Rights Of A Bailee

Under the regime of Indian Law, the Indian Contract Act, 1872 (hereinafter referred to as “the Act”) deals with contractual transactions. Chapter IX  (from Sections 148 to 181) of the Act deals with ‘Bailment’. As per Section 148 of the Act, 'bailment' refers to the act of delivering goods by one party, known as the bailor, for a certain purpose to another, the bailee, under a contract that the goods will either be returned upon the fulfilment of the purpose or otherwise disposed of according to the directions of the bailor. In simple words, bailment is the temporary transfer of possession of goods from bailor to bailee without passing the ownership.

A bailee is the person who accepts the goods for the purpose agreed upon. Under the Act, a bailee has several rights, all of which protect him during his relationship with bailor in bailment. All these rights ensure that he is treated fairly and equitably in matters related to the goods entrusted to him.

This article will explore the rights of a bailee in India as provided by the Indian Contract Act, 1872.

Right To Sue For Breach Of Contract

Section 73 of the Act provides for compensation for loss or damage caused by breach of contract. In case the bailor is in default of the terms and conditions of the bailment contract, the bailee can bring an action against the former for any loss in form of damages due to such breach. The bailee can claim for all actual losses and expenses caused by breach of the contract.

For instance, if a bailor delivers defective goods or fails to compensate the bailee for services rendered in the bailment contract, then the bailee would be entitled to bring an action to enforce the contract or make a claim for damages.

Right To Claim Damages

Section 150 of the Act provides the duty of the bailor to disclose known faults in the goods bailed. This duty arises when these faults materially interfere with the use of the goods or expose the bailee to extraordinary risks. Therefore, if it is the duty of the bailor to disclose the faults in the goods bailer then it is the corresponding right of the bailee to be informed about those faults. If the bailee suffers any damage due to the undisclosed faults in the goods bailed, then the bailor will be responsible for paying damages to the bailee. 

Right To Avoid Liability For Unauthorised Use

As per Section 152 of the Act, a bailee shall be exempted from liability for the loss, destruction, or deterioration of the bailed item if he has taken the care provided for in Section 151. Section 151 outlines the standard of care required for a bailee. It provides that the bailee is required to take care of the goods as a man of ordinary prudence would, under similar circumstances, take care of his own goods. This suggests that the bailee automatically has no liability for any damage to the property unless and otherwise, he fails to meet the required standard of care.

Right To Reimbursement For Necessary Expenses

As provided for in Section 158 of the Act, if the bailee incurs any expenses on the bailment of the goods, they are entitled to recover the same from the bailor. The bailee is entitled to be paid the costs incurred for preserving and protecting the goods.

For instance, if the bailee incurs costs of maintaining or repairing the goods when the latter are in their custody then the bailee is entitled to recover costs from the bailor.

Right To Compensation

Under Section 164 of the Act, a bailee has the right to compensation from the bailor in cases where there is a loss that may have arisen due to some defects in the goods or due to the bailor's defective title in the goods. If the bailor gives goods that have inherent defects or do not hold lawful right of bailing the goods, due to which the bailee faces damage, then the bailor will be liable to the bailee to pay compensation.

For example, if the goods are damaged because of a latent defect or a third party claims his ownership to the goods causing loss to the bailee, he is entitled to recover his loss from the bailor.

Right To Return The Goods In Cases Of Joint Bailers

As per Section 165 of the Act, in the absence of any agreement to the contrary, when several joint owners of goods have entered into bailment with the bailee, the bailee has the option to deliver the goods back to, or according to the directions of, one joint owner without the consent of the remaining joint owners. 

Right With Respect To Re-Delivery To Bailor Without Title

According to Section 166 of the Act, when the bailor has no title to the goods, however, in good faith the bailee has delivered back the goods to the bailor, or according to the directions of the bailor. In these circumstances, the bailee will not be responsible to the owner of the goods in respect of such delivery. 

Right To Apply To The Court 

As per Section 167 of the Act, if a third person claims goods bailed, he may approach the Court to stop the delivery of the goods to the bailor and to determine title to the goods. Therefore, when a third party claims over the bailed goods, the bailee may approach the court to stop delivery of goods to the bailer and determine the title of the goods. 

Right To Lien

The right of lien is one of the more important rights a bailee enjoys. It is governed by Sections 170 and 171 of the Act. It is the right to retain possession of the goods until due remuneration or charges are paid by the bailor, if any.

• Particular Lien (Section 170): As per Section 170 of the Act, a bailee has a right to retain the goods till they are paid for specific services rendered for those goods. For instance, if a mechanic is employed to repair a car, then that mechanic has a right to retain possession of that car till he is paid for his services rendered with respect to repairing that car.

• General Lien (Section 171): In some cases where the relationship between the parties is such that involves continuing transactions, a bailee can exercise a general lien and retain the possession of the goods till all dues are cleared. A general lien is available to particular classes of bailees, such as bankers, factors, attorneys, and policy brokers.

However, the lien can only be exercised for lawful charges. Wrongful detention by the bailee shall disqualify them from claiming any remuneration.

Right To Use Goods In A Manner Agreed Upon

A bailee is entitled to make use of the goods in the manner agreed upon by the parties in a contract of bailment. If the goods bailed are for a specific purpose, the bailee can utilise the goods solely for that purpose only. In case no instructions are given, he is entitled to use the goods in a manner that would be reasonable under the circumstances.

For instance, when a car is bailed to a bailee for its repair; automatically, the bailee has the right to use the car to test its functionality after the repairs are over.

Right To Terminate Bailment

Section 159 of the Act refers to returning of goods that were loaned for free. It indicates that a lender is at liberty to take the goods back at his will, even though it was lent for some time or purpose. However, if the borrower has suffered significant losses because they relied on the loan, the lender must pay them the difference between the loss and the benefit they got from the loan if the lender requests the early return of the goods. 

A bailee who accepts possession of goods for a particular purpose is also entitled to retain goods for that particular purpose and for the agreed time. This right is further emphasised in Section 159, which says that if the lender (being the bailor) takes back the goods before the agreed time and if such deprivation causes the borrower (who is a bailee) to suffer a loss greater than the benefit conferred by the loan, the lender should refund to the borrower the excess loss suffered.

Right Against Wrongdoer 

Section 180 of the Act provides that if someone wrongfully takes away or damages the goods that were bailed to a bailee, the bailee can take legal action against that person, just as the owner (bailor) could have. Both the bailee and the bailor have the right to sue the third party for the loss or damage caused.

Section 181 of the Act further states that if the bailor or bailee wins the lawsuit and gets compensation, the amount received must be shared between them based on their respective rights or interests in the goods. This ensures both parties get a fair share of the compensation.

Conclusion

Under Indian law, the right of a bailee provides a balanced relationship with the bailor. The rights protects the bailee from undue hardship, faulty instructions, or defaults in the bailed goods. At the same time, they cast clear obligations on the bailee to act reasonably and diligently with the goods provided. From the rights of the bailee, particularly the right to lien and the right to claim compensation, the law Act demonstrates the protective nature of the law towards the person who has been entrusted with the goods belonging to someone else. Therefore, the Indian Contract Act, 1872, ensures a very delicate balance between the promotion of safeguarding the interests of both the bailor and the bailee. This aids in promoting a just and fair bailment relationship.