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BAILMENT AND PLEDGE

BAILMENT AND PLEDGE


Bailment: Sn. 148.

Bailment is the delivery of goods by A to B on a contract that he shall, when the purpose is accomplished, be returned or otherwise disposed of, according to the directions of A. A is called the bailor and B is the bailee.


The leading case is Coggs Vs. Bernard.

A person who is already in possession of goods may contract to hold them as bailee and the owner in such a case becomes bailor. Delivery of goods may be constructive or symbolic. Bailment may be gratuitous or non-gratuitous. The essential feature of bailment is that goods are delivered for a temporary purpose. There is no transfer of title to goods delivered. Only possession is given under a contract. Deposit, Hire and Pawn are examples.


Duties of bailee :

The law fixes certain duties on the bailee :

The bailee must take care of his goods as a man of ordinary prudence. Under such circumstances the standard of care is that of a prudent man, i.e., what care he would have taken in respect of his own property. Duties have been fixed on bailees like, Common Carriers, Railways, Shipping companies, hotels, bank's safety vault etc. In Martin's case, the hospital authorities were bailees to take care of the jewels of the inpatient, they were held liable when the jewels were lost. In Nichol's case, the hotel which was the bailee of the "Coat" of customer C, was held liable, when the coat was stolen. The bailee is not liable for any loss or destruction of property, if he has taken the standard of care as a prudent man.


Use : The bailee should not make use of the goods bailed. But he may use it according to contract. If any damage arises to the goods from such use the bailee is liable.


E.g.

(i) A lends his horse to B for riding only. B allows his son C to ride. C rides with due care but due to accident C falls and horse is injured. B is liable to A for injury to horse.


ii) A lends his horse to B for riding to reach place P. B rides to place D and accidentally horse is injured. B is liable.


Mixing of goods : (Sns. 155 to 157) :

If the bailee without the consent of the bailor, mixes his own goods with that of the bailor the title to goods will be in proportion to their shares; But, when the bailee mixes without the consent of the bailor, and if the goods can be separated, then bailee is bound to meet the expenses for separation and also to pay damages if any. But if the goods are of such a nature that it is impossible to separate, the bailee is liable, for the loss of the goods, to the bailor.


i) Bailee B mixes cotton bales of A marked as X with his own goods marked Y. The bailee should pay the cost for separation.


ii) Bailee mixes 25 bags of wheat flour of A with his own 25 bags of maize flour and makes a heap. The separation is impossible. The bailer may treat his 25 bags of wheat flour, as lost, and may use for value thereof. The bailee is under a duty to return or deliver the goods bailed, to the bailor on the efflux of time or fulfillment of the purpose, with profit or increase, if any.


E.g. : A gives custody of his cow to B to take care. The cow gives birth to a calf. B should return the cow and calf.


Rights of bailee :

1. The bailee has a right of lien i.e., to retain the goods bailed by the bailor, until his charges (or claims) are paid as per the agreement. The lien is lost when the goods are delivered or handed over to bailor.


2. The bailee has a right to sue any person who causes damage to goods bailed with him.


Finder of Goods : (Sns. 168-169)

The finder of goods is a bailee and must preserve the goods and find out the owner. He has no right to sue the owner for compensation for trouble and expense voluntarily incurred by him to preserve the goods and to find out the owner. But, he may retain the good until he receives such compensation from the owner. But, when the owner has offered a special reward the finder may sue for such reward.


He may retain the goods until he receives it. He has a particular lien over the goods. When the owner cannot be found or if found refuses to pay the lawful charges, he finder may sell it. He may sell if :-

1. The goods are of perishable nature, or

2. The charges amount to 2/3rd of the value of the goods.


Leading case : Newman Vs. Bourne. D in his shop found a broach which had been left by customer P. D placed it in the drawer but later found it missing. P sued D. Held : D liable, as he had not taken reasonable care.


Pledge : Sn. 172 :

Pledge is the bailment of goods as security for payment of a debt or performance of a promise. The bailor is the pawnor and the bailee is the pawnee. The subject matter is always movable property. There is the transfer of physical possession and juridical possession to

the bailee. A keeps jewel with B and taken Rs. 2000/- as loan. A is the pawnor and B is the pawnee. The security is the jewel.


Rights and Liabilities of Pawnee :

Right to retain : Pawne may retain the goods for :

i) Payment of debts or performance of a promise.

ii) For payment of interest on debt, and

iii) All necessary expenses incurred for possession or preservation of the pledged goods.

