businees law asgnment # 2

8/7/2019 businees law asgnment # 2

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Define bailment and pledge, distinguish their features and also explain how an agency created and

terminated?

Bailment refers to delivery of goods by oneperson to another for some purpose upon a

contract,that they shall ,when the purpose is accomplished ,be returned according to the

directions of person delivering them. It is only applicable to movable property.

Example;

Asif delivers a piece of cloth to Bilal to make a suit. There is a contract of bailment between Asif

and Bilal. Asif becomes a bailee and Bilal becomes a bailor.

The bailment of goods as security for payment of a debt or performance of a promise is called

pledge. Only movable property may be pledged and that too for just limited interest.

Features of bailment;

y Contract;A bailment is based on a contract between bailor and bailee. The delivery of goods

should be made for some purpose and when the purpose is accomplished, the goods

shall be returned to the bailor. If the goods are delivered without any contract i.e by

mistake, there is no bailment. For example, A gives a piece of cloth to T. There is a

contract of bailment between A and T.

y Delivery of goods;Bailment is the delivery of movable goods from one person to another, mere custodydoes not create relationship of bailor and baliee. A servant who receives goods from his

or her master to take to a third person has only custody. The possession remains with

master, so the servant cannot be called bailee.

y Specific purpose;There should be some purpose for bailment of goods. There is no contract when the

goods are delivered by mistaken. When the purpose is accomplished, the goods will be

returned to the bailor or disposed off according to the instructions of the bailor. The

purposes could for carriage, use, safe custody, security and work.

y No change of ownership;In bailment, the possession of goods can be changed but not the ownership. Merecustody without possession is not bailment. If there is a change in ownership the

transaction may be a sale or exchange but not bailment.

y Return of same goods;When the purpose is accomplished, the goods must be returned in original form or

disposed off according to the directions of bailor. If the bailee has an option of paying

money or of returning different property, there is no bailment. The deposit of money


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with a bank is not a bailment because, there is no obligation to return the same money.

However, notes or things deposited in a locker are a bailment.

Rights of bailor;

y To claim damages;The bailor can recover damages from the bailee if any damage to the goods bailed is

caused due to the bailees negligence.

y To demand returns of goods;The bailor can demand the return of the goods bailed as soon as the purpose of

bailment is accomplished. if the bailee makes default in returning the goods at the

proper time and place, the bailor is entitled to compensation arising from such situation

y To claim increase;The bailor is entitled to claim any increase in profit, which may have accrued from the

goods bailed.

y To terminate bailment;The bailor has the right to terminate the bailment if the bailee does any act, which is

against the terms of the contract through the term of bailment has not and expired or

the purpose of bailment has not been accomplished.

y To sue;The bailor may sue the bailee for breach of contract if the goods are not returned or

disposed off as directed by the bailor. He can take action for negligence, destruction etc.

when the bailee is guilty of such conduct. The bailor may also sue third party who

damaged or took the bailed property from the bailees possession.

Duties of bailor;

y To disclose fault;.y To pay expenses;y To indemnify for demanding backy To indemnify for defective titley To receive back goods


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Rights of bailee;

y To claim damages;It is a duty of bailor to receive goods back from the bailee after the purpose is

completed. If the bailor dont receive the goods back, then the bailee can clain the

compensation for all expenses that incurred for safe custody.

y To demand return of goods;The bailee can ask for all expenses that incurred by him or her for the purpose of the

bailment from the bailor.

y To compensation;If the bailor has no right to bail the goods or to receive them back or to give directions

regarding them and as a result, the bailee suffers a loss, the bailee is entitled to receive

such loss from bailor.

yTo sue;

If the 3rd

person wrongfully deprives the bailee of the use or possession of the goods

bailed or causes the injury to the goods, bailee is entitled to sue such person. The bailor

can also bring an action against such 3rd

person in respect of such goods bailed.

Duties of baliee;

y To take reasonable carey Not to make unauthorized usey Not to mix goodsy To return goodsy To return increase

Rights of pledgor;

y To redeemy To claim damagesy To claim increase/benefity To redeem to debt

Duties of pledgor;

y To compensate and pay for expensesy To complete and comply with terms and conditions


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Rights of pledgee;

y To retainy To retain for other debtsy To claim expensesy To sue and sell

Duties of pledgee;

y Reasonable carey No unauthorized usey No mixing of goodsy Not inconsistent with terms and conditionsy Returns of goodsy Give increase

An agency connotes a relation existing where one person has authority or capacity to create a legal

relation between the principle and third party.

businees law asgnment # 2

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