she claims. This abandoning tenant is known as constructive or
presumptive bailor.25

vii) Service Agreement Bailment: Bailment is usually done by agreement as a paid


service, which gives the property custodian a responsibility and obligation to
protect the goods. Common examples of service agreement bailments are vehicles
parked in a monitoring parking garage, securities or bonds left with a bank, animals
lodged at kennels and goods left at a storage facility under the control of the
bailee. 26

23
Supra, note 7 at 210.
24
Lawyer.com, „Bailment‟. See online: contracts.lawyers.com/contracts/bailment.html.
25
Lawyer.com, Bailment. See online: contracts.lawyers.com/contracts/bailment.html.
26
Lawyer.com, Bailment. See online: contracts.lawyers.com/contracts/bailment.html.
DUTIES OF THE BAILEE
There are some duties of the bailee to take care of the goods bailed upon him. The bailee‟s duty
to deal with the goods according to the bailor‟s orders is incidental to the contract of bailment,
and arises on the delivery of the goods, although those orders may have already been given and
accepted in such a manner as to constitute a prior special contract. 27 In all cases of bailment the
bailee is bound to take care of the goods bailed to him. 28 Where a bailment arises under a
contract, the duties of the bailee are governed by the terms of the contract. However, such duty
may vary or extinguish by an appropriate exemption clause limiting the bailee‟s liability to a
stated sum or by an exclusion clause rendering the bailee immune from any liability. 29 Where a
contract does not cover a given situation or there is no contract, the bailee may be liable in tort
for goods lost, damaged or destroyed while in his possession. 30
In Houghland v RR Low ( Luxury Coaches) Ltd,31 the Court held that all bailees (gratuitous or
otherwise) owe the bailor a duty to take reasonable care of the goods bailed upon and the burden
is on the bailee to show that there was no negligence on his part in taking care of the goods.
Section 104 of the CA 1950 deals with this particular issue which says:
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.

Thus, it appears from the above section that the bailee is under an obligation to take care of
goods like a person takes care of his own goods. The law says that his care will be identical to
the care taken by a man of ordinary prudence under similar circumstances in case of his own
goods. In Carolyn Coster v Andrew Prekarsky, 32 the Supreme Court of Alaska observed that “a
bailee has the duty to exercise the degree of care of reasonably careful owner. The care that is
reasonable will necessarily depend on the particular circumstances of each bailment. The court
also observed that in a bailment case, the bailor bears an initial burden of establishing i) the
existence of the bailment and ii) damages, destruction or loss of the chattel involved in the
bailment.33

The bailee is not bound to take any extra care which a man of ordinary prudence would not take
of his own goods under similar circumstances. The bailee will not be liable if any loss is caused
even after taking the proper care as desired by section 104 unless any special contract to the
contrary is found. Section 105 of the Contracts Act states:

27
See Streeter v Horlock (1822) 1 Bing. 34.
28
N.E. Palmer, Bailment, (North Ryde N.S.W.: Law Book Co., 1991), p. 1120.
29
Brian Coote, Exception clauses: some aspects of the law relating to exception clauses in contracts for the
carriage, bailment and sale of good, (London: Sweet and Maxwell, 1964), at p. 102.
30
Supra, note 7 at 603.
31
See [1962] 1 QB 694.
32
Supreme Court Case No. 5282, 9 June 2000 (Alaska, the USA).
33
Other relevant cases on this point are: Lane v City of Kotzebue, 982 p.2d 1270, 1772 (Alaska, 1999); See also,
Sadder v Alaska Marine Lines Inc. 856 p.2d 784, 787 (Alaska, 1993).
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 104.

The most important duty of the bailee is to return the goods to the bailor as directed by the bailor
after the expiry of time or accomplishment of the purpose for which the goods were bailed.
Section 113 of the Contracts Act describes this duty clearly, which says:

It is the duty of the bailee to return, or deliver according to the bailor‟s 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 does not fulfill this duty then he will be responsible for any loss suffered by the
bailor. This consequence of non compliance of above duty has been mentioned in section 114 of
the Act as follows:

If, by the fault of the bailee, the goods are not returned, delivered, or tendered at the
proper time, he is responsible to the bailor for any loss, destruction, or deterioration of the
goods from that time.

