Interpretative Analysis on “Duties of Bailor & Bailee”

Interpretative Analysis on “Duties of Bailor & Bailee”

12 Jan, 2023

Interpretative Analysis on “Duties of Bailor & Bailee”

Author – Surjit Raiguru, Student of Symbiosis Law School, Pune

Introduction:

Although individuals enter into agreements of bailment on a daily basis, the variety and significance of bailments are usually unknown to the general public and disregarded by attorneys[1]. This neglect is partially due to the complexity of bailment and its intersection with other areas of the law. According to a noted commentator[2], bailment is a contractual conveyance of personal property that is enforceable in tort. Bailment is a contractual transfer of personal property that is enforceable in litigation. Although bailment draws from other areas of the law, it remains a distinct legal personality that has yet to be thoroughly explored.

Bailment, which is often defined as “the rightful ownership of property by someone who is not the owner,” derives from the French word bailor, which implies “to deliver”[3]. Most bailments need the purpose to create a bailment relationship, delivery of the property to the bailee, and acceptance by the bailee[4]. To constitute a legal bailment, the bailee must acquire ownership of the bailed property. If the bailee refuses to follow ownership, there is no bailment, and neither of the rights and responsibilities associated with a bailment are created”[5]. Possession in the context of bailment is comprised of two elements which are the execution of direct control over bailed goods and the purpose to exert physical control[6].

Before sealing a bailment deal, a bailee may frequently request that a clause releasing it from culpability for the negligent loss or damage of property under its control be included. Although a bailee is permitted to include an exculpatory phrase in the bailment agreement, the restriction of culpability may not be enforceable in all jurisdictions[7].

Simple and plain are the reasons for and against limiting a Bailee’s culpability for negligence. Exculpatory provisions, according to critics[8], undermine social morality and encourage negligence. However, proponents[9] of these limitations argue that the constraints of competitive business would deter the majority of negligent behavior and that the possible harm caused by exonerating clauses must be weighed against the equally essential concept of contract freedom.

The concept of Bailment is comprised of two essential terms: possession and ownership. As noted previously, in bailment, just custody of the goods is passed to the bailee; ownership is not transferred. Consequently, despite surrendering custody of the items, the bailor continues to retain ownership rights. The core of bailment is the exchange of commodities’ possession. There is really no bailment if possession of the goods does not transfer to the bailee. Even after giving possession of the commodities to the bailee, the bailor retains ownership of the items. In a sale of goods contract, both ownership and custody of the products are passed to the buyer, whereas in a bailment agreement, the bailee does not get ownership.

Analysis:

Depending on the form of bailment created, the obligation of care owed by the bailee varies. In general, commercial bailees are required to maintain the bailed property against deterioration or loss with reasonable care. Ordinary diligence is the extent of care that a fairly prudent individual would exhibit when handling his or her own products in comparable circumstances. However, a bailee who would’ve been irresponsible with his or her own property is not exempt from exercising due diligence when catering for the property of another. What comprises ordinary care is typically an issue for the fact-finder that depends on the nature of the bailed property, the bailee’s business, and the norms of the bailee’s specific trade. If the bailed commodities are of high value, the bailee is required to exercise greater care than if they are of low value. In Kelton v. Taylor[10], the defendant hid the cotton belonging to the plaintiff beneath a shed. The cotton was stolen, and the plaintiff filed a negligence lawsuit against the bailee. Finding that the bailee’s technique of storing the cotton was not careless, the court noted that “what might be ordinary diligence… with regard to a bag of oats or a bale of cotton, could be gross negligence with regard to a bag of gold or a box of diamonds’. Court decisions may also be influenced by commercial traditions. In Thackray v. Johnstown Airways, Inc.[11]., a state appeal court reversed a jury decision and ruled that the bailee was not liable for failing to hire a night watchman when a hangar fire damaged numerous airplanes. The court’s decision was based on the basis that appointing night watchmen was not a common business practice. In the absence of a formal contract to the alternative, a bailee is neither a guarantor of the bailed items nor responsible for their preservation. However, the majority of courts accept that bailees may expand their common law obligations through the means of the contract.

