 |
|
Coggs v. Bernard is a landmark case both for
English property law and contract law. It sets out the duties owed by a bailee
- someone in possession of property owned by another. The case pertains to several
barrels of brandy belonging to John Coggs.
|
Introduction
Chapter IX of the Indian Contract Act, 1872 (unless
otherwise specified, wherever the word ‘Section’ is used, it shall pertain to a
section of the Indian Contract Act, 1872) deals with the ‘Contract of
Bailment’. We shall cover the important provisions of this chapter that provide
for the general principles of bailment. A distinction shall also be made as the
provisions that are mandatory in nature and the provisions that specifically
favour party autonomy.
Section 148
Section 148 defines ‘bailment’ as 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 direction of the person delivering them.
Section 150
Section 150 talks about Bailor’s duty to disclose
faults in the goods bailed. This section casts a negative duty upon the bailor
to disclose to the Bailee faults in the goods bailed. The Bailor is bound to
disclose following kinds of faults:
1. Faults of which the Bailor is aware.
2. Faults that the Bailee to extraordinary
risks.
3. Faults which materially interfere with
the use of such goods.
Any failure on part of the Bailor in this respect makes him
directly responsible for damage arising out of such faults. Thus there is an
implied warranty that the goods are not dangerous and in all the other cases,
the Bailor has an obligation to make such disclosure.
Section 151
Section 151 talks about the standard of care to be
adopted by the Bailee. The standard of care in such cases is that of a man of
ordinary prudence and depends upon the bulk, quality and value of the goods.
Section 152
Section 152 absolves the Bailee of liability in cases
where the goods get destroyed if the Bailee has taken the standard of care as
prescribed under Section 151.
Section 153
Section 153 grants a positive privilege to the Bailor
to terminate the contract if the Bailee does any act that is inconsistent with
the terms of the agreement. Thus the standard of care to be adopted by the
Bailee is that of an ordinary man but he must act within the four corners of
the agreement. Any act done by him that vitiates the contractual conditions
gives a choice to the Bailor to terminate the contract.
Section 154
Section 154 casts a negative duty upon the Bailee to
provide compensation to the Bailor in case the Bailee makes such use of the
goods which is inconsistent with the terms of the agreement. Thus, in case of
any act that is inconsistent with the terms of the agreement or unauthorized
use of goods, the Bailor can not only terminate the contract but also claim
damages from the Bailee.
Section 158
Section 158 talks about repayment by the Bailor of
necessary expenses. This provision talks about the expenses that are to be borne
by the Bailor in cases where it is not specified in the Contract. A Bailee is
to be a custodian of the goods as per the terms of the contract is entitled to
remuneration, irrespective of the fact that whether or not it is specified in
the contract itself, from the Bailor for the necessary expenses incurred by him
for the purposes of Bailment. It is important to note that this provision also
gives rise to the right of lien over the goods to the Bailee. The Hon’ble
Calcutta High Court in the case of Surya Investment Co. v. State Trading
Corporation of India, reported at AIR 1987 Cal 46, has held that:
“….. If the Bailee has to incur any expenditure for the
preservation of the goods from deterioration not provided for in the contract
of bailment, the Bailee will be entitled to recover such expenditure from the
owner inasmuch as the owner will derive benefit therefrom if ultimately the
goods are delivered to the owner. A Bailee cannot lose the possession as well
as charges for bailment…. A Bailee’s right of lien arises out of its possession
and is lost with the loss of possession.”
Subsequently, the Hon’ble Court also observed that the
Bailee cannot be denied its claim for storage charges solely on the ground that
the Bailee has claimed or exercised the right of lien and, therefore, it is not
entitled to get any charge for keeping the goods bailed.
Section 160
This provision casts a duty upon the Bailee to return or
deliver the goods to the Bailor as soon as the time or the purpose for which
they were bailed has expired. It is not necessary that the Bailor has to make
demand in this respect to the Bailee to return or deliver the goods. The
provision also states that the Bailor’s directions, if any, as to the manner in
which the goods are to be returned or delivered must be obeyed by the Bailee.