The goods bailed to the bailee may have any increase or profit gained during the continuance of
bailment and in such case of any accretion to it the question arises that who will be the owner of
such accretion. Law says that generally the bailor will be treated as its owner and so that it has to
be returned by the bailee to the bailor unless there is any contract to the contrary. Section 116 of
the CA 1950 states:

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.

ILLUSTRATION
A leaves a cow in the custody of B to be taken care of. The cow has given birth to a calf. B is
bound to deliver the calf as well as the cow to A.

RIGHTS OF THE BAILEE


Like duties, there are some important rights of a bailee. Some of the rights are stated below:

1) To demand possession of goods.


2) To know material defects in goods.
3) To demand proportionate share of mixed goods.
4) To demand damages due to faults in bailor‟s title or defects in goods.
5) To demand expenses of bailment.
6) To demand lien for remuneration.
Bailee’s Right of Particular Lien
This is possessory right of bailee to retain the goods bailed till the return of pay under certain
conditions. Where the bailee has, in accordance with the purpose of the bailment, rendered any
service involving the exercise of labor or skill in respect of the goods bailed, he has, in the
absence of a contract to the contrary, a right to retain the goods until he receives due
remuneration for the services he has rendered in respect of them.

ILLUSTRATIONS
(a) A delivers a rough diamond to B, a jeweler, 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.
(b) 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 wage. B is not entitled to
retain the coat until the payment is made, as three months‟ credit facility has been given
to the bailor.

Thus, subject to the satisfaction of the following conditions the bailee has a right to particular
lien on the goods:

(1) The bailee has to provide a service in agreement with the principle of the
bailment.
(2) The services rendered by the bailee in exercising labor and skill as required under
the bailment contract.
(3) The service rendered merits some remuneration.
(4) The remuneration is not paid.
(5) There is no contract to the divergent.
(6) The bailee is in the possession of the goods bailed.

If the above situations are satisfied then the bailee has a right to hold of such goods bailed to him
till he obtains due remuneration for the service he has rendered to the bailor in respect of them.
This type of lien is called „particular lien‟ because the goods could be retained only for any
amount owed for the service rendered for the goods till the remuneration is unpaid. But, if a
bailee renders any service in reference to goods „A‟, he cannot retain goods „B‟. This is not
justified, under the law of bailment.

Bailee’s Right of General Lien

The right of general lien is not given to all bailees, but it is available to certain types of bailees
under certain situations. The general right of lien must be distinguished from the earlier
particular lien. Right of general lien is wider than the particular lien, because general lien
presents a right to the bailee to retain any goods bailed to him for payment. Here, the goods
retained and the goods in respect of which the service is rendered should be similar.
Right Regarding Delivery of Goods to one of Several Joint Bailors

If more than one join owners bail their goods to a bailee then he may deliver the goods back to
any one of the joint owners provided that there is no contrary agreement to it is found. Section
118 of the CA 1950 (CA 1950) states in this regard that:

If several joint owners of goods bail them, the bailee may deliver them back to, or
according to the directions of, one of the joint owners without the consent of all, in the
absence of any agreement to the contrary.34

Thus, the law gives an option to the bailee in case of joint owners of goods bailed that he can
return it back to any one of them. But if any contrary provision is entered into the agreement, the
provision in the contract will prevail over other options.

Right Regarding Delivery of Goods to Bailor without Title

Sometimes it may happen that the bailor in fact does not have any title to the goods bailed and in
such a case the bailee delivers it back to the bailor or dispose the goods as per the directions
given by the bailor. In such cases the bailee will have no liability to the actual owner of the
goods for delivering it to the bailor who did not have any title to it. Section 119 of the CA 1950
reads to this regard as follows:

If the bailor has no title to the goods, and the bailee, in good faith, delivers them back to,
or according to the directions of, the bailor, the bailee is not responsible to the owner in
respect of the delivery. 35

Thus, the law gives a bailor an indemnity and in such a case the bailee enjoys the right to deliver
it back to the bailor or to dispose of it according to the directions of the said bailor who does not
have any title to it.

