ABSTRACT
A bailment is a contract that mandates a temporary transfer of goods from the owner/ possessor to another person in order to accomplish a purpose. This particular study deals with the concept of delivery of goods as an undeniable essential in a contract of bailment. This piece of analytical study will delve into the types of delivery and the importance of the delivery of goods in a bailment contract. This piece of commentary aims to be of guidance to any person wishing to learn the nuances of delivery of goods in a bailment contract, as entailed in Section 149 of the Indian Contract Act, 1872. It also gives a thorough explanation of the different aspects related to delivery of goods in bailment through case laws and real-life situations.
Keywords: bailment, delivery, goods, bailee, possession
1.1 INTRODUCTION
Bailment or a lawful process of transfer and retrieval of goods between persons is the prime basis for the topic in contention. The term ‘bailment’ evolved from the French term ‘bailer’, connoting ‘to deliver’. The Indian Contract Act of 1872 provides the aspect of bailment of goods under Section 1481. It states that the contract of bailment deals with the transfer of goods between people with a specific aim or purpose. This kind of contract mandates that once the purpose for which the goods were bailed is fulfilled, the goods need to be returned to the original owner or possessor of the goods. If not, the goods need to be disposed of or set aside, adhering to the instructions of the deliverer.
Two parties: Bailor (person owning/possessing the goods, who transfers them) and Bailee (person with whom the bailor deposits his goods for a fixed time period) are involved in a contract of bailment.
Apart from the rightful owner of goods, a person in mere possession of a particular good can also enter into a contract of bailment. Also, in a bailment, there is only a transfer of goods and not a transfer of rights. An example for a contract of bailment: A person M parks his car in P’s home and asks him to take care of his belonging (car) until M returns from America. The case of Kaliaperumal v. Visalakshmi2 (1938), decided by the Madras High Court, states accurately that “delivery is an essential element of bailment.”3
In this regard, Section 1494 of the Indian Contract Act talks about the manner in which the goods are delivered to the bailee. According to this section, the goods can be delivered in any manner such that the exact bailee (the one who contracted with the bailor) or any agent authorized by the bailee, finally receives the goods.
The manner of delivery is of two types: Actual delivery (direct passing over of goods) and Constructive delivery (passive, indirect signalling or transfer). It is the duty of the bailor to put the bailee in the possession of goods and the delivery should essentially be upon a contract of bailment. In the landmark judgment of Ram Ghulam v. Govt. of UP5, the High Court of Allahabad observed that a bailee is obliged to make a delivery of goods on a contractual basis. Since the goods in question in the case were not bailed by the owner to the Government, the Court held that the Government never occupied the position of a bailee in the first place and that there was no contract of bailment.
Further, the delivery of goods to the bailee must have a purpose. Through this study, the author aims to touch upon the details elucidated in Section 149 of the Act- Concept of delivery of goods to the bailee, the types of delivery, its importance and the role of this aspect in various other forms of bailment.
1.2 REVIEW OF LITERATURE
To obtain a clear view of the topic in contention, the author of this study indulged in the review of scholarly material available on the topic. Avtar Singh, in his book ‘Law of Contract and Specific Relief’6 explains the contract of bailment. In the context of Section 149, he provides the description of delivery of possession, the types of delivery, essentials for a valid and recognizable delivery and examples from real-life relating to each essential. The author goes on to state the obvious that a bailment does not exist without the delivery of goods and the implied understanding of the return of the same goods delivered. The author explains that this is the reason why a money deposit with the bank is not a bailment, as the banker has no obligation to return the same notes and coins deposited. It explains the difference between bailment and other similar relations like agency, hire-purchase, etc. The drawback is that this piece of literature fails to explain the importance of the delivery of goods as a mandatory aspect in special types of bailments like hire and pledge.
In the book ‘The Indian Contract and Specific Relief Acts’7(16th edition) written by Pollock and Mulla, a detailed account of the aspects of Section 149 is given. The authors, apart from the description of the provision, elucidate a subtle feature with respect to the delivery of goods- consciousness of the bailee.
The bailee needs to recognize the purpose and be aware that the specific goods delivered to him are to constitute a valid contract of bailment. He can’t receive the goods in oblivion of the contract and its purpose. The bailee’s receipt of goods should be a conscious act and he must have an intent to receive the goods in the context of the contract. This piece of literature concentrates on the modes of delivery and analyses various situations which can or cannot constitute a delivery but misses out on an exhaustive explanation of essentials like delivery upon contract and an exception to it: non-contractual bailment.
In the book of Halsbury’s Laws of India (Contract, Vol 9) 2nd edition8, it is given that the goods that are being delivered must be the ones that were contracted for. Delivery of the incorrect set of goods will not validate the bailment.
The author has also taken note of one uncommon feature: invalidity of the attempt to try and form a bailment with the pretext of future attainment of property as there is no accepted delivery here. This book only gives an overview of the section and doesn’t explore the nuances of the delivery of goods.
