Bailment Meaning Types Examples Of Bailment Contract

Bailment Meaning

Explanation

Let us say the person (trader) sometimes sells the shares without possessing the sharesSharesOrdinary Shares are the shares that are issued by the company for the purpose of raising the funds from the public and the private sources for its working. Such shares carry voting rights and are shown under owner’s equity in the liability side of the balance sheet of the company.read more. I.e., I.e., short sell the shares to earn short term profits; thereupon, in this example, it could be seen that the seller sells the shares even without having ownership of the shares. In this transfer of the possession of goods, sometimes some liabilities are also transferred to the bailee depending upon the type of bailment. For example, when we park our car in the parking lot, it is the transfer of possession but not ownership, but in case there is some physical damage, then the person who has the person, i.e., bailee, will be responsible for the same.

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Features

The first basic requirement is the agreement, which may be written or verbal, and should be clear from any ambiguity.The possession of goods or assets must have been transferred from one person to another, i.e., from bailor to bailee. It will need to be returned to the bailor after the expiration of the bailment agreement.They should be for some predetermined purpose; for instance, we may give our car to the service center to be serviced.The existence of consideration depends upon its type, i.e., the monetary presence of consideration is not mandatory.

How Does it Work?

Bailment is an agreement that could be oral or written mutually agreed upon between the person giving possession and the person taking possession, which might involve consideration. The bailor transfers the possession to the bailee for any mutually agreed purpose. The bailee fulfills the terms; in the end, the bailee transfers the possession of such bailed assets back to the bailor, and the bailor pays certain consideration if agreed upon.

Types of Bailment Contract

#1 – Gratuitous

This type does not include any consideration; in other words, the bailment with no consideration is gratuitous. They may either be for the benefits of bailee or bailor or maybe for both, for instance, parking the car at your friend’s house due to lack of space, giving the car to your friend for use, etc.

#2 – Non-Gratuitous

Similarly, those bailments in which the bailee gives some consideration to the bailor are non-gratuitous. They are generally entered into for the sake of earning, for instance, hiring a motor vehicle from some hiring agency on the agreement of payment of hiring charges.

Examples of Bailment

Where one person is handing over the keys of their car to the car valet service provider;When one person parks his car at his friends or some known house.Situation when we give our car to our friend to use;When we deposit our shoes at the shoe center while visiting any temple, monuments, etc.The most common example is availing locker services from banks, i.e., banks are the bailee, and the person keeping his belongings in such lockers is the bailor. They both agreed upon some consideration, i.e., bailor uses the locker, and in turn, bailee charges the consideration for providing such services.

Elements

Transferring of possession by the bailor to the bailee;Accepting the possession of the assets by bailee from bailor;Completion of such mutually agreed terms by both parties.Payment of consideration, if any.Handing over of possession back to bailor by bailee;

Essentials of Bailment Contract

It requires at least two parties, i.e., one should be the bailor, and the other is the bailee.Under this, an agreement or contract is mandatory which might be written or verbal as well;After entering such an agreement, the bailee must have returned the possession to the bailor.

Difference between Bailment and Consignment

Under bailment, the transferor of assets is called the bailor. The receiver is called bailee; conversely, in consignment, the transferor is called the consignor, and the receiver is called the consignee.Under bailment, the ultimate possession and ownership rest with the bailor. On the other hand, under consignment, the consignorThe ConsignorThe consignor is an independent owner who transfers goods to the consignee for sale on their behalf. The consignee acts as an agent or middleman, and the stock’s ownership remains with the consignor until the goods are sold.read more can sell out such assets that are handed over to the consignee under consignment.Bailment does not give any right to transfer the ownership to the bailee, but under consignment, the consignor may have to transfer the ownership rights if the consignor sold the consigned assets.The assets transferred under bailment are for a temporary purpose. However, in the case of consignment, the assets might have converted into permanent possession of the consignee if the assets are sold.

Conclusion

The term ‘Bailment’ broadly means transferring the possession to another person to fulfill some predetermined agreement, which might require the bailee to do something or vice versa in the exchange of some consideration, which is not mandatorily required to exist. Generally, the bailor does not enjoy the right to use such bailed assets while they have bailee.