Contract of bailment and pledge are different from each other. According to section 148 of The Indian Contract Act, 1872, Bailment means delivery of goods from one person to another person for some purpose. On the accomplishment of such purpose, the person receiving the goods returns or otherwise disposes of them as per the instructions of the person delivering them. The person who delivers the goods is known as bailor. The person to whom such goods are delivered is known as bailee.
In this type of bailment, neither the bailor nor the bailee receives any remuneration. Such a bailment may be for the exclusive benefit of either the bailor or the bailee. However, it terminates on the death of either the bailor or the bailee.
Section 159 states that in the case of the gratuitous bailment, the bailor or the lender may require the bailee to return the goods at any time, even before the expiration of the period of lending. Also, he can do so even before the fulfillment of the purpose of bailment.
However, if the bailee or the borrower incurs any loss due to this act of the bailor, the bailor needs to indemnify him for the loss or damages.
Bailment for Reward
It is for the mutual benefit of both the bailor and the bailee. For example, A hands over his goods to B for transporting them to Delhi. A has the benefit of transportation and B gets transportation charges. Thus, both of them are benefitted.
There are three different types of bailments:
- A Bailment that Benefits Both the Bailor and Bailee: An example of this would be parking your car in a paid parking lot. You would get the benefit of parking your car and the owner of the lot would get the benefit of the fee that is paid. A bailee can face liability for damaging the bailed items if they were negligent.
- A Bailment that Only Benefits the Bailor: This is referred to as a gratuitous bailment. Free valet service would be an example of this because the valet service (bailee) would not be receiving compensation for parking your car. A bailee can face liability for damaging the bailed items if they have been grossly negligent or acted in bad faith.
- A Bailment that Only Benefits the Bailee: A common example of this would be checking out a book or movie from the library. You would be the bailee in this situation because you would be taking the book or movie. The library (bailor) would receive no benefit from loaning out the book, but would still expect it to be returned at the end of the rental period. In this scenario, a bailee can face liability for basically any damage done to the bailed item. This is the highest standard of care required out of the three categories.
When is a Bailment Terminated?
A bailment can be terminated in the following situations:
- When the Purpose of the Bailment has ended: For example, if you remove your parked car from the lot it was parked in, the bailment will be terminated.
- At the End of a Fixed Term: If the parties agree that an item will only be bailed for a specific period of time, the bailment will be terminated when that time frame ends.
- If the Bailed Property is destroyed: If there isn’t a property for the bailment, then the bailment will naturally end.
- If One Party Gives Notice of Termination: This only applies to bailments that have been set for an indefinite period.
What Happens if the Item Isn’t Claimed By the Bailor?
If you are the bailee and the bailment period is over, then the bailor has a right to reclaim the item. But if the bailment ended after a fixed term, and the bailor hasn’t reclaimed the item, then the bailee has a right to say that the item has been abandoned.
If the bailor has made not attempts to reclaim the property and it was clearly understood that at a fixed time, the bailor would be the one to reclaim it, then common law applies. This means that the bailee can claim the property as their own.
However, the bailee should make a good faith effort to not conceal the property or to deceive the bailor in hopes that the property would be considered abandoned.