The pawnee may not retain goods for any other debt or promise. He has a particular lien. The lien may be extended for subsequent advances if the parties agree. The pawnee is entitled to receive extra-ordinary expenses which may be incurred to preserve the pledged goods.


In Bank of Bihar Vs. State of Bihar, the Supreme Court held that if sugar bags of C are seized by Government, from the godown of the Bank, the Govt. was liable to pay amount to the Bank which was a pawnee of customer C. On pawnor's default of payment or non-performance at the stipulated time, the pawnee may bring a suit against the pawnor on debt or promise. He may retain the goods as collateral security. He may sell the goods on giving reasonable notice to the pawnor. If the proceeds of sale are less to satisfy the debt, the pawnee may sue the pawnor for the balance of the amount. If the proceeds are more, the pawnee should account for the same to the pawnor and pay thereof.


Pledge by non-owners :

The general rule is that only the owner may pledge his goods. However, there are a number of circumstances when a non-owner may make a pledge. Such a pledge is valid.

1. Mercantile agent, who is in possession of goods (or documents), may in the ordinary course of business pledge the goods in good faith and with knowledge of his right.


2. Person in possession of goods, obtained by voidable contract, may make a pledge of the goods, and it is a valid pledge if the pawnee acts in good faith, without any knowledge of defective title. (Pledge of goods made after the contract is rescinded is not valid).


3. . Person with limited interest may pledge his goods and the pledge is valid. His right extends only to his interest.


4 . Vendor, who continues to be in possession of goods sold to a vendee (buyer), may make a pledge of the goods with the consent of the buyer. Hence, the pawnee takes the goods in good faith, without knowledge of the previous sale.


General Lien and Particular Lien :

Lien is a right of a person to retain the goods of another until certain demands are satisfied.

There are two types of liens :


General Lien : entitles the person, in possession of goods, to retain the goods, until all claims and accounts are satisfied against the owner, i.e., detaining is for general balance of accounts.

Eg : Bankers, Factors, Attorneys, Advocate etc. A bank has a general lien and hence if 'C' has two accounts : deposit account and loan account, the Bank may transfer deposit to loan account, without 'C' s instructions.


Particular Lien : is attached to specific goods for the unpaid price of carriage or for work or labour.

Eg : Finder of goods

Bailee's lien.

Pawnees' lien.

Agent's lien.

Seller's lien.

Partner's lien.


The bankers lien is only for the general balance of account. Hence, when a depositor sued for the return of the jewels pledged by him to the Bank, the bank claimed general lien over all accounts and the jewels.

The deposit may be for a specific purpose, customer C deposited Rs.8000 with his bank B to make telegraphic transfer to his firm at place P. B claimed general lien and adjusted to Cs loan account. Held, specific purpose accepted was for transfer. Hence no general lien.

The bankers, factors wharfingers, attorneys, high court or policy agents may exercise general lien. In all other cases there is only a particular lien. The intention of the parties is relevant in such cases.


Bailer's duties :

i) To disclose faults in the goods :

The bailor should disclose to the bailee any faults in the bailed goods, if the bailor is aware of them. This disclosure is necessary when the faults are of such a nature as to materially interfere with the use of them or expose the bailee to extraordinary risks. If the bailor does not disclose, he becomes responsible for any damage or loss resulting therefrom.


a) A lends his horse which he knows to be vicious, to B. He does not disclose this fact. The horse runs away, B is thrown and injured. A is responsible to B.

b) A hires a carriage of B. The carriage is unsafe, though B is not aware of it. A is injured. B is responsible to A.


ii) To repay expenses to the bailee : (Sn. 158) " If according to the agreement the bailee is gratuitous, the bailor should pay the necessary expenses incurred by the bailee.


iii) To account for loss incurred from defective title :

a) For loss arising from any defect in the title to the goods bailed, the bailor should bear the loss.

b) If the bailor has defective title, and the bailee, in good faith, delivers them back to the bailor or to any person directed by him, the bailee is not responsible. The real owner may obtain a court order preventing the bailee from delivering the goods to the bailor.


Bailer's rights :

1. Right to the restoration of goods: / The bailor; has a right to the restoration of the goods bailed by him.

2. Right to be compensated: The bailor has a right to compensation if the goods bailed are

damaged or he suffers a loss due to negligence of the bailee. If the goods or chattel bailed increase in value bailer is entitled to it. A gives his cow for custody of C. Cow gives birth to a calf. A is entitled to cow and calf.






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