In the journal article ‘Essence of a Bailment: Contract, Agreement or Possession?’9, written by Tay and Alice Erh-Soon, an extensive discussion of factors like consensual delivery, implied consideration for bailment, overpowering of contractual bailments, etc. is given. The article states that bailment arises from the relationship of the bailor with the goods and his/her hold and transfer of possession. Though the article gives plenty of case examples, it is based on the U.S. and U.K. law judgments. It lacks an Indian perspective.
1.3 RESEARCH QUESTIONS
What are the intricacies of actual and constructive deliveries under Section 149 of the Indian Contract Act?
What kind of unique instances has the section been applicable under and what are the roles played by the bailee and bailor here?
What is the importance of the delivery of goods in special types of bailments like hire and pledge?
1.4 OBJECTIVES OF RESEARCH
To understand the necessity and importance of delivery of goods in a contract of bailment.
To analyse Section 149 of the Indian Contract Act, 1872 and present its nuances along with the roles of a bailor and bailee with respect to delivery of goods.
To contemplate the different types of bailments and find their relevance to the concept of delivery of goods to the bailee.
1.5 RESEARCH METHODOLOGY 1.5.1 NATURE
There are two types of methods that can be adopted for a study: doctrinal method and non-doctrinal method. The doctrinal mode of research deals with legal research that makes use of pre-existing, published and authenticated information. It also focuses on case laws and statutes. On the other hand, the non-doctrinal method of research involves field study (collection of data from first-hand sources).
1.5.2 DOCTRINAL RESEARCH
The doctrinal method has been adopted in this study/ commentary. This research involves the usage of data from secondary sources like books, journal articles, reports and other published material that are available on the particular topic. The research will also use relevant laws and cases. The nature of this research will be analytical and conceptual, thereby relating existing principles and concepts and analysing various aspects with regard to the topic.
SECTION 149- DELIVERY OF GOODS TO THE BAILEE
2.1 DELIVERY OF POSSESSION
While intending that the goods of bailment have to be put in the possession of the bailee or any person authorized to possess them, on behalf of the bailee, Section 149 of the Indian Contract Act allows two types of delivery: Actual and Constructive.
2.1.1 ACTUAL DELIVERY
It is the most common type of delivery with regard to bailment. It involves the real transfer of goods from the bailor to the bailee. The goods can be delivered to the bailee (or any other person authorized by him) by the bailor himself or by his agent. A common example of this would be X handing in his laptop for repair and maintenance to Y, who runs a shop for the sales and service of computers and laptops.
2.1.2 CONSTRUCTIVE DELIVERY
Constructive delivery is the type of delivery that does not involve the actual transfer of possession of goods. It can also be called attornment. It is one wherein, the bailor, without granting the bailee the real possession of the goods, provides him the means of getting access to the goods. An example of this could be when the bailor or his agent delivers the key to a box containing certain goods to the bailee or his agent. Although there’s no transfer of goods, the bailee gets the title to access the goods through this type of delivery.
2.1.3 CUSTODY AND POSSESSION
Having custody means guarding or taking care of something. Possession means to have something with authority thrust upon him/ her. Delivery of goods in the context of bailment is a temporary transfer of possession of the goods between the bailor and the bailee. The goods will be returned by the bailee to the bailor in the original condition or with authorized modifications (in case of cloth delivered to a tailor for the stitching of a new dress) after a period of time. Mere custody of goods cannot be held equal to possession to sum up to bailment.
For example: A servant holding a suitcase owned by the master doesn’t mean that there has been a contract of bailment and transfer of possession. In this case, it is mere custody.
This was held in the English law judgment of Reaves v. Capper10 that a servant holding goods as a result of what his job demands does not parallel the possession of goods.
2.2 DELIVERY UPON A VALID CONTRACT
A valid contract of bailment must be the premise for the delivery of goods. A contract can be implied or explicit. Apart from the notable case of Ram Ghulam v. Govt. of UP11 which held that the bailee must deliver goods on a contractual basis, the case of Taj Mahal Hotel v. United India Insurance Company Ltd and Ors.12 questioned the existence of a bailment contract in the case of valet parking (good delivered). The Court held that the appellant can’t resolve liability in this case because valet parking (even though gratuitous) holds benefits for the appellant which was the required consideration to allow valet parking to be a legitimate contract of bailment.
2.2.1 NON-CONTRACTUAL BAILMENT
Defying the traditional view of ‘delivery upon contract’, the modern world has seen instances where delivery of certain goods (transfer of possession) has been held to form the bailment relationship, even in the absence of a contract. This is called non-contractual bailment. This was observed in the case of Lasalgaon Merchants Cooperative Bank Ltd. v. M/s. Prabhudas Hathibai13 where seizure of goods by the Government ended up with the Govt. as bailees who are bound to take reasonable care of the goods in their custody, even without the existence of a contract per se.
