CONTRACTS OF BAILMENT, PLEDGE & AGENCY

Bailment

The definition of bailment as contained in section 148 is given here under:

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 person delivering the goods is called the “bailor”. The person to whom they are delivered is called the “bailee”

Explanation.—If a person already in possession of the goods of another contracts to hold them as a bailee, he thereby becomes the bailee, and the owner becomes the bailor, of such goods although they may not have been delivered by way of bailment.

Essentials of Bailment:

Contract

There is an underlying contract between the bailor and bailee, there may be an explicit contract or it may be an implied contract.

Specific purpose

The bailment of goods is always for some specific purpose.

Delivery of goods

There must be delivery of movable goods in a contract of bailment.

No change of ownership

In a contract of bailment, only the possession of goods is transferred from bailor to the bailee, whereas the bailor has all ownership rights over the goods delivered.

Return of the goods delivered on accomplishment of purpose.

When the purpose for which the goods are delivered is completed, the goods must be returned in the original form or modified form as per instructions of the bailor.

For the benefit of the bailor– Mr. Yasir, while going out of city handed over some precious household articles to Mr. Usman for safe custody, without any obligation to pay any fee/ charges. It is a bailment for the benefit of the bailor.

For the benefit of the bailee—Mr. Umer handed over his car to Mr. Ahsan, as he was in need of conveyance for few days. Mr. Umer handed over this car without any obligation on the part of Mr. Ahsan to pay any rent / charges for the use of this car. This bailment is exclusively for the benefit of the Mr. Ahsan, the bailee.

For the benefit of bailor and bailee—Mr. Ahmad availed locker facilities from M/S XYZ bank ltd. Under the terms and conditions of the contract Mr. Ahmad was required to pay Rs.1000/ annual fee on account of availing this facility. This contract is for the benefit of parties, the bailor and the bailee.

business and labour laws  CONTRACTS OF BAILMENT, PLEDGE & AGENCY

respect of the goods. He is responsible for the safe delivery of the goods bailed with him and in default is responsible to the bailor for any loss of the goods.

Goods given to a person by bank on trust receipt—Person becomes a bailee—Liable for criminal breach of trust in case of non-accounting of goods. The execution of a trust receipt is a recognised mode of making a person bailee of the goods and in such circumstances the Bank must be deemed to be in possession or control of the goods. The validity and efficacy of such instruments of trust are now generally acknowledged. If a person, who has signed such a trust receipt, fails to hand over to the Bank the sale-proceeds of the goods sold, the former would be liable for criminal breach of trust.

Intentional wrong delivery by carrier—Carrier liable for damages—Where the carrier has made intentional wrongful delivery of goods, he cannot escape liability to indemnify the plaintiff for the loss caused to him by wrongful deliveries of the consignments.

Care to be taken by bailee (section 151)

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

Contract by bailee exempting himself from liability for negligence—The learned authors considered that a contract by a bailee purporting to exempt himself wholly from liability for negligence was not valid. This opinion is based on the express provisions for contracting out in S. 152, and in fact throughout the Chapter on Bailments wherever a rule of law is to operate only in the absence of a contract to the contrary, it is expressly so stated in the section (refer sections 163, 165, 170, 171, and 174).

Care to be taken by bailee:

Theft of goods pledged with Bank—Document of pledge containing condition that during the continuance of pledge agreement the borrowers shall be responsible for all loss, damage, or deterioration of security caused by theft, fire, rain or any other cause whatsoever—There being. no discrepancy between provisions of S. 151, Contract Act, 1872 and condition of document of pledge, if loss had been caused by theft, fire, rain or any other cause, it would be the duty of the bailee to explain that he had taken care of the goods as a man of ordinary prudence would under similar circumstances take of his own goods and if in spite of that the goods pledged were lost in manner as recorded in the condition of document of pledge, liability of borrower could not be legally or equitably denied.

Injury to goods in transit by Railway—Onus of proof as to negligence by carrier—How burden is to be discharged

Where due to long delay in transit, goods carried by Railway were damaged. Held: Although the burden of establishing want of care on the part of’ the Railway lies on the consignor yet it is the duty of the railway to supply the entire material from which the amount of care that is taken is ascertained. The Railway pleaded that the delay was caused due to unavoidable circumstances but no material was supplied in support of this plea; Therefore the presumption of want of due Care would arise against the Railway.

Loss to goods by negligence of ship-owner—Claim for damages against ship-owner sustainable:

The ship-owner committed a breach of the obligation contained in the bill of lading and as such the consignee was entitled to recover damages.

Damage to contents of parcel—Burden of proof is on consignor–Mere damage to containers does not prove damage to contents.

Comments

The bailee tendering a contract of pledge does not become owner, but, as having possession and right to possess, he is said to have a special property. Any kind of goods, documents, or valuable things of a personal nature may be pledged. Delivery is necessary to complete a pledge; it may be actual or constructive. It is sufficient if the thing pledged is delivered under the contract within a reasonable time of the lender’s advance being made.

Pledge—Monthly statements of stocks lying in godown showing goods as pledged with defendant-Bank—All such documents signed by authorised person on behalf of plaintiff—Debit advice vouchers produced by defendants showing conveyance charges paid to Godown Keeper visiting godown, and debited to account of plaintiff—Goods, held, in possession of defendant under pledge and not merely hypothecated.

Contract of Agency

In general terms, Agency refers to the relationship which exists between two persons, the Principal and the Agent in which the Agent has to perform different duties/ functions as per instructions of the principal and also enters into contract with the third party / parties on behalf of the principal. The relationship of agency plays an important role in business and commercial dealings. This relationship is legal created by virtue of agreement between Principal and Agent.

Definition of Agent and Principal: Sec. 182

Agent is a person employed to do any act for another or to represent another in dealing with a third persons. The person for whom such act is done, or who is so represented, is called the Principal.

Explanation

The legal relation between a merchant in one country and a commission agent in other is that of principal and agent, and not seller and buyer, though this is consistent with the agent and principal, when the agent consigns the goods to the principal, being in a relation like that of seller and buyer for some purposes. A merchant, therefore, in this country who orders goods through a firm of commission agents in Europe cannot hold the firm liable as if they were vendors for failure to deliver the goods. And the result is the same if the goods are ordered through a branch in this country of a firm of commission agents in another country. For the same reason, where a commission agent buys goods for a merchant at a price smaller than the limit specified in the indent, he cannot charge any price higher than that actually paid by him, except in the case of a custom to the contrary.

An agent may have, and often has, in fact, a large discretion, but he is bound in law to follow the principal’s instructions provided they do not involve anything lawful. To this extent an agent may be considered its a superior kind of servant; and a servant who is entrusted with any dealing with third persons on his master’s behalf is to that extent an agent. But a servant may be wholly without authority to do anything as an agent, and agency, in the case of partners, even an extensive agency, may exist without any contract of hiring and service.

Agency may be created in the following ways:

1. By consent

2. By operation of law

3. By estoppel

4. By ratification

Agency by Consent:

Consent may be express or implied.

Express Agency:

Such agency is created by words either spoken or written. In business transactions, this relationship is usually established through writing an agreement

Implied Agency:

An authority is referred to as implied when it is inferred from the conduct of the parties or circumstances of the case. Definitions of express and implied authority as contained in section 187 of the Act are given below:

“An authority is said to be express when it is given by words spoken or written. An authority is said to be implied when it is to be inferred from the circumstances of the case; and things spoken or written, or the ordinary course of dealing, may be accounted for circumstances of the case.”

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