Special Kinds of Contract ( Bailment and Pledge )

Bailment and pledge 

Bailment the world ‘bailment’ is derived from the French world the French world ‘baillier’ which means ‘to deliver etymologically, it means any kind of handling over’. In legal sense, it involves change of possession of goods from one person to another for some specific purpose. 

Definition of Bailment Sec. 184 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 directions of the person delivering them. The person delivering the goods is called the ‘bailor’ and the person the person to whom they are delivered is called the ‘bailee’. 

Examples 

A delivers a piece of cloth to B, a bailor, to be stitched into a suit. There is a contract or bailment between A and B. 

A sells certain goods to B who leaves them in the possession of A. The relationship between B and A is that of bailor and bailee.

Duties of a bailer  

Duty to disclose defects [Section 151]

Duty to bear expenses [Section 158]

Duty to indemnity the bailee in case of premature termination of gratuitous bailment

 
Duty to indemnity the bailee against the defective title of bailor [Section 164] 

Duty to receive back the goods [Section 164

Duty to bear the risk of loss [Section 152]

Duties of a bailee  

Duty to take care of the goods bailed [Section 151

&152]  Duty not to make any unauthorized use of goods [Section 154]

Duty not to mix bail or’s goods with his own goods [Section 155 to 157]

Duty to return the goods [Section 160

Rights of a Bailor  

Right to claim damage in case of negligence [Section152]

Right to terminate the contract in case of unauthorized use [Section 153]

Right to claim compensation in case of unauthorized use [Section 154]  

Right to claim the separation of goods in case of unauthorized mixture of goods which cannot be separated [Section 157]  

Right to demand return of goods [Section 160] 

Right to claim compensation in case of unauthorized retention of goods [Section 161] 

Right to demand accretions to goods[Section 163] 

Rights of a bailee  

Right to claim damage [Section 150]

Right to claim reimbursement of expenses [Section 158]

Right to be indemnified in case of premature termination of gratuitous bailment [Section 159] 

Right to recover loss in case of bailor‘s defective title [Section 164

Right to recover loss in case of bailor‘s refusal to take the goods back [Section 164]

Right to deliver goods to any one of the joint bailors [Section 165]

Right to deliver goods to bailor in case of bailor‘s defective title [Section 166]

Right to particulars lien [Section 170]

PLEDGE 

Meaning of pledge (or pawn) [Section 172] the bailment of goods as security for payment of a debt or performance of a premise is called pledge (or pawn). 

Example X borrows of Rs. 1, 00,000 from Citi Bank and keeps his shares as security for payment of a debt. It is a contract of pledge. 

Meaning of A pawner (or pledgor) [Section 172) 

The person who delivers the goods as security for payment of a debt or performance of promise is called the pawnor or pledgor. In aforesaid example X is pawnor 

Meaning of Pawnee (or pledge) [Section 172) the person to whom the goods are delivered as security for payment of a debt or performance of promise is called the Pawnee or Pledgee. 

In the aforesaid example Citi Bank is the Pawnee. 

Rights of Pawnee 

Right of retainer [Section 173]

Right to claim reimbursement of extraordinary expenses [Section 173]

Right to sue pawnor [Section 176]

Right to sell [Section 176]

Right against true owner [Section

Rights of a Pawnee  

Duties of Pawnee 

Duty to take reasonable care of the goods pledged

Duty not to make unauthorized use of goods

Duty not to mix pawnor’s goods with his own goods

Duty to return goods

Duty to return accretion to the goods

Rights of Pawnor  Right to get pawnee’s duties duly enforced

Right to redeem [Section 177]

Duties of Pawnor  Duty to comply with the terms of pledge

Duty to compensate the Pawnee for extraordinary expenses [Section 185]

Agency contract

 Meaning of Agency: 

Agency is relation between an agent his principal created by an agreement. Section 182 of the Contract Act defines an Agent as ‘‘A person employed to do any act for another, or to represent another in dealings with third persons. 

The person for whom such act is done, or who is so represented is called the principal”. 

Essential Features of Agency 

The principal 

The agent 

An agreement

 
Consideration not necessary 

Representative capacity

 
Good faith 

The competence of the principal Modes or Methods or Creation of Agency 

Agency by express agreement: A contract of agency may be made by express words, whether written or oral. 

Agency by implied agreement: ‘‘An authority is said to be implied when it is to be inferred from the circumstances of the case. 

Agency by estoppel: When a principal by his conduct or act cause a third person to believe that a certain person is his authorised agent the agency is aid to be an agency by estoppel. 

Agency by necessity: It means the agency which comes into existence when certain circumstances compel a person to act as an agent for another without his express authority. 

Agency by holding out: When a principal by his active conduct or act and without any objection permits another to act as his agent, the agency is the result of principal’s conduct as to the agent. 

3. Agency by ratification: 

Ratification means confirmation of an act which has already been done. Sometimes, an act is done by a person on behalf of another person but without another person’s knowledge and authority. If he accepts and confirms the act, he is said to have ratified it. 

4. Agency by operation of law: 

In certain circumstances the law treats a person as an agent of another person. For example, 

When a partnership is formed, every partner automatically becomes agent o another partner. 

When a company is formed its promoters are treated as its agents by operation of law.

RIGHTS AND DUTIES OF AGENT 

Rights of an Agent 

Right to retain money received on principal’s account. 

Right to receive remuneration.

 
Right of lien on principal’s property. 

Right to be indemnified. 

Right to compensation for injury caused by principal’s neglect. 

Duties of an Agent 

To follow the direction of the principal. 

To conduct the business of agency with reasonable skill and diligence. 

To render accounts on demand 

To communicate with the principal. 

Not to deal on his own account 

To pay the amounts received for the principal

Not to delegate his authority

 
Not to act in excess of authority 

Duty on termination of agency by principal’s death or insanity. 

TERMINATION OF AGENCY 

Termination of agency means revocation (cancellation) of authority of the agent the modes of termination of agency may be classified are as: 

(a) Termination of Agency by the act of the Parties. 

By revocation o authority by the principal 

By renunciation (giving up) of business of agency by the agency 

By mutual agreement 

(b) Termination of agency by Operation of Law

Completion of business of agency 

Death or insanity of principal or agent

 
Insolvency of the principal 

Destruction of subject matter 

Expiry of time

 
Agency subsequently becoming unlawful.

 
Termination of sub agent’s authority revocable agency when the authority of agent cannot be revoked by the principal it is said to be an irrevocable agency. 

An agency is irrevocable in the following cases: 

If the agency is coupled with interest : when an agent himself has a special interest in the property which forms the subject matter of the agency, such agency is said to be coupled with interest. 

Where the agent has partly exercised his authority 

When the agent has incurred a personal liability.