Contract Of Bailment: Jaiib/DBF Paper 3 (Module D) Unit-4

Contract Of Bailment: Jaiib/DBF Paper 3 (Module D) Unit-4

Dear bankers,

As we all know that is Contract Of Bailment for JAIIB Exam. JAIIB exam conducted twice in a year. So, here we are Contract Of Bailment (Unit-4), Commercial Laws with Reference to Banking Operations (Module D), Legal & Regulatory Aspects of Banking -Paper 3.


A ‘bailment’ is the delivery of goods by one person to another for some purpose. When the purpose is accomplished, the goods are to be returned or otherwise disposed of according to the direction of the person delivering them.

  • The person delivering the goods is called the ‘bailor’.
  • The person to whom they are delivered is called the ‘bailee’.

Meaning Of Bailment

  • When one person delivers to another, certain goods to be used for a certain purpose, the contract is known as a contract of bailment. Here, the contract will specify the time for which the goods will remain with the person taking them. Also, the person who gives the goods can direct the other either to return the goods after the requisite time has expired or, direct him to dispose off the goods in a particular manner.

Bound To Disclose To Bailee Bailor

The bailor is bound to disclose to the bailee faults in the goods bailed

  • Of which the bailor is aware,
  • And which materially interfere with the use of them,
  • Or expose the bailee to extraordinary risk;

and if he does not make such disclosure, he is responsible for damage arising to the bailee directly from such faults. If the goods are bailed for hire, the bailor is responsible for any damage whether he was aware of the existence of such faults in the goods bailed or not.

Effects of Mixing of goods and Expenses

  • If the bailee (with the consent of the bailor), mixes the goods of the bailor with his own goods, the bailor and the bailee shall have an interest, in proportion to their respective shares, in the mixture this produced.
  • If the bailee, without the consent of the bailor, mixes the goods of the bailor with his own goods and the goods can be separated or divided, the property in the goods remain with the parties respectively. The Bailee is is bound to bear the expense of separation or division, and any damage arising from the mixture.

Duties of the Bailee with regard to goods

  • It is the duty of the bailee to return the goods bailed as soon as the time, for which they were bailed has expired or the purpose for which they were bailed has been accomplished.
  • The bailee is responsible to the bailor for any loss, destruction or deterioration of the goods of the goods are not returned on time.
  • In the absence of any contact to the contrary, the baillee is bound to delivery to the bailor any increase or profit which may have arisen from the goods bailed.

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