LEGAL ASPECTS OF

BUSINESS

LAW OF BAILMENT AND PLEDGE

MADE BY- SURELEE DULLOO 216

VARUN KUMAR 241
UDIT GUPTA 243
VAISHALI SUKHANI 244
TONURUCHI OLIMMAN 261
 BAILMENT
According to section 148 of the contract act- 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 off
according to the directions of the person delivering them.

The person delivering the goods is called BAILOR and the person to whom it is
delivered is called the BAILEE and the transaction is called BAILMENT.
A bailment is thus a delivery of goods on condition that the recipient shall
ultimately restore them to the bailor or dispose them of according to the
directions of the bailor.

Common examples of bailment are :-

1. Hiring of goods
2. Delivering of cloth to tailor for stitching
3. Delivering a watch or scooter for repair
4. Depositing goods fro safe custody
 *FEATURES OF
BAILMENT
From the definition given by section 148 it follows that a bailment has the
following essential features:

It is a delivery of MOVABLE GOODS by one person to another person (not being

his servant). Section 149 explains the mode of delivery and states that the
delivery of goods may be either ACTUAL or CONSTRUCTIIVE
The goods are delivered for SOME PURPOSE. When goods are delivered by
mistake without any purpose, there is no bailment within the meaning of its
definition in section 148.
The goods are delivered subject to the condition that when the purpose in
accomplished the GOODS ARE TO BE RETURNED IN SPECIE OR DIPOSED OF
according to the directions of the bailor, either in their original form or in an
altered form
 TYPES OF BAILMENT

On the basis of reward On the basis of benefit

For the exclusive

Gratuitous benefit of bailor

For the exclusive

Non-Gratuitous benefit of bailee

For the mutual

benefit
 * DUTIES OF BAILEE
* TO TAKE REASONABLE CARE OF THE GOODS BAILED: As per section 151,
whether the bailment is gratuitous or non-gratuitous, Bailee is responsible to
take as much care of the goods bailed to him as a man of ordinary prudence
would, under similar circumstances

* Not to mix the goods bailed with his own goods: The Bailee must not mix the
goods of the Bailor with his own goods. If he mixes the Bailors goods with his
own goods :-
a.With the Bailors consent, both shall have a proportionate interest in the
mixture thus produced (section 155);
b.Without the Bailors consent, and 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 (section 156);
c.Without the Bailors consent, so that the mixture is beyond separation, the
Bailor is entitled to be compensated by the Bailee for the loss of the goods
(section 157).
* Not to set up an adverse title: The Bailee must hold the goods on behalf of
and for the Bailor. He cannot deny the right of the Bailor to bail the goods and
receive them back. If he delivers the goods to a person other than the Bailor,
he may prove that such a person had a right to them as against the bailer.

* 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, or according to his
direction, any increase or profit which may have accrued from the goods
bailed (section 163).
* To return the goods: t is the duty of the Bailee to return or deliver, according
to the Bailors direction, the bailed goods. If he fails to do so, heis responsible
to the bailor for any loss (section 161) notwithstanding the exercise of
reasonable care on his part.

* Not to make any unauthorized use of goods: According to section 154, in

case where Bailee uses the goods bailed in a manner which is inconsistent with
the terms of the contract, he shall be liable for any loss even though he is not
guilty of negligence, and even if the damage is the result of an accident (or
Act of GOD).
 *RIGHTS OF BAILEE
* Delivery of goods to one of several joint Bailors of goods: If several joint
owners of goods bail them, the Bailee may deliver them back to, or according to
the directions of, one joint owner without the consent of all, in the absence of
any agreement to the contrary (section 165).

* Delivery of goods to Bailor without title: 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 thee owner in respect of
such delivery (section 166).
* Right to apply to Court to stop delivery: If a person other than the Bailor, claims
goods bailed, the Bailee may apply to the Court to stop the delivery of the goods
to the bailor, and decide the title to the goods.

* Rightof action against trespassers: If a third person wrongfully deprives the

Bailee of use or possession of the goods bailed to him, he has the right to bring
an action against that party (section 180).
 * DUTIES OF BAILOR
1) DISCLOSE KNOWN FAULTS OF THE GOODS SET TO BAILMENT-
It is duty of bailor to
disclose any defects, which are present in goods, which are being bailed.