Right to Claim Damages for Non-Discloser of the Faults in the Goods Bailed

The bailor has a general duty to disclose the faults of the goods bailed to the bailee. If he does
not make disclosure of any defects in the goods, he is responsible for damage arising to the
bailee. In this respect we may refer to section 103 of the CA 1950 as follows:

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; and, if he does not make the disclosure, he is responsible for damage
arising to the bailee directly from those faults. If the goods are bailed for hire, the bailor
is responsible for the damage, whether he was or was not aware of the existence of the
faults in the goods bailed.

34
See, section 118 of the CA 1950 (Malaysia).
35
Section 119 of the CA 1950 (Malaysia).
ILLUSTRATIONS
(a) 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 away and injured.
“A is responsible to B for the damage sustained.
(b) A hires a carriage of B. The carriage is unsafe, though B is not aware of it, and A is
injured after using the carriage. B is responsible to A for the injury.”

Thus, the first paragraph of to the section 103 of the CA 1950 imposes the duty upon the bailor
to disclose the faults in the goods of which he has the knowledge and the faults in the goods
materially interfere with the use of them or expose the bailee to extraordinary risks. If the bailor
does not make such disclosure as required by section 103 then the bailee may claim damages
from the bailor for the injury sustained due to such fault in the goods.

Second paragraph to section 103 mentioned above imposes a strict liability on the bailor in a
special case which states that if the goods are bailed for hire, the bailor is responsible for such
damage, whether he is or is not aware of the existence of such faults in the goods bailed. Thus, in
case of bailment for hire the bailee has the right to claim damages for every loss suffered by him
due to the non-disclosure of the faults in the goods bailed whether that fault is known to the
bailor or not.

Right to Claim Payment for Necessary Expenses

Section 111 of the CA 1950 gives the bailee the right to claim necessary expenses incurred by
him in case of non-gratuitous bailment. It provides:

Where, by the conditions of the bailment, the goods are to be kept or to be carried, or to
have work done upon them by the bailee for the bailor, and the bailee is to receive no
remuneration, the bailor shall repay to the bailee the necessary expenses incurred by him
for the purpose of the bailment.

Rights to be indemnified by the Bailor

Section 117 of the Act gives the bailee the right to be indemnified by the bailor which lays down
that if the bailor does not have any legal right to make a bailment, but he does so without lawful
authority over the goods bailed, then the bailee can claim any compensation for loss suffered by
him due to that unauthorized bailment. The section states:

The bailor is responsible to the bailee for any loss which the bailee may sustain by reason
that the bailor was not entitled to make the bailment, or to receive back the goods, or to
give directions respecting them.

Right to Claim Compensation for Safe Custody

If the bailor does not receive back the goods and the bailee in consequence of it suffers any loss
then the bailor is bound to make good the loss suffered by such bailee. Thus, if a person does not
take his dress from the tailor after the date of delivery then the bailor is bound to give
compensation to the bailee for secure custody.

LIABILITY OF THE BAILEE


There are three types of liability of a bailee to the bailor. They are:
i) Liability under contract;
ii) Liability in torts;
iii) Liability for negligence.

Liability under Bailment Contract


A bailee has liability under contract of bailment. Usually the bailment contract whether it is in
writing or oral provides certain terms related to the liability of a bailor in case of breach of
contractual terms. So, a bailee is liable to the bailor for breach of contractual terms. The main
liability of the bailee arises out of section 104 of the CA 1950 which provides a duty for the
bailee to take reasonable care to safeguard the bailed goods. This section states that the bailee
must 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‟.
In Houghland v RR Low (Luxury Coaches) Ltd,36 the plaintiff and her husband were returning
from an excursion in one of the defendants‟ motor coaches. She had deposited her suitcase with
the coach driver who put it in the boot and locked. After a break in the journey for tea, the coach
would not start and the passengers had to wait until a relief coach came some three hours later.
During the three hours time, the original coach was parked unattended in the dark. When the
relief coach arrived, the passengers unloaded the luggage from the original coach and transferred
it to the relief coach. The driver of the first coach supervised the reloading of the luggage on the
relief coach but there was no supervision of the discharge and transfer of the luggage from the
first coach to the relief coach.
The driver of the relief coach did not assist in any way with the luggage. On arrival at the
destination, the plaintiff‟s suitcase could not be found. The plaintiff sued the defendant as a
gratuitous bailee who had failed to discharge the duty to take reasonable care of her suitcase. The
trial court entered judgment for the plaintiff and the defendants appealed. The Court of Appeal
(the UK) dismissed the appeal. The Court held that all bailees (gratuitous or otherwise) owe the
bailor a duty to take reasonable care of the goods bailed and the burden is on the bailee to show
that there was no negligence on his part in the care he took of the goods.
In Abdul Rahman v. Ariffin,37 the plaintiff and the defendant made an agreement that the plaintiff
would give a buffalo to the defendant (bailee) and the defendant would look after the buffalo and
they both will share the produce of the buffalo. However, the buffalo was lost due to no

