Page 100 - DCOM103_COMMERCIAL_LAW

Unit 10: Contract of Bailment

Notes

Note In United Breweries Ltd v/s State of Andhra Pradesh (1997), 3 SCC 530: 1997 AIR SCW
1414, the appellants sold beer in bottles to the customers. The customers were required to
pay cost of beer and to deposit a sum for bottle which was refundable. The customers were
advised to collect empty bottles from the consume and return them to the appellants and
get back their deposit for the bottles. Supreme Court held that there was no sale of bottles
but in clear terms it was bailment.

10.1.2 Kinds of Bailments

Bailments may be, classified into six kinds as follows:
1. Deposit: Delivery of goods by one person to another for the use of the former, i.e., bailer;
2. Commodatum: Goods lent to a friend gratis to be used by him;
3. Hire: Goods lent to the bailee for hire, i.e., in return for payment of money;

4. Pawn or Pledge: Deposit of goods with another by way of security for money
borrowed;
5. Delivery of goods for being transported, or something to be done about them, by the bailee
for reward.
6. Delivery of goods as in (5) above, but without reward.

10.2 Duties and Rights of Bailer and Bailee

After understanding term bailment, let us start with duties and right of parties involved in
bailment. These parties are bailer and bailee. Bailee is also termed as finder of goods.

10.2.1 Duties of a Bailer

1. To disclose know faults in the goods (S.150): The bailer is bound to disclose to the bailee
faults in the goods bailed, of which the bailer is aware and which materially interfere
with the use of them or expose the bailee to extraordinary risks. If he does not make such
disclosure, he is responsible for the damage arising to the bailee directly from such faults.
If the goods are bailed for hire or reward, the bailer is responsible for such damage whether
he was or was not aware of the existence of such faults in goods bailed.

Examples: (i) 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 and injured. A
is responsible to B for damage sustained.

(ii) 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 for injury.
2. Liability for breach of warranty as to title: The bailer is responsible to the bailee for any
loss which the bailee may sustain by reason that the bailer was not entitled to make the
bailment, or to receive back the goods or to give directions respecting them (s.164).

Example: A gives B’s car to C without B’s knowledge and permission. B sues C
and receives compensation. A, the bailer, is responsible to make good this loss to C, the
bailee.

LOVELY PROFESSIONAL UNIVERSITY 93