The decision was upheld in the case of State of Gujarat v. Memon Mohd. Haji Hasan14 in 1967. The Court ruled that bailment is viewed within the realms of the Indian Contract Act, 1872 only when it comes as a result of a contract. But it would be unreasonable to say that bailment is inexistent without a valid contract.
The Court cited the example of a finder of goods who would be entitled to take reasonable care of the goods and try finding the real owner to return them. In this case, there exists no contract but the finder of the lost goods is thrust with the role of a bailee and there arises a bailment relationship.
2.3 DELIVERY UPON A PURPOSE
The delivery of goods for bailment must have a specific purpose that can be fulfilled. For example: Caretaking of goods, modification, etc. Delivery of goods upon purpose also has an implied understanding that after the completion of the purpose, the goods in temporary possession of the bailee must be returned to the bailor.
OTHER JUDICIAL INTERPRETATIONS IN THE CONTEXT OF SECTION 149
3.1 RAILWAY COMPANIES AND SECTION 149
In the case of Lachmi Narain v. Bombay15 decided by the High Court of Allahabad, the appellant sent goods for dispatch to be carried out by the respondent railway company. A number was entered on the forwarding note by an official but the number wasn’t entered on the corresponding goods. The goods were set aside and the note number was put on them by a person who was not officially authorized. The goods were stolen thereafter.
The Court held that mere recording of a serial number on the forwarding note and no other subsequent action to process or consider the giving of goods does not constitute a delivery of goods to the respondents. The Court also said there’s no proof of any act done on behalf of the plaintiffs to put the respondents in possession of the goods and therefore the railway company is not liable.
In another case decided by the High Court of Allahabad [Secretary of State for India v. Sheobhagwan Chiranjilal16-1935], a slightly similar situation was observed. Goods were given to a railway official without a forwarding note and the official didn’t grant the person a receipt either. The goods were set aside and part of them got destroyed by fire. The Court held that the railway company will be held liable in this situation. The Court reasoned that the goods given to the official fell under the ambit of Section 149 of the Indian Contract Act.
Further, the goods for dispatch were properly delivered and accepted by the railway official, non-compliance with rules stating the need for receipt and forwarding note cannot absolve liability. Also, the fire that arose due to sparks from the hemp of the engine could have been avoided by exercising reasonable care over the delivered goods (which is essential).
3.2 MARITIME TRADES AND DELIVERY OF GOODS
It is a common fact after the case of Port of Bombay v. Sriyanesh Knitters17, that storage of goods for import under the watch of the Port Trust comes under the view of a bailment relationship. This is because the goods are delivered and awaiting return as per Section 149. The parties to the bailment, in this case, were the consignee (owner of goods who happens to be the shipment of the receiver) and the Port Trust Authority. Analysing this, the case of Forbes Forbes Campbell & Co. Ltd. v. Port of Bombay18, observed that in most of the cases, the shipowner (deliverer of goods) will be the bailor to the Port Trust and not the consignee (owner and receiver of the shipment). This case also observed that the ruling of the Sriyanesh knitters’ case wasn’t a general principle but a conclusion to the particular case facts.
SPECIAL TYPES OF BAILMENTS IN RELATION TO DELIVERY OF GOODS
4.1 HIRE
A hire is a non-gratuitous form of bailment. It is to possess and use goods for a fixed period of time by paying charges for them. In the case of Atul Mehta v. Bank of Maharashtra19, the issue in question was whether the hiring of bank lockers could sum up to the actual delivery of possession. The Court stated that the hire of bank lockers does not come under the purview of a bailment contract as there was no proper transfer of possession and the valuables were just placed in a hired place (not under the guard of the bank). This is a landmark judgment in India.
4.2 PLEDGE
As pledge is the bailment of goods as security for a debt or upkeeping a vow, it entails the most important essential of delivery of possession of goods (for security). Either an actual or constructive delivery of goods is accepted in the case of a pledge as well. An add-on aspect is a hypothecation wherein the owner of the goods does not give up title or possession of the goods pledged as security, such as for profession and earning money.
One such situation was observed in the case of Bank of Chittoor v. Narasimhulu20 of 1966. Here, the owner of a cinema projector pledged it with a bank but retained the physical possession as it was his source of income. The Court reasoned this out by saying that the bank, which is devoid of actual possession of the goods pledged as security, has the legal right over it. In hypothecation, the pledgee can take control of the pledged good in case of default. As is known that the delivery of goods must be upon a purpose, a pledge has the purpose of goods serving as the security.
CONCLUSION
As has been discussed above, delivery of goods is paramount in terms of a bailment contract. It finds application in all situations of bailment along with a particular mode of delivery, purpose and contractual or non-contractual (in rare cases) obligations. Also, there is a difference between custody and possession of goods, which decides the existence of a bailment relationship. The author has focused on key aspects and has delivered different interpretations of Section 149 of the Indian Contract Act with respect to bailment and its types in this study.
Authored by Manisha Bharathi R
SYMBIOSIS LAW SCHOOL
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