10. The Indian Contract Act 1872: Bailment and Pledge - IdmcrackfreedownloadInfo

10. The Indian Contract Act 1872: Bailment and Pledge





Bailment and Pledge – Business Law (BBS 2nd Year)

Define bailment and describes the
essentials factors of bailment.

 Bailment is a kind of special
contract, caused by the delivery of goods. However it’s not a transfer of
ownership of goods rather it is the delivery of goods on a returnable basis.
NCA defines bailment as “ A contract
relating to bailment shall be deemed to have been concluded in case any person
delivers any property to another person on a returnable basis or for handing it
over to any other person or selling it as ordered by him. For eg: “ A gives his
house to B on a rent for Rs. 2000 monthly, it is the bailment of building for
hire,” X gives his car to repair to Z. It is the bailment of a goods for

Essential factor of Bailment:
i) Delivery of goods: Delivery of
goods can be defined as the change of possession of goods from one person to
another, but the ownership of the good remain same. It must be made on the
ground of free consent. The delivery of goods may be actual and constructive. A
gives his bike to B on hire for one day, B takes the bike immediately. It is an
actual delivery of goods, however constructive delivery is not a change of the
physical possession of goods. The goods remain in the same place but something
is done that causes a change of its possession to the bailee. For example
delivery of key of store or vehicles is the constructive delivery.
ii) Delivery for some special
Delivery of goods must be made for some purpose through which the
Bailee is bound to return the goods when the purpose is achieved. If goods are
delivered by mistake than there is no contract of bailment.

iii) Creation of Contract: The
relationship between a bailor and a bailee is the creation of a contract. There
must be a written document if delivery of good worth more than 200. Thus the
both bailee and bailor are bound to create a contract and also they should be
competent to create a contract.

iv) The good must be return.

v) No transfer of ownership

vi) Consideration is not necessary:
the contract of bailment may be gratuitous or non- gratuitous. If bailment is
made for the benefit of a bailor or of a bailee it is gratuitous. For ex: X
lets his bike to A just for 10 minutes.
Rights and duties of Bailor:

What is bailor describes the right
and duties of bailor.
Bailor is a party or person on who
agree to de4liver his goods to the bailee for some purpose for some period of
time on a condition that the bailee shall ultimately return the goods to the
bailor. For ex: If A delivers his car to B for a week, here A is bailor and the
car may be delivered gratuitously or non- gratuitously.

The rights of bailor are given
1) Enforcement of a bailee’s duties:
Bailor can enforce the duties of bailee as his own right by suit in the
following circumstances.

i) To demand compensation, in case
of damage of goods.

ii) To demand damage in case of an
unauthorized use of goods or breach of the terms, and unauthorized mixing of
goods with other goods.

iii) To return goods in the
prescribed time.

iv) To demand natural increment or
profit in goods.

2) Right to avoid or terminate the
The bailor has a right to terminate the contract……..

At any time in the following circumstances:

i) If the objectives of the contract
can not be fulfilled.

ii) if the contract has an illegal

iii) If the the bailee breac hes the
terms of contract.

iv) If the bailment is gratuitous.

3) Restoration of goods lent
Where goods are lent gratuitously the bailor can demand their
return at any time.
4) Right to receive compensation
from wrong doer.
The following are the duties of
i) Duty to disclose the known
defects of good:
 A bailor has to disclose the known defects of the……

goods for bailment. If the bailor does not do so, he will be responsible for
the harm or the loss to bailee, but not for unknown defects.

ii) Duty to bear extraordinary
The bailor is responsible to bear the extraordinary expenses of goods
eg: medical treatment of sick animals, or the expenses made for keeping the
good safe.

iii) Duty to indemnify the bailee: The bailor is responsible to the bailee for any loss due to his/ her imperfect
or defective title of the goods and premature termination of the contract.

iv) Duty to receive back the goods.
Define Bailee and describes the right
and duties of bailee.
Bailee is the party of a bailment
contract to whom goods is delivered by bailor on the condition that after the
completion of purpose of contract, or some period of time the bailee should
return the goods to the bailor. If X gives his house on rent to Y. The Y is

The right of bailee is given below:
i) Right to be indemnified for the
loss caused by lack of information about the goods, defective titles of good.

ii) Right to deliver goods to one of
the several(joint owners): If the bailment contract is concluded by several
joint owner the bailee may deliver the goods back to one of the joint owners,
without consent of other owner in the absence of any agreement to the contary.

iii) Right of special lien: Special
right is the right of a bailee that can keep the goods bailed in his/ her
custody until the bailor does not pay all the necessary charges. The bailee
even can recover the charge by selling the property.

iv) Right to deliver the goods to
bailor even though the real owner of goods is not the bailor.