The contract signed of Bailment confers both rights and obligations on the parties. However, these rights and responsibilities are not absolute in a signed contract of bailment. Consequently, they are precisely defined by the Indian Contract Act of 1872. The rights of one side are the responsibilities of the other, and vice versa collectively, few of which are subjected to interpretation below:

  1. According to Section 150 of the Indian Contract Act which states, “The bailor is bound to disclose to the bailee faults in the goods bailed, of which the bailor is aware, and which materially interfere with the use of them, or expose the bailee to extraordinary risks; and if he does not make such disclosure, he is responsible for damage arising to the bailee directly from such faults” but to the contrary, it is the duty of the bailor to know about the faults of the goods bailed to the bailee, he can’t escape the liability just because  he was ignorant of it. And, the word “Extraordinary” is a vague term to be used in this section, it totally differs from person to person so to rectify the clause, it should be “extraordinary risks as for a man of ordinary prudence”.
  2. According to Section 151 of the Indian Contract Act which states, “In all cases of bailment the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality and value as the goods bailed” so it is essential to comprehend why the section discusses “goods of the same bulk, quality and value”. It is evident that the yardstick of care would vary as the amount and other characteristics of the commodities change. Under similar conditions, a person cannot be expected to handle 10 kilograms of grain and 70 kilograms of grain with same care.
  3. Paradoxically according to Section 152 of the Indian Contract Act which states, “The bailee, in the absence of any special contract, is not responsible for the loss, destruction or deterioration of the thing bailed, if he has taken the amount of care of it described in section 151”, therefore, there can’t be a universal standard of appropriate care for bailment. Therefore, it varies from case to case, and this reasoning has on occasion been upheld by the courts. This provision may be misapplied by the bailee to cover their own careless behavior. Consequently, it is crucial to comprehend the case-by-case interpretation of level of care by the courts.
  4. Even according to Section 154 of the Indian Contract Act which states, “If the bailee makes any use of the goods bailed which is not according to the conditions of the bailment, he is liable to make compensation to the bailor for any damage arising to the goods from or during such use of them” but what if the bailee gets to claim unauthorized profits by not using the bailed goods for his/her use but to a third party and the bailor gets no remuneration for it.
  5. Furthermore, according to Section 158 of the Indian Contract Act which states, “Where, by the conditions of the bailment, the goods are to be kept or to be carried, or to have work done upon them by the bailee for the bailor, and the bailee is to receive no remuneration, the bailor shall repay to the bailee the necessary expenses incurred by him for the purpose of the bailment” but “necessary expenses” is a vague term which differs from person to person so to avoid the extra expenses incurred, the bailor should give proper directions to the bailee so that he/she can take reasonable care of it as of all mentioned by the bailor. So to rectify the clause must add “necessary expenses incurred to maintain the good as per the directions given by the bailor”. For example, wash of car two times weekly must be sufficient for me but washing the car daily for maintenance can increase my expenses which was unnecessary.
  6. Additionally, according to Section 159 of the Indian Contract Act which states, “The lender of a thing for use may at any time require its return, if the loan was gratuitous, even though he lent it for a specified time or purpose. But if, on the faith of such loan made for a specified time or purpose, the borrower has acted in such a manner that the return of the thing lent before the time agreed upon would cause him loss exceeding the benefit actually derived by him from the loan, the lender must, if he compels the return, indemnify the borrower for the amount in which the loss so occasioned exceeds the benefit so derived” but “a thing” is a complete switch, it must be replaced by “goods”, i.e., movable goods.

Conclusion:

There is no uniform solution to these issues due to the fact that the rules differ from jurisdiction to jurisdiction and even within the same jurisdiction. The finest piece of advice for bailors is to use extreme caution when getting into a bailment contract. The bailee should read all signs, receipts, and contracts before signing them.

The bailor should also inquire about the bailee’s policy regarding the loss or destruction of the bailed property. If the bailee insists on restricting its liability for carelessness, the bailor should seek for bailees that offer comparable services without limiting liability. If a bailee places a cap on the amount the bailor can be reimbursed for loss or destruction to the bailed goods, the bailor should either insist that the bailee agrees in advance to extend the bailee’s obligation or guarantee the property for the remainder amount prior to giving it to the bailee. Even though a bailee signs a formal agreement, he or she frequently fails to study and comprehend the terms. Consequently, bailees continue to strive to reduce or exclude their obligation for carelessness, bailors continue to claim for lost or damaged property, and courts continue to deliver inconsistent and contradictory opinions.

