Table of Contents
What is Bailment?
Definition: A bailment is defined as a type of legal relationship that revolves around the contractual transfer of assets or property from a bailor who voluntarily but temporarily gives up the possession to a baile but not the entire ownership.
Bailment is a legal relationship between two companies or parties in common law, where assets or property are transported from a bailor to a bailee. In this connection, the bailor handovers physical ownership of a piece of personal property to the bailee for a certain period but retains ownership. A bailment is created as an act of transporting goods to a bailee for a particular reason without possession of the property but the baile would not have the entire ownership.
The term ‘bailment’ has originated from the word ‘biller, a french word. It means ‘to deliver’. Bailment has been described in Section 148 of the Indian Contract Act, 1872. According to the contract, bailment entails delivering goods from one person to another for a specific reason. Upon an agreement, when the objective is completed, the good must be returned or traded with the assistance of the person who has delivered the goods.
Understanding Bailment
A bailment is an agreement that follows from the transport of goods. It suggests a sort of association in which the personal property of one person momentarily goes to another person for some reason while the possession is with another person.
Bailment is the transport of goods by one individual to another for some reason, upon a contract, that they shall, when the objective is done, be returned, or else discarded as per the instructions of the individual delivering them.
When bailors create a bailment, the bailees must intend to and actually physically possess the bailable asset. Three types of bailments are prevalent-
- Bailment to benefit both parties
- Bailment to benefit only the bailor
- Bailment to only benefit the bailee
Bailment parties – Bailor and Bailee
There are usually two groups to the contract of bailment. The person who is the owner and transports the goods is the ‘bailor’ while the person to whom the goods are transported is called the ‘bailee’.
There are usually two parties to the contract of bailment. The person who is the owner and delivers the good is called ‘bailor’ while the individual to whom the goods are delivered is called ‘bailee’.
In the bailment, the bailee must ensure a reasonable amount of care for the personal property of the bailor, as any sort of loss or damage to property because of the negligence of bailment duty might result in legal issues.
Working of Bailment
A bailment is a contract in common law that becomes effective when someone delivers an asset to any other person for security. Bailments only begin once the property is in the hands of the bailee. The bailor is the owner of the asset and temporarily relinquishes it to the bailee. Although the bailor gives possession to the bailee, the bailor retains legal ownership of the asset.
Importance of Bailment
Bailments permit people to transport ownership of their property to any other person for safekeeping. Bailees may have more safe means when it comes to owning assets. This is remarkably accurate in the case of banks, which are assigned by their clients to own and preserve their money.
Features of a Bailment
1. Delivery of ownership
The first important feature of bailment is the delivery of ownership by an individual to another.
2. Contract
The association of a bailor and the bailee is contractual. The agreement must explicitly reveal the objective of the delivery of goods and, later, when the aim is complete, to return the goods to the owner.
3. Purpose of delivery
A bailment of a good is made for some objective and is subject to the condition that when the purpose is over, the goods will be sent to the bail.
Service Agreement Bailment
Service agreement bailments benefit both parties in the relationship. The bailor gets the benefit of safeguarding their asset by the bailee who receives payment for their service. Parking your car in a secure lot, renting a safe deposit box, using a paid valet service, or dropping your clothes off at the cleaners are common examples of service agreement bailments.
Bailment End
The most usual termination for a bailment occurs when the relationship ends after the asset is transferred back to the bailor by the bailee.
Types of Bailment
Based on remuneration
1. Gratuitous Bailment: When a bailment is constituted without considering any benefit to the bailor or the bailee, it is described as gratuitous bailments.
2. Non-Gratuitous Bailment: When bailment is constituted considering benefit for bailment, it is known as Non-Gratuitous Bailment.
Based on Benefits to the Parties
1. Bailments That Benefit Both the Bailor and Bailee: It is also referred to as a service agreement bailment and in this, both bailor and bailee get the benefit out of the bailment for instance parking your car in a paid parking.
2. Bailments That Only Benefits the Bailor: This is understood as a gratuitous (free) bailment in which bailors give their goods to bailees for safe custody, and in the process, bailees do not get any benefit for example valet service in the hotels.
3. Bailments That Only Benefits the Bailee: Such type of bailment is also known as constructive bailment in which bailors give their goods to the bailees for the benefit of the bailees for example your friend borrows your book for a week.
use the property common example consideration
What are the Duties of Bailors?
1. Disclosing the known faults
Bailors are responsible for disclosing all the known faults about that good that is delivered to the bailee for bailment.
2. Bearing expenses of bailment
In non-gratuitous bailments, bailors are expected to bear all expenses while in gratuitous bailments, they are required to pay all the necessary expenses.
3. Indemnify Bailee
Bailors are also responsible for indemnifying the bailee if the losses incurred by him due to the premature termination are more in comparison to benefits he had received. Bailor is also responsible for indemnifying the bailee if that the bailee suffers because the title of the bailor to the good is defective.
4. Receiving back the goods
Once the term of the bailment expires, or its purpose is fulfilled, it is the duty of the bailor to receive the goods back from the bailee.
What are the Duties of the Bailee?
1. Doing reasonable care of the goods bailed
A bailee is responsible for taking good care of the goods bailed to him or her does not matter the bailment is gratuitous or non-gratuitous.
2. No unauthorized use of goods
Bailees are also responsible for not doing any sort of unauthorized use of bailed goods, as, after the possession of the property of the bailor, the bailee would be held liable for any damage to the goods.
3. Not mixing goods bailed with own goods
After the bailment, the bailee is responsible to not mix the bailed goods with his own goods.
4. Returning any accretion to the goods
If there is no contract for the bailed goods, if the bailee makes any profit from the goods bailed, it is the duty of the bailee to return it to the bailor.
5. Returning the goods
Once the time period of bailed good has bailed is expired or its purpose is completed, the bailee is responsible for returning the bailed goods.
Termination of Bailments
A bailment can be terminated in different situations when-
- The purpose of a Bailment is fulfilled
- The end of a Fixed Term has occurred
- The bailed property is destroyed
- One party of the bailment gives notice of termination
Wrap Up!
On the concluding note, it is clear that a bailment agreement revolves around the transfer of possession of the good from the bailor to the bailee for fulfilling a specific purpose.
Bailment of goods is different from the sale of goods, as in sales ownership is transferred while in bailment ownership is not transferred to bailee from the bailor.
Now, after understanding the whole concept, what is your definition of bailment? Share with us in the comment section below.
