Termination of Bailment | Law of Contracts - CLAT PG PDF Download

Termination of Bailment

A contract of bailment can be terminated in the following scenarios:

•  Expiry of Fixed Period:  If the goods are bailed for a specific duration, the bailment concludes at the end of that period.
•  Fulfillment of Object:  When the goods are bailed for a particular purpose, the bailment ends upon achieving that purpose.
•  Inconsistent Use of Bailed Goods:  If the bailee uses the goods in a manner contrary to the bailment terms, the bailor can terminate the bailment prematurely.
•  Destruction of Subject Matter:  The bailment is terminated if the subject matter is destroyed or undergoes a change making it unsuitable for bailment.
•  Termination of Gratuitous Bailment:  A gratuitous bailment can be ended by the bailor at any time, even if it was for a fixed period or purpose. However, the loss to the bailee from early termination should not exceed the benefit gained from the bailment.
•  Death:  A gratuitous bailment ceases upon the death of either the bailor or the bailee.

 Pledge and Bailment 

 Bailment 

•  Meaning:  Bailment involves the transfer of possession of goods from one person (the bailor) to another (the bailee) for a specific purpose, with the condition that the goods will be returned or disposed of once the purpose is fulfilled.
•  Example:  If Sam gives a cloth to John, a tailor, to make a shirt, this is a case of bailment. The purpose could be repairs, safe custody, etc.
•  Use of Goods:  The bailee can use the goods as per the terms of the contract. However, the bailee does not have the right to sell the goods.
•  Lien:  The bailee can exercise a lien on the goods only for labor and services rendered.

 Pledge 

•  Meaning:  Pledge is a specific type of bailment where goods are bailed as security for the payment of a debt or the performance of a promise.
•  Definition:  Pledge is the bailment of goods as security for the payment of a debt or the performance of a promise, as outlined in Section 178 of the Indian Contract Act.
•  Example:  When a farmer delivers 50 bags of wheat to a bank as security for a loan, it is an example of pledge.
•  Specific Purpose:  Pledge is made for a specific purpose, such as providing security for a loan or fulfilling an obligation.
•  Use of Goods:  The pledgee cannot use the goods pledged. If the pledger fails to redeem the goods within the stipulated period, the pledgee has the right to sell the pledged goods.
•  Lien:  The pledgee can exercise a lien even for non-payment of interest.