2)BEAR EXTRAORDINARY EXPENSES OF AILMENT-

It is the duty of the bailor that he should also pay
necessary expenses sustained by the bailee connection with the bailment
3) INDEMNIFY BAILEE FOR LOSS IN CASE OF PREMATURE TERMINATION OF
BAILMENT-
It is the duty of the bailor to compensate the bailee
if he terminates the bailment before the due date

4) RECEIVE BACK THE GOODS UPON THE EXPIRY OF THE BAILMENT-

It is the duty of
the bailor to take goods back from the bailee after fulfillment of the purpose
5) INDEMNIFY THE BAILEE- when the title of the bailor to the goods is defective
and the bailee suffers as a consequence, the bailor is responsible for the bailee
 *RIGHTS OF BAILOR
1) ENFORECEMT OF RIGHTS:
The bailor can enforce by suit all the liabilities or duties of the bailee as his
rights

2) AVOIDANCE OF CONTRACT:
The bailor may terminate the bailment if the bailee does with regards to the
goods bailed, any act which is inconsistent with the terms of the bailment

3) RETURNS OF GOODS LENT GRATUITOUSLY:

When the goods are lent gratuitously, the bailor can demand
their return whenever he pleases even though he lent them for a specified time
or purpose

4) COMPENSATION FROM A WRONG -DOER:

If a third person wrongfully deprives the bailee of the use or
possession of the goods bailed or does them any injury, the bailor or the bailee
may bring a suit against the third person for such deprivation or injury
 PLEDGE/PAWNMENT
The bailment of goods as security for payment of a debt or performance of a
promise is called PLEDGE. Thus pledge is only a special kind of bailment.
Here goods are deposited with a lender or a promisee as security for payment of
a loan or performance of a promise.
The bailor in this case is called the PAWNOR and the bailee is called the
PAWNEE. The ownership remains with the pledger. The pledgee or pawnee
has only a special interest in the goods. The general interest remains in the
pawnor and wholly reverts to him on discharge of the debt.

EXAMPLE: A borrows Rs.100 from B and keeps his watch as security for payment
of the debt. The bailment of watch is called a PLEDGE.
 *RIGHTS OF PAWNEE
* Right of retainer: This right can be exercised for the payment of the debt,
performance of the promise, interest due on the debt & for all necessary
expenses incurred.(Sec.173)
* Right of retainer for subsequent advances: The subsequent advances by the
pawnee after the date of pledge gives him the right over the pledged goods.
(Sec.174)
* Right to extraordinary expenses: It includes the extraordinary expense incurred
for the preservation of goods pledged. (Sec 175)
* Right against true owner, when the pawnors title is defective: If the pledged
goods obtained by the pawnor under a avoid contract but the contract has not
been rescinded at the time of the pledge, the pawnee acquires a good title to
the goods, provided he acts in good faith & without notice of the pawnors defect
of title. (Sec 178-A)
* Pawnees rights where pawnor makes default:
1. He may file a suit against the pawnor upon the debt or promise & may retain
the goods pledged as a collateral security.
2. He can recover from the pawnor any deficiency arising on the sale of the goods
by him.
 *DUTIES OF PAWNEE
* Duty to take a reasonable care of goods pledged to him.
* Not to mix the pledged goods with his own goods.
* Not to make use of the goods pledged because the goods are a type of
security and not for use.
* To return the goods to pawnor on repayment.
* Not to do any act in violation of the terms of the contract of pledge, & of the
provisions of the Contract Act.
* To deliver any accretion to the goods to the true owner. For eg. In case of
pledged shares any bonus shares received belongs to the pawnor.
 * RIGHTS OF PAWNOR
1) RIGHTS OF REDEMPTION-
A pawnor has a right of redemption after depositing the dues.

2) RIGHT OF SUIT-
If a pawnee makes unauthorized sales the pawnor has the right to file a suit
against the pawnee.

3) RIGHT OF PROPER CARE-

The pawnor can enforce the pawnee to do proper care and maintain the
pledged goods..
 * DUTIES OF PAWNOR

DUTIES OF PAWNOR

MEET THE OBLIGATIONS- PAY EXTRA EXPENDITURE-

Pawnor must meet the He should compensate the
obligations regarding the pawnee for any
contract within specified extraordinary expenses
time. incurred by him.
* AS TO PURPOSE:
Pledge is the bailment of goods as security for the performance of a specific
promise, i.e., the payment of a debt or performance of a promise.
Bailment, on the other hand, is for a purpose of any kind.

* AS TO RIGHT OF SALE
In case of default by the Pawnor to repay the debt, the Pawnee may, after
giving notice to the Pawnor, sell the goods pledged with him. The Bailee
may either retain the goods or sue for his chares.

* AS TO RIGHT OF USING THE GOODS

In case of pledge, the Pawnee has no right to use the goods pledgen with
him. In case of bailment, the Bailee may do so if the terms of bailment so
provide.