The duties of bailee is given below:
i) Duty not to make unauthorized use
of the good bailed.
ii) Not to mix the bailed goods with
other goods.
iii) duty to take reasonable care of
the goods bailed.
iv) Duty to return the goods to the
bailor in time.
v) To return the goods with their
natural profit or increments.
vi) To follow the terms and the
instruction of the bailor.
vii) Duty to compensate the loss or
damage caused by him/ her.
Finder of Lost goods
Define finder of lost goods and
write the right and duties of finder.
Finder of lost goods is the person
who finds and keep the lost goods of another person in his own possession, the
law implies that there is a contract of bailment between the owner and finder
of the lost goods. By the law the finder is treated as the bailee who had
agreed to keep the goods of bailor(the person whose good is lost) safely and
promised to return back to the owner.

The right and duties of finder of
lost good is given below:
i) Right of possession: A finder of
lost goods has the right to keep it in his possession until the true owner is

ii) Right of lien : The finder has
the right to keep the goods in his custody until the owner pays the expenses
;incurred in keeping them safe, in repairing the goods and in searching the
true owner.

iii) Right to sue for reward: The
finder can sue for any specific reward which the owner has offered for the
return of the goods. He/She may also retain the goods until he received such

iv) Right to sell the goods:  A
finder of lost good can sell those dgoods in the following circumstance:
– If the true owner can not be
– If the bailor does not pay the
expenses within a reasonable time.
– If the goods naturally decrease or
are destroyed within specific time.
– If the lawful charges of the
finder in  respect of the goods found amount to 2/3 of the value of good.

i) To search the real owner of the
goods found.
ii) Not to mix the found goods with
other goods.
iii) To return the goods to the real
owner after receiving the necessary expenses.
iv) To take care of good and not to
make an unauthorized use of such goods.
Pledge or Pawn
Define pledge and write the right
and duties of pawaner.
Pledge is a kind of bailment where
the transfer of goods or bailment of goods are made as a security for the
payment of debt, or performance of a promise. In such case, the person who
gives goods as a security is called pledger or pawnor (bailor), and the person
who receive the goods as a security is called ‘pledgee’ or ‘pawnee’
 (bailee). The pledge is bound to return the pledged goods on the
fulfillment of his debt or pledgor’s promise. Thus the contract, by which the
possession of goods is transferred as a security is known as pledge.
For ex: X borrows Rs. 50000 from Y
and keep his gold as a security for the payment of that loan.

Essentialities of pledge:
i) Delivery of goods.
ii) Delivery for security.
iii) Lawful purpose.
iv) Return of goods.
v) The goods must be long lasting.
Right and Duties of a pawner
i) A pledgor has a right to enforce
the following duties upon a pledge by a suit.
ii) for reasonable care of goods.
iii) for redemption of goods.
iv) to receive the goods with
v) To stop selling the goods by
depositing dues.
vi) Right to get surplus after the
sale of goods bailed by the pledge.
vii) Right to  return the goods
after the full payment of dues.

i) To compensate the extraordinary
expenses incurred for necessary care of goods pledged.
ii) To receive the goods after the
full payment as per contract.
iii) To pay the rest of the dues, if
it is insufficient by the sale of the goods pledged.
iv) To dispose the facts or defects
and goodness of the goods pledged. 

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Business Law by Tejpal Sheth

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The Indian Contract Act 1872: Bailment and Pledge

Learning Objectives

In this chapter, the students will come to know

  • What is a bailment and pledge of goods?

  • Types of bailment.

  • Duties and rights of a bailee.

  • Duties and rights of a bailor.

  • Termination of a bailment.

  • Lien

  • Pledge

  • Rights of a pwanor and a pledgee.


The term ‘bailment’ is derived from the French word ‘bailer’ which means to deliver a thing under a contract. The delivery of goods by one person to another person for a specific purpose with a condition to return the goods when the purpose is over or otherwise disposed off according to the direction of the person.

The person who delivers the goods is known as the ‘Bailor’ and the person who receives the …

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