Section 148 of the Indian Contract Act states that “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’.“
The essentials of Bailment are as follows:
1) Delivery of Possession: The delivery of possession of commodities from one person to another is the first and possibly most crucial element of bailment. The term “delivery of possession” is distinct from “custody,” which refers to when a servant or guest has custody of the owner’s goods but not possession; in this case, the servant or guest is not the Bailee.
For a contract of bailment to arise, the goods have to be handed over to the bailee for a specific purpose. For example: In one case a customer arrive at a restaurant and the waiter promptly took his coat without being asked and hung it on a hook behind him. When the customer was about to leave he notice the coat was gone. In this case the waiter was held liable as a Bailee as he had taken the coat into his possession and relived the plaintiff of its care and thus had assumed the responsibility of a bailee.
A lady handed over some gems to a goldsmith to be melted down and remade into new jewels in another case. When the Goldsmith’s work was done for the day, the lady would receive the gems and place them in a box in the Goldsmith’s apartment. She was in possession of the box’s key. The jewels vanished one night.
Here the action against the Goldsmith failed and he was not held liable as merely placing a box in the defendant’s room to which the plaintiff herself had the key does not come under the ambit of delivery under Section 149 of the Indian Contract act. Delivery is essential to constitute Bailment and bailment came to an end as soon as the plaintiff was in possession of the melted Gold. According to Section 149 of the Indian Contract Act, Delivery is made to the bailee when anything is done to place the goods in his possession or of any person authorised to hold them on his behalf.
Thus Delivery is of two kinds: Actual Delivery and Constructive Delivery. When the Bailor hands over to the bailee physically the goods, it is known as actual delivery as he physically comes in possession of the goods. In constructive delivery the goods remain in the same place and there is no change in physical possession yet something happens to the effect of placing the goods in the possession of the bailee.
A good illustration of this is explained in Fazal v Salmat Rai, The defendant was in possession of the plaintiff’s mare under the execution of a degree. After the decree had been satisfied by the plaintiff, the court ordered the re-delivery of the mare back to the plaintiff. The defendant refused unless he was paid maintenance charges. The mare was subsequently stolen from his custody. Here the court held the defendant liable as after the delivery order had been passed, the relation of bailor and bailee had been established according to Section 148 of the Indian Contract act.
2) Delivery should be upon Contract:
The 2nd condition is that delivery of goods should be for a specific purpose and upon a contract that when the purpose has been fulfilled, the goods would be returned to the Bailor. So essentially when a person’s goods go into the possession of another person without a contract being established, then this doesn’t come under the ambit of bailment under section 148.
This principle was best explained in the case of Ram Gulam v Govt of U.P in which the plaintiff’s goods were stolen and was recovered by the police and was kept in police custody. Subsequently the goods were stolen again yet the plaintiff’s action against the state could not stand. It was held that the obligations that a Bailee has arises from a contractual relationship and cannot come independently from a contract. In the present case the goods were not handed over to the government under any contract of bailment and thus the government cannot be considered to be a Bailee in this situation and is not liable to indemnify the plaintiff.
In Lasalgaon Merchants Coop Bank Ltd v Prabhudas Hathibhaf, the Bombay High Court has discussed about imposing the obligation of a Bailee without a contract. They held that if certain goods are seized by the government or comes under their possession, then they become a bailee and are bound by its obligations even without the existence of a contract of bailment.
3) Delivery should be upon some purpose:
The third criterion is that the items must be bailed for a defined purpose, and once that purpose is fulfilled, the goods must be returned to the bailor or disposed of according to the bailor’s instructions. It cannot be regarded to be a contract of bailment if the person who receives the items is not bound by the agreement to return the commodities or dispose of them according to the bailor’s instructions.
This feature differentiates bailment from most other forms of transactions of similar kind. This is the reason that depositing money with a banker doesn’t come under the ambit of bailment as the banker is not duty bound to return the same money. Similarly an agent collecting money on behalf of the principal is not bailment.
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