36
[1962] 1 QB 694.
37
[1956] MLJ 89.
negligence of the defendant. When the plaintiff sued the defendant for the value of the buffalo
the court held that it was the duty of the bailee to prove that the loss to the buffalo was not
attributable to lack of care on his part.
In Port Swettenham Authority v TW Wu and Co. (M) Sdn Bhd,38 the Privy Council determined
the liability of the bailee for breach of reasonable duty of care. In this case 93 cases of
pharmaceutical goods had been unloaded at Port Swettenham (now Port Klang) and kept in the
custody of the Port Authority (the bailee) pending collection by the plaintiffs (bailors).
Subsequently, the plaintiffs were able to collect only 29 cases of medicines and the rest of the
cases of medicines were stolen. The plaintiff brought an action against the bailees for breach of
contract and /or conversion of the remaining 64 cases of medicines. The court determined that
the onus lay on the bailees to prove that the goods had not been lost because of their negligence
or misconduct or that of their servants. The court found that the bailees had failed to discharge
that onus. Accordingly the court gave judgment for the bailors.
We can refer to a recent case on the liability of bailee for breach of contractual terms. In Tai
Seng Glass Sdn. Bhd. v Jasa Kita Warehousing Services Sdn. Bhd.,39 the Court of Appeal
(Malaysia) held that when goods are delivered by plaintiff to the defendant under contract, a
bailment contract is created between the plaintiff and the defendant. Due to this plaintiff and the
defendant relationship the defendant had a duty to take all reasonable care to safeguard the goods
kept in the warehouse so that they are not stolen or damaged. If reasonable care is not taken as
provided in section10440 of the CA 1950, the defendant would be liable to the plaintiff (bailor)
for damages.
We know that there are some extra-contractual bailments. Extra-contractual bailment is
presumed in the circumstances of the specific case and the liability of the bailee is determined
based on the principle of fairness and torts.

Liability of Bailee for Tort


Tort is a civil wrong done to a person or institute. The law of torts says that every person has a
duty to take care of his neighbor and not to harm him. If that person breaches his duty to take
care, he will be liable to compensate the injured person. In Utusan (M) Sdn. Bhd v. Prestige
Freight and Forwarding (M) Sdn. Bhd and others 41 the plaintiff (bailor) appointed the
defendants (bailees) as their logistic service providers and to keep the goods in the warehouse for
payment until received by the plaintiff from the warehouse. The goods were lost due to the
negligence of the defendant. As a result, the High Court of Malaya, Kuala Lumpur, ruled that as
the bailees the defendants had a duty to take reasonable care of the goods „as a man of ordinary
prudence‟ as provided in section 104 of the CA 1950 . Therefore, the defendants were held liable
to the plaintiff for damages.

38
(1978) 2 MLJ 137.
39
(2010) 1 LNS 745, at p. 37.
40
Section 104 of the CA 1950 provides: “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.”
41
(2011) 1 LSN 17.
A bailee might be liable for conversion in tort law. If he deals with the bailed goods in such a
way which is inconsistent with bailment law or the instructions given by the bailor, then he
might be liable for conversion of the goods bailed to him. In that case he will be liable to return
the goods to the bailor or if the goods are sold or used up by him he would have to pay
compensation equal to the value of the goods. In this regard we may refer to the valuable
observation of Atkin J. in Lancashire and Yorkshire Railway Co. v MacNicoll,42 where he said:

It appears to me plain that dealing with goods in a manner inconsistent with the rights of
the true owner amounts to a conversion, provided that it is also established that there is
also an intention on the part of the defendant in so doing to deny the owner‟s right or to
assert a right which is inconsistent with the owner‟s right.
In Oakley v Lyster, 43 Scrutton LJ also observed that all types of interference with the bailed
goods do not amount to conversion. An interference with the bailment goods can be reckoned as
conversion in law if the interference is serious and the bailee denies the ownership of the bailor.
According to Perke B., the burning of a log of wood belonging to another person without his
permission would amount to conversion. However, cutting a log into two pieces might not be
considered as conversion.44 In such a case, the bailee would only be liable for violating the
conditions of the bailment contract if the contract prohibits such act. But, the cutting of the log
into two pieces with an intention to carve it into a figurine would be a conversion. According to
Krishnan Arjunan et al, in the tort of conversion, the liability of the bailee is strict liability. The
bailee can be liable even if he did not know that another person was the owner of the goods or
another person had a title to the goods superior to his own interest in the goods. 45

Liability for Negligence


Negligence is to show carelessness in taking care of the safety of the goods bailed. A negligent
person would be liable in law to compensate the victim or injured person for his negligent act.
Similarly, if a bailee is negligent in taking reasonable care of the goods of the bailor, he will be
liable to compensate the bailor if the goods are stolen or damaged. Hence, it is recognized law
that a bailee will be liable to the bailor for negligently dealing with the bailor‟s goods and as a
result the bailed goods are damaged or lost.
In this regard we may refer to the recent case decided by the High Court of Malaya, Kuala
Lumpur in 2011 in Utusan Melayu (M) Berhad v Prestige Freight and Forwarding (M) Sdn.
Bhd. and others,46 the plaintiff (bailor) appointed the defendants (bailees) as their logistic service
providers and to keep the goods in the warehouse for payment until received by the plaintiff from
the warehouse. The goods were lost due to the negligence of the bailee. After hearing the case
the High Court of Malaya held that the bailee had a duty to take reasonable care of the goods „as
a man of ordinary prudence‟ as provided in section 104 of the CA 1950 . Therefore, the
defendants were held liable to the plaintiff for damages.

42
[1918] 88 LJKB 601.
43
[1931] 1 KB 148.
44
Simmons v Lilystone (1853) 8 Ex 431.
45
Supra, note 2 at 608.
46
(2011) 1 LSN 17.
BURDEN OF PROOF IN THE LAW OF BAILMENT

As said above in the law of bailment the onus to prove the allegation (known as burden of proof)
is on the bailee and not on the bailor. The bailor‟s duty only to prove that there was a bailment
agreement and the bailed goods has been lost or damaged while it was in custody of the bailee.
About this point the Court of Appeal (the UK) in Houghland v. RR Low (Luxury Coaches) Ltd,47
observed that all bailees (gratuitous or otherwise) owe the bailor a duty to take reasonable care of
the goods bailed and the burden is on the bailee in the care he took of the goods.

In Abdul Rahman v. Ariffin,48 the plaintiff entrusted a buffalo to the defendant (bailee) under an
agreement between them. In the agreement, it was agreed that the defendant would look after the
buffalo and they would share its produce in equal proportion between them. Unfortunately, the
buffalo was lost when it was in the custody of the defendant (bailee).

After hearing the case and taking evidence from the plaintiff (bailor), the learned Magistrate held
that there was a contract of bailment of the buffalo but held that the plaintiff had the onus to
prove that the loss of the buffalo was due to the negligence or default of the defendant (the
bailee), but he failed to prove that onus. Therefore, the plaintiff has no cause of action.

On Appeal, the Court of Appeal (Malaysia) held that the onus was on the defendant as the bailee
in this case to prove with adequate evidence that the loss was not attributable to lack of care on
his part. The plaintiff had no duty to prove this onus. Therefore, the learned Magistrate was
wrong in holding that the onus was on the plaintiff.

