1. CHAPTER 12 KHALID MAHMOOD CHEEMA
CONTRACT OF BAILMENT
CHAPTER 12
KHALID MAHMOOD CHEEMA

2. Bailment
Bailment is derived from a French word ‘Bailer’ which means to deliver a thing under a contract for return at a specified time or under a specific condition
Bailment is simply the delivery of goods by one person to another for some purpose or specific time and which must be returned after the completion of the purpose or expiry of specified time
Bailment is voluntary transfer of possession of goods by the owner to another person

3. Bailment
Bailment arises when one person transfer possession of goods to another person on condition that he will return them after accomplishment of the purpose
Bailor: Person delivering the goods
Bailee: Person to whom the goods are delivered
The bailee is under obligation that he must return the goods

4. Characteristics of Bailment Contract
Delivery of Goods
Contract
Return of Goods in Specie
Ownership of Goods
Return of Same Goods

5. Characteristics of Bailment Contract
Delivery of Goods
Delivery means transfer of goods from one person to another for some temporary purpose and time
The delivery may be actual or constructive
Actual delivery is handing over goods to the bailee
Constructive may be made by doing something which has the effect of putting the goods in the possession of the intended bailee or any person authorised to hold them on his behalf
Mere custody of goods does not create the relationship of bailor and bailee

6. Characteristics of Bailment Contract
2. Bailment is Based on a Contract
In bailment, the delivery of goods is upon a contract that when the purpose is accomplished, they shall be returned to the bailor
E.g. tailor must deliver the clothes after tailoring the clothes upon the receipt of charges
But there is also some exception where there is no formal contract but there is a bailment relationship e.g. “Finder of the Lost Goods”

7. Characteristics of Bailment Contract
3. Returns of Goods in Specie
Specie means the ‘specific goods’
The specific goods must be returned after the completion of specific purpose
Specific and not other goods must be returned

8. Characteristics of Bailment Contract
4. Ownership of Goods
Only the possession of goods is transferred and not the ownership
The transfer of ownership would make this transaction a sale/exchange
Return of Same Goods
The same and not different goods must be returned after the completion of the specific purpose or expiry of specific time period

9. Types of Bailment
Bailment can be classified according to the following two categories
Benefits
Rewards
According to Benefits
For the Benefits of Bailor
For the Benefits of Bailee
For the Benefits of Both
According to Rewards
Bailment without Rewards
Bailment with Rewards

10. According to Benefits For the Benefit of Bailor
Goods delivered for the exclusive benefit of the bailor
E.g. keeping ornaments with neighbors without any charges
b. For the Benefit of Bailee
Delivered goods to be used by bailee without any compensation to the bailor
E.g. Using pen of bailor, Borrowing money without charging any interest

11. According to Benefits c. For the Benefit of Both Bailee and Bailor
Delivery of goods for the mutual benefits of both bailor and bailee

12. According to Rewards(Charges)
a. Bailment Without Rewards
There is no charges for delivery of goods
Also called ‘Gratuitous Contract’
b. Bailment For Rewards
There are certain charges for the delivery of goods
Also called ‘Non-Gratuitous Contract’

13. Duties of Bailor To Disclose Known Faults in the Goods
Duty to Repay Necessary Expenses
Duty to Repay Extra-Ordinary Expenses
Duty to Indemnify for Demanding Back
Duty to Indemnify for Defectives
Duty to Receive Back Goods

14. Duties of Bailor To Disclose Known Faults in the Goods
It is the duty of the bailor to disclose the known faults in the goods to be delivered
There are two specific cases
In case of Gratuitous Bailment, Bailor is responsible for only known faults
In case of Non-Gratuitous Bailment, Bailor is responsible for both known and unknown faults

15. Duties of Bailor Duty to Repay Necessary Expenses
Repay the expenses in case of gratuitous bail
No repaying in case of non-gratuitous bail
E.g. Delivery of car but the car tire is damaged. In this case expenses must be repaid

16. Duties of Bailor Duty to Repay Extra-Ordinary Expenses
The extra-ordinary expenses are only repaid in case of non-gratuitous bailment
In case of renting a car, the rent fee is necessary expenses while denting the damaged car is extra-ordinary expense

17. Duties of Bailor Duty to Indemnify for Demanding Back
The bailor must compensate all the losses to the bailee in case the bailor demands the goods before the expiry of specified time period
E.g. A gives cycle to B, B makes some repair costing him Rs Incase A demands the cycle before the specified time, B can demand for the repair expenses

18. Duties of Bailor Duty to indemnify for defectives
If title of the bailor to the goods is defective, the bailor must indemnify bailee’s loss
Duty to Receive Back Goods
Bailor must receive back the goods from the bailee after the accomplishment of the purpose

19. Duties of Bailee Duty to Take Responsible Care
Bailee should take care of goods bailed and must make necessary arrangements for securing the goods and responsible for the expenses/damages due to his negligence

20. Duties of Bailee Duty not to Make Unauthorized Use
Usage by bailee must be according to the terms and conditions of the contract
If not then bailee must compensate any damage

21. Duties of Bailee Duty Not to Mix Goods
If goods are mixed with the consent of the bailor, it does not matter
If mixing of goods is without bailors consent, then bailee must compensate the damages
If mixed goods are separable, then bailee bears separation expenses
If mixed goods are inseparable, then bailee must pay all the expenses

22. Duties of Bailee Duty to Return Goods
The bailee must return goods bailed after:
The completion of the purpose
Expiry of specific time period
The goods must returned:
According to bailors’ direction
Without any demand

23. Duties of Bailee Duty to Return Increase
The bailee must repay any increase or profit must be repaid to the bailor

24. Termination of Bailment
Expiry of Time
Accomplishment of Purpose
Unauthorized Usage by Bailee
On Death (If Gratuitous Bailment)
Termination by Bailor
Destruction of Subject Matter