REFERENCES:

  • N. PALMER, BAILMENT 1 (1979).
  • S. WILLISTON, A TREATISE ON THE LAW OF CONTRACTS § 1030, at 875 (3d ed. 1967). For a case adopting Professor Williston’s definition, see Zuppa v. Hertz Corp., 111 N.J. Super. 419, 423, 268 A.2d 364, 366 (1970). See generally R. BROWN, THE LAW OF PERSONAL PROPERTY § 10.1 (3d ed. 1975).
  • See M. Bruenger & Co. v. Dodge City Truck Stop, Inc., 234 Kan. 682, 685, 675 P.2d 864, 868 (1984);
  • See also J. STORY, COMMENTARIES ON THE LAW OF BAILMENTS § 2 (7th ed. 1863).
  • See, e.g., Wright v. Autohaus Fortense, Inc., 129 Ill. App. 3d 422, 424-25, 472 N.E.2d 593, 595 (1984);
  • Allright Auto Parks, Inc. v. Moore, 560 S.W.2d 129, 130 (Tex. Civ. App. 1977).
  • But see infra notes 33-35. See generally R. BROWN, supra note 3, §§ 10.2-10.3.
  • R. BROWN, supra note 3, § 10.2.
  • Id.; see also Farmer v. Machine Craft, Inc., 406 So 2d 981, 982-83 (Ala. Civ. App. 1981);
  • Morris v. Hamilton, 225 Va. 372, 374-75, 302 S.E.2d 51, 52-53 (1983).
  • Willis, The Right of Bailee’s to Contract against Liability for Negligence, 20 HARV. L. Revd. 297, 299-304 (1907)
  • See, e.g., Note, supra note 16, at 776 n.46
  • See, e.g., supra note 20 (Massachusetts, Ohio, and Oklahoma cases).
  • Kelton s Taylor < https://unicourt.com/case/wi-dbc1-kelton-buford-et-al-vs-maryanne-taylor-et-al-2615869 >
  • Thackray vs Johnston Airways < https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1287568/ >

[1] N. PALMER, BAILMENT 1 (1979).

[2] S. WILLISTON, A TREATISE ON THE LAW OF CONTRACTS § 1030, at 875 (3d ed. 1967). For a case adopting Professor Williston’s definition, see Zuppa v. Hertz Corp., 111 N.J. Super. 419, 423, 268 A.2d 364, 366 (1970). See generally R. BROWN, THE LAW OF PERSONAL PROPERTY § 10.1 (3d ed. 1975).

[3] See M. Bruenger & Co. v. Dodge City Truck Stop, Inc., 234 Kan. 682, 685, 675 P.2d 864, 868 (1984); see also J. STORY, COMMENTARIES ON THE LAW OF BAILMENTS § 2 (7th ed. 1863).

[4] See, e.g., Wright v. Autohaus Fortense, Inc., 129 Ill. App. 3d 422, 424-25, 472 N.E.2d 593, 595 (1984); Allright Auto Parks, Inc. v. Moore, 560 S.W.2d 129, 130 (Tex. Civ. App. 1977). But see infra notes 33-35. See generally R. BROWN, supra note 3, §§ 10.2-10.3.

[5] R. BROWN, supra note 3, § 10.2.

[6] Id.; see also Farmer v. Machine Craft, Inc., 406 So 2d 981, 982-83 (Ala. Civ. App. 1981); Morris v. Hamilton, 225 Va. 372, 374-75, 302 S.E.2d 51, 52-53 (1983).

[7] Willis, The Right of Bailee’s to Contract against Liability for Negligence, 20 HARV. L. Revd. 297, 299-304 (1907)

[8] See, e.g., Note, supra note 16, at 776 n.46

[9] See, e.g., supra note 20 (Massachusetts, Ohio, and Oklahoma cases).

[10] Kelton s Taylor < https://unicourt.com/case/wi-dbc1-kelton-buford-et-al-vs-maryanne-taylor-et-al-2615869 >

[11] Thackray vs Johnston Airways < https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1287568/ >

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