Section 161
This section is an extension of Section 160. Section 161
talks about the responsibility of the Bailee when the goods are not duly
returned, delivered or tendered at the proper time. In such cases, the Bailee
is responsible to the Bailor for any losses, destruction or deterioration of
the goods from that time onwards. However, it is pertinent to note that the
Bailee shall be responsible only for the damage that has arisen because of his fault
or negligence and not for a cause other than his default. In the case of Annamalai
Timber Trust Limited v. Trippunithura Devaswom, reported at AIR 1954 Tr
& Coch 305, it has been held that unexplained failure to return the
thing bailed is presumed to be by the Bailee’s default.
It is noteworthy to mention that the remedies of the Bailor
in the event the Bailee did not return the goods have not been specified in
this provision. Also, under this section, the Bailee is responsible only to the
Bailor. In case, the Bailor refuses to accept the goods, he may be liable to
compensate the Bailee for any necessary expenses incurred towards safe custody
of the goods depending upon the facts and circumstances of each case.
Section 163
The wordings of Section 163 start with ‘in the
absence of contract to the contrary’. This shows that Section 163 is a
provision that provides for Party Autonomy. However, when the parties to a
contract are silent as to the contents of Section 163, in such cases the Bailee
is bound to deliver to the Bailor as per his directions, any profit which may
have accrued from the goods bailed. Thus any profit that has arisen on account
of the goods bailed must be given to the Bailor and unless otherwise specified,
the Bailee has no right over such profit.
Section 170
Section 170 also contains the term ‘in absence of a
contract to the contrary’ thereby signifying that Party Autonomy is paramount
for the purposes of this section. However, when the parties to a contract are
silent, then the Bailee has a right of lien to retain goods for which it has
rendered any service until he receives due remuneration for such services
rendered.
What is important to see is that if the Bailor has the right
to remove the goods from time to time, then unless otherwise specified, there
is no right of lien vested in the Bailee. The right of lien would arise only
where the Bailee has a right to continuing possession of the goods. The right
of lien does not entitle the Bailee to sell the goods and recover the dues. The
Bailee shall be entitled to exercise lien only to the extent he has spent his
labour and skill in services rendered as per the purpose of the bailment
specified in the agreement and towards any other purpose or goods.
The Allahabad High Court, in the case of Kalloomal
Tapeshwari Prasad & Co. v. Rashtriya Chemicals & Fertilizers Limited,
reported at AIR 1990 All 214, has provided an understanding of Section 170 in
the following manner:
“On an examination of this Section, it will be apparent
that the extent of bailee's lien is in respect of services involving the
exercise of labour or skill rendered by him in respect of goods bailed. It
follows that the services which are to be rendered must be limited to the
labour or skill which has been spent by the bailor over the goods bailed. The
lien has nothing to do with any other service rendered by the bailor in respect
of contract of bailment. As a matter of fact, labour and skill must have been
spent firstly in accordance with the purpose of bailment, must have been so
spent so as to improve the goods bailed and thirdly it applies only to such
goods over which the bailee has bestowed his labour and expense and not to
other goods. All these conditions are again subject to a contract to the
contrary. If there be any contract to the contrary the bailee will not be
entitled to enforce his lien under S. 170.”
Thus we see that mere making arrangement for storage of
goods in a warehouse for payment would not attract this provision since no
labour or skill is being exercised in respect of such goods.
Conclusion
There are only two sections (Section 163 and Section 170) in
Chapter IX of the Contract Act that provide for Party Autonomy. Rest all the
other sections provide for the general principles of bailment that are to be
mandatorily followed in all the contracts relating to bailment. The general
principles of bailment mentioned in various provisions of Chapter IX are not
straightjacket formulas that are to be mechanically and perfunctorily applied
to every case. These sections are merely the guiding lights that help in
preserving the equity and good sense of the contract and have to be applied
depending upon the facts and circumstances of each case.
No comments:
Post a Comment