CMA Laws and Ethics Bailment Question and Answers

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Bailment

Question 1. Contracts of Bailment
Answer:

  • As per Section. 148, Bailment is an act whereby the goods are delivered by one person to another for some purpose, on a contract, that the goods shall, when the purpose is accomplished be returned or otherwise disposed of according to the directions of the persons delivering them. It is a voluntary delivery of goods for a temporary purpose.
  • Ownership of goods remains with the bailor.
  • Goods should be movable goods.

Parties:

    • Bailor- The person delivering the goods.
    • Bailee- The person to whom the goods are delivered.

Question 2.Essential Elements of Contracts of Bailment Sec. 151: Duty to take reasonable care of goods.
Answer:

  1. There must be an expressed or implied contract between the parties.
  2. It can be made of goods only.
  3. There must be delivery of goods from one person to another.
  4. Goods must be delivered for some purpose express or implied.
  5. The delivery of goods must be conditional.
  6. The return of the goods may be in the original form or i.e. in an improved form as agreed between the bailor and bailee.

Read and Learn More CMA Laws and Ethics Paper

Modes:

  1. Actual Delivery.
  2. Symbolic Delivery
  3. Constructive Delivery.
  • Bailment may be gratuitous (without any remuneration or reward) or for reward, (for consideration)

Question 3. Classification
Answer:

Duties of Bailor:

Section. 150: Bailor must disclose all defects Or faults in the goods bailed. He is responsible for defects in the goods hired to bailee whether the bailor was aware of such defects or not.

Section. 158:

  1. Where the bailment is gratuitous, he must reimburse the bailee for any expenditure incurred in keeping the goods.
  2. He should reimburse any expense that Bailey may incur by way of loss in the process of returning the goods or complying with other directions for returning the goods.
  3. He must compensate the bailee for any loss or damage suffered by the bailee more than the benefit received.
  4. He is bound to accept the goods after the purpose is accomplished.

Question 4. Rights of Bailor
Answer:

  • Right to enforce the duties of the bailee.
  • Right to terminate the contract if Bailey does anything inconsistent with the conditions of bailment.
  • In gratuitous bailment, he has a right to demand back goods even before the expiry of the bailment period.
  • Right to claim the increase or profit from the goods bailed which may have occurred from the value of goods.

Question 5.Duties of Bailee
Answer:

  • Section. 151: Duty to take reasonable care of goods.
  • Section. 152: If he takes care of goods as a man of ordinary prudence, he will not be liable for any loss or damage of goods bailed.
  • Section. 152: If he takes care of goods as a man of ordinary prudence, he will not be liable for any loss or damage of goods bailed.
  • Section. 153: Duty not to make unauthorized use of goods.
  • Section. 154: If he makes any unauthorized use of goods, he will be liable to make good the loss.
  • Section. 155-157:
    1. Duty not to mix the goods bailed with his goods without the bailor’s consent. If he does so he has to make good the loss.
    2. Duty not to set up an adverse title
  • Section. 160: Duty to return the goods on expiration of the bailment period. Section. 161: If he fails to return, he will be responsible to the bailor for any loss,
    destruction or deterioration of goods thereafter.
  • Section. 163:
    1. Duty to return any extra profit occurring from goods bailed.
    2. Duty not to do anything inconsistent with the bailment conditions.

Question 6.Rights of Bailee
Answer:

  1. Right to claim compensation for any loss arising from non-disclosure of known Or unknown defects in goods.
  2. Right to claim indemnification for any loss or damage as a result of defective title.
  3. Right to deliver back the goods to joint bailors as per the agreement.
  4. Right to deliver goods back to bailor whether has the right to the goods.
  5. Right to exercise his right of lien.
  6. Right to take action against third parties.

Question 7.Termination of Bailment
Answer:

  • Section. 153: Where bailee makes unauthorized use of the goods bailment becomes voidable at the bailors’ option.
  • Section. 159: At bailor’s will
    1. In non-gratuitous bailment, the bailor has a right to take back the goods, after the purpose is over.
    2. In gratuitous bailment, he can take back the goods any time, provided in case of loss more than benefit, the bailee must be compensated.
  • Section. 160:
    1. When the period or purpose of bailment is over.
    2. Where the subject matter is destroyed or becomes illegal.
  • Section. 162: A gratuitous bailment is terminated by the death of the bailor or bailee,

Question 8. Lion
Answer:

It refers to the right of one person to retain the possession of some goods, belonging to another person, until come debt or liability is discharged.

Question 9. Types of Lien
Answer:

Particular Lien:

  • It is available only against those goods in respect of which bailee has eroised skill and labor.
  • Bailees lien ic a particular lion
  • It is available to all.

Conditions for exercising Particular Lien

  • If Bailee has exercised his labor and skill on goods bailed.
  • When work has been completed on time.
  • If the payment is due.

General Lien

  • It refers to the right of one person to retain the possession of any goods, belonging to another person, until some debt or liability is discharged.
  • It Is available to bankers, factors, warfingers, attorneys of the High Court, and policy brokers.