The famous author on Law of Contract, Mr. Chitty was also of the opinion that in the bailment
case the burden of proof is on the bailee to prove that the loss or damage to the goods bailed was
not due to his negligence or fault to take reasonable care. He wrote in his book at p. 846 that:

In the case of loss or damage to goods bailed, the onus is on the bailee to show that the
loss or damage was not attributable to any lack of care which by law is required of him. 49

Similarly, the eminent author on Law of Contract, Krishnan Arjunan and Abdul Majid have
observed in their book on point of burden of proof in bailment case that the burden of proof is on
the bailee and not on the bailor to prove with adequate evidence that the loss was not due to the
lack of care of the defendant.50

Thomas J. in Abdul Rahman case (mentioned above) observed at p. 89 that:

47
[1962] 1 QB 694.
48
[1965] 1 MLJ.
49
Chitty, Chitty on Contract, 20th edition, at p. 846.
50
Supra, note 2 at 605-607.
It seems to me that once loss has been proved by the plaintiff, the onus has been proved
by the plaintiff, the onus has been discharged on the part of the plaintiff and the onus then
shifts to the defendant to show that the loss occurred in the circumstances which proved
no lack of care on his part.

In the Port Swettenhan Authority v. T W Wu and Co. (M) Sdn. Bhd,51 the appellants (bailees)
Contended that sections 104, 105 and 114 of the CA 1950 (Malaysia) did not specify that they
(as bailees) had the onus of proving that they took the degree of care specified in section 104 in
respect of the 64 missing medicine cases. In response, the Privy Contracts (UK) held that
sections 104 and 105 of the CA 1950 placed upon the appellants (the bailees) the onus of proving
that they had taken as much care of the respondents‟ (bailors‟) goods as a Port Authority of
ordinary prudence would under own similar circumstances have taken of its own goods of the
same bulk, quality and value as to the 64 lost cases. In this case the Privy Council also observed
that:

Even if there is nothing in the provisions of the Contract Act 1950 (Malaysia) to establish
with certainty whether the onus is upon the bailor to prove the default or upon the bailee
to disprove it, those provisions must be interpreted in the light of the common law. And,
at common law the onus is always upon the bailee, to prove that the loss of any goods
bailed to him was not caused by any fault of his or of any of his servants or agents to
whom he has entrusted the goods for safe keeping. 52

Pollock and Mulla, who are considered as legal scholar of great weight, have written in their
book to the similar effect that:

In cases governed by the provision of sections 151 and 152 [which correspond exactly
with sections 104 and 105 of the Contracts Act 1950 (Malaysia) the loss or damage of
goods entrusted to a bailee is prime facie evidence of negligence and the burden of proof,
therefore, to disprove negligence lies on the bailee.53

In Jaya Jusco Stores Sdn Bhd. v Sime Darby Security Services Sdn Bhd.,54 the High Court
(Malaysia) held that once the plaintiff had established the bailment under sections 104, 105 of
the CA 1950, the onus of proof shifted to the bailee to show that it had taken as much care of the
plaintiff‟s goods as a person of ordinary prudence would.

In the latest case on the point of bailment decided by the High Court of Malaya, Kuala Lumpur,
Utusan Melayu (M) Berhad v Prestige Freight and Forwarding (M) Sdn. Bhd. and others, 55 the
plaintiff (bailor) appointed the defendant (bailees) as their logistic service providers and to keep
51
[1978] 2 MLJ 137.
52
See Port Swettenhan Authority v. T W Wu and Co. (M) Sdn. Bhd., supra, at p. 138; See also, Lee Heng v Port
swethenham Authority [1971] 2 MLJ 27.
53
Pollock and Mulla, Indian contracts and specific Relief Acts, 6th edition, at p. 521.
54
[2000] 5 MLJ 107.
55
(2011) 1 LSN 17.
the goods in the warehouse for payment until received by the defendant from the warehouse. The
goods were lost due to the negligence of the defendant. As a result, the High Court of Malaya,
Kuala Lumpur, held that as a bailee the defendants has a duty to take reasonable care of the
goods „as a man of ordinary prudence‟ as provided in section 104 of the CA 1950 (Malaysia).
Therefore, the defendants were held liable to the plaintiff for damages. The High Court also held
that the burden of proof was on the defendants to show that the loss of the goods was not
attributable to the lack of care on the part of the defendants; the plaintiff (bailor) did not have
that onus to prove.

