Bailment - Definition, Distinctions with Pledge and Sale of Goods

Q. Explain the various kinds of Bailment. [10 marks - 2015]

Q. Distinguish ‘bailment’ from ‘pledge’ and ‘sale of goods’. [10 marks - 2016]

Q. Distinguish Pledge from Bailment and Mortgage. [10 marks - 2017]

Q. Write any two differences between Sale & Bailment. [4 marks - 2018]

Q. What are the essential elements of Bailment? Differentiate between ‘Bailment’ and ‘Agency’. [10 marks - 2018]

Q. Define Bailment [4 marks - 2022]

Q. Explain various kinds of bailment [10 marks - 2021 - BA LLB]

Q. Explain bailment and discuss its essential requirements [20 marks - 2021 - BA LLB]

Bailment

Bailment is defined in the Indian Contract Act, 1872 under Section 148 as “A Bailment is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them”.

Types of Bailment

There are three different types of bailments: those that benefit both parties, those that benefit only the bailor, and those that benefit only the bailee. 

1. Bailments That Benefit Both Bailor and Bailee

These are standard service agreement bailment. For example, a car parking service provider, the bailee gets paid for keeping the car and bailor the car owner has to pay the parking charges. The bailee has liability for the damages.

2. Bailments That Benefit Only the Bailor

These are a kind of free bailment. For example, free valet parking service. In this case, bailee the service provider doesn’t receive compensation for parking the car but can be held liable for damages.

3. Bailments That Benefit Only the Bailee

These are constructive bailments. For example, Mr. X rents a book from a library. Here Mr. X is the bailee while the library is the bailor, which gets no benefit from the relationship. The library however, expect the book to be returned at the end of the rental period.

In this type of bailout, the bailee faces liability for basically any damage to the bailed item. This is the highest standard of care required out of the three categories.

Essential Element of Contract of Bailment

1. A Valid Contract

A contract of bailment is a special type of Contract which include offer and acceptance, lawful consideration, the parties' capacity and legal intentions. There are two types of bailment based on consideration:

(a) bailment without consideration - Gratuitous Bailment

(b) bailment with consideration - Non - Gratuitous Bailment

2. Delivery of Possession

Delivery of goods in case of a bailment contract can be actual and constructive. Actual delivery of goods means the bailor physically gives goods to the position of the bailee. In the case of constructive delivery of goods, goods are not physically yielded, but a few actions imply that the bailee has been given custody of the goods.

3. Delivery at the end of Contract

After creating a contract, the goods are relaid from the bailor to the bailee. The Contract must have details about the transfer and the return of the goods. Contract of bailment can be expressly signed by parties or told by the parties.

Difference between Bailment and Sale of Goods

Contract of sale	Contract of bailment
Transfer of ownership and possession.	Transfer of possession
The buyer has complete control over the use of the purchased property	Bailee needs to use the property according to the instructions given by the bailer.
The buyer pays the price for the goods	The goods are required to return to the bailer after the specified period after accomplishing the purpose of bailment.
The buyer holds the ownership of the property until he sells the property to another person.	The bailer is not entitled to use the bailed property until the purpose of bailment is achieved.

Difference between Bailment and Pledge

Contract Bailment	Contract of Pledge
A Bailment is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. .	The bailment of goods as security for payment of a debt or performance of a promise is called a Pledge. The Bailor in this is called the Pawnor and the Bailee is called Pawnee.
The bailee is required to return the property in the same condition and the purpose is typically for safekeeping, storage, or a specific use of the property.	Securing the payment of a debt is the aim of a pledge; ie., security against a debt.
If there is a bailment, the amount of compensation is often negotiated separately. It’s possible that the bailee won’t get paid for their labor	Until the obligation is settled, the pawnee is permitted to keep the pledged goods. The pawnee may sell the pledged property to recover the loan if the debtor defaults.
Unless otherwise agreed upon, the bailee is usually expected to return the item in the same condition as it was received.	After the debt is paid back, the pawnor receives their goods back. The pawnee may sell the property to pay off the loan if it is not paid back.
The property may be used by the bailee for the specified purpose but, any usage that goes beyond the parameters of the agreement may need the bailor’s consent.	Unless the pawnor specifically grants it or it’s required for the property’s safety, the pawnee is not entitled to use the pledged assets.
The bailment may end by mutual consent, the accomplishment of the goal, or the passage of the agreed time frame.	Once the obligation is repaid, the commitment is cancelled. The pawnee may sell the pledged property and end the pledge if the debtor is unable to make payments.
Bailment’s obligations and rights only apply to the bailor and the bailee.	In the event of the pawnor’s default, the pawnee’s rights and interests may be claimed against other parties.

Distinction between Bailment and Agency

Contract of Bailment	Agency
Voluntarily Change of possession from one person to another is called contract of bailment.	‘Agency’ is the legal relationship between an agent and Principal; to bring the principal into legal relationship with the third party.
In bailment, the Bailee does not represent the Bailor. He does not derive any authority from the Bailor.	The agent represents his principal and derives certain power from his principal.
In Bailment, A Bailee cannot sell the property  under bailment	In Agency, an agent can sell the property.
A Bailee cannot transfer the ownership of the property	An agent can transfer the ownership of the property