Question 10.Finder of Goods
Answer:

  • Refers to a person who finds the goods belonging to another person i.e. the goods lost by the true owner – he enjoys all the rights and carries all the responsibilities of a bailout.
  • Though the finder has no right to sell the goods found in the normal course, he may sell the goods if the real owner cannot be found with reasonable efforts or if the owner refuses to pay the lawful changes subject to the following conditions:
  • article b in danger of perishing and losing the greater part of the value,
  • lawful charges of the finder amount to two-thirds of the value of the article found.

Bailment Descriptive Question And Answers

Question 1. Goods seized by the Customs Authority is a case of bailment under the Indian Contract Act offer your views.
Answer:

When the goods are transferred to any person, the person having the possession is responsible for such goods as it is a case of bailment. In this case, the possession of goods is with the customs authority, therefore bailment exists as per the Indian Contract Act, of 1872.

Question 2. Deposit of money in a bank does not constitute bailment. Justify.
Answer:

Bailment is concerned with only moveable goods. Money is not included in the category of moveable goods. As such deposit of money is not a bailment

Question 3. What are the rights of a finder of goods under the Indian Contract Act, of 1872?
Answer:

A finder of goods has the following rights under the Indian Contract Act, of 1872:

Bailment Rights Under Indian Contract

Question 4. State the essential elements of a contract of bailment. Distinguish between the contract of bailment and the contract of pledge.
Answer:

Difference between the contract of bailment and contract of the pledge:

  1. Right of sale: In case of pledge, the pawnee (pledgee) can sell the goods and recover his debt, if the pawnor (pledger) does not pay while in bailment the bailee can retain the goods and sue for damages, but he has no authority to sell the goods.
  2. Purpose: Pledge is specifically for securing a debt, while bailment may be for any purpose example for repairs, safe custody, etc.,
  3. Right to use the goods: In the case of pledge, the pawnee cannot use the goods pledged but the bailee can use the bailed goods if the contract so provides.

Question 5. What do you moan by bailment? Mention the duties of a bailor In this respect.
Answer:

  • As per Section 148 of the Indian Contract Act the term ‘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 the thorn.

Duties of the Bailor:

  1. The bailor must disclose to the boiler faults In tho goods bailed, of which the bailor is aware, and which materially interfere with the use of thorn, or expose tho bailee to extraordinary risks;
  2. If the bailor does not make such disclosure and some loss or damage results, he is responsible for so much of it as arises to the bailee directly from such faults;
  3. If the goods are bailed for hire, the bailor is responsible for damage arising to the bailee directly from such faults, whether he was or was not aware of the existence of such faults in the goods bailed.

Bailment Practical Question And Answers

Question 1. Comment on the following based on legal provisions: On 01.11.2012 Mr. Barun kept his cow under the custody of Mr. Tarun for one month and paid INR 1000 for maintenance. On 15.11.2012, the cow gave birth to a calf. On 30.11.12 Tarun returned the cow retaining the calf. .
Answer:

  • According to the Indian Contract Act, The goods given as bailment still belong to the giver (bailor), and any profit or income arising out of goods belongs to the bailor Barun.
  • Hence bailee (with whom the goods are kept) should not only give the cow but also the calf. He (Tarun) should not keep the calf with him.

Question 2. Arvind hires a carriage of Govind and agrees to pay INR 500 as hire charges. The carriage is unsafe though Govind is unaware of it. Arvind is injured and claims compensation for injuries suffered by him. Govind refuses to pay. Discuss the liability of Govind.
Answer:

The problem asked in the question is based on the provisions of the Indian Contract Act, of 1872, as contained in Section 150.

  • The section provides that if the goods are bailed for hire, the bailer is responsible for such damage, whether he was or was not aware of the existence of such faults in the goods bailed.
  • Accordingly, applying the above provisions in the given case Govind is responsible for compensating Arvind for the Injuries sustained even if he was not aware of the defects in the carriage.

Question 3. Mr Jatin found a wristwatch in a shopping mall. He made all efforts to trace the true owner of the wristwatch but could not find him. He sold the same to Nitin, who buys without any knowledge that Jatin is. merely a finder. Is the sale by Jatin to Nitin valid? Decide.
Answer:

When a thing which is commonly the subject of sale is lost, if the owner cannot with reasonable diligence be found, or if he refuses upon demand, to pay the lawful charges of the finder, the finder may sell it:

  • The finder of goods can sell the goods only in the circumstances permitted under section 169 of the Indian Contract Act, of 1872 which are as under:
  • If the goods are in danger of perishing or losing the greater part of their value, the finder can sell the goods.
  • If the lawful charges of the finder in respect of the goods amount to a minimum of two-thirds of the value then the finder can sell the goods.
  • In the present case, the sale by the finder will not be valid as it does not seem to fall in any of the above-stated circumstances. Hence, the sale by Jatin to Nitin is invalid.

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