RESPONSIBILITY OF THE BAILEE: AN ISLAMIC SPIRITUAL


PERSPECTIVE
The liability of a bailee has been explained above with the help of some decided cases. Now it is
crucial to discuss whether the great religion of the world „Islam‟ does say anything about the
responsibility of a bailee. Islam means peace and security. Islamic religion ensures peace and
security for humanity. It also puts great emphasize on justice and fairness. The principles of
justice and fairness demand that the bailee who is like a pledge is bound to return the bailed
goods to its real owner (the bailor), when the owner wants it back or when the bailment contract
expires. It would be unfair to allow the bailee to claim the ownership of the bailed property and
to sell it or to consume it. Therefore, Allah (s.w.t.) the Creator of this earth has asked the people
including the bailees to render back the trust to its original owner. In this regard we may refer to
the holy Quran where Allah (s.w.t.) says:

Allah commands you to give back the trusts to their rightful owners, and when you judge
between people, judge with fairness. Surely, how excellent is the counsel which Allah
gives you. Allah is He who hears and observes all. 56
Verse 58 of Surah Nisa of the holy Quran clearly commands the bailee to render back the bailed
goods (trust) to its rightful owner. On the basis of this Quranic verse we can say that under
Islamic law of contract it is compulsory for a bailee to return the bailed goods to the bailor when
he asks the bailee to return it. This Quranic verse also does not allow the bailee to keep the bailed
goods in his custody beyond its agreed period and he cannot also claim the ownership of the
bailed goods and even he cannot transfer the ownership of the bailed goods to other persons.
This is the conclusive Islamic contract law on point of the responsibility of the bailee in relation
to the bailed goods.
In the same verse Allah (s.w.t.) also says: “When you judge between people, judge with
fairness.” This verse commands the judges in the court or arbitrators appointed by the bailor and
bailee to reconcile the dispute related to bailed property. This verse commands the judge or the
arbitrator to judge between the bailor and bailee in relation to the bailed property fairly. So, here
Allah (s.w.t.) emphasizes on the „fairness principle‟. Bailment is of different types: it can be
contractual or non-contractual bailment. Non-contractual bailment for example, presumed

56
Surah Nisa (4): 58.
bailment or constructive bailment where the goods are passed to the bailee mistakenly or the
bailee gets the possession of goods for someway without any intention of the bailor. In all these
circumstances, Allah commands the bailee to render back the bailed goods to the bailor and
commands an arbitrator to give a fair award after hearing both the bailor and bailee about the
facts and disputes related to the bailed goods. So, as a concluding remarks we can say that under
Islamic law of contract it would be unjust and unfair for the bailee to claim ownership of the
bailed goods and to consume or to sell it without prior permission from the bailor. Islamic
religion always suggests a peaceful solution to disputes of people with the holy intention of
maintaining peaceful and joyous social life in this world. In this regard Allah (s.w.t.) says in the
same verse 58 of Surah Nisa that: “Surely, how excellent is the counsel which Allah gives you.
Allah is He who hears and observes all.”

CONCLUSION
In this chapter we have discussed the nature and concept of the law of bailment, the duties, rights
and liabilities of bailee under the bailment law in Islam as well as the traditional law. We have
found that bailment is one of the most important branches of law which offers the society some
benefit to keeping valuable goods in custody of some good people who are known in legal term
as bailee and in Arabic term mu‟taman (trustee). Some people may not feel secured to keep some
valuable goods or other movable property in this own custody for fear of thieves or robbers. In
those cases, the owner of the goods may consider to keep the goods in custody of some other
people who are reliable and pious in the society.
Another important point is that the law of bailment clearly specifies the duties, rights and
liabilities of the bailee to avoid any disputes between the bailor and the bailee. However, as we
have discussed in the „Introduction‟ of this chapter that the law of bailment is not exhausted.
There is some lacuna in this law as there is no separate legislation on bailment law in Malaysia.
The only bailment law that Malaysia has is the 34 sections in the CA 1950 (Malaysia) which
was codified from the Contracts Act 1872 of India around 150 years ago. So, the bailment law in
Malaysia is really very old and it is essential to update the law based on the latest updates in the
UK and Australia and also in compliance with Islamic law principles. There is a scope of further
research in this area on point of shariah principles related to the bailor-bailee relationship. The
amanah (trust) principle is relevant in bailment law. There are many ahadis from Prophet
Muhammad (s.w.t.) which instruct the mu‟taman (trustee/bailee) to be honest and fear Allah to
follow amanah rules and regulations. Similarly, Islam also provides some guidelines for the
mu‟tamin (owner, bailor) in relation with his duties and responsibilities for the bailed goods as
well as the rights of the mu‟taman.

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