Law of Contracts - THE DOCTRINAL BASIS OF SUB- BAILMENT

INTRODUCTION

The evolution of the concept of sub-bailment can be traced back to the evolution of the concept of bailment. One of the first mentions on the subject of sub-bailment can be found in Halsbury’s Laws of England where it is said that a sub-bailee is a person to whom the actual possession of goods is transferred by someone who is not himself the owner of goods, but has a present right to possession of them as the bailee of the owner . In theory though the concept of sub-bailment has existed over a period of time in practice its evolution has been recent.

The legal opinion on the concept of sub-bailment was developed only 38 years ago with the case of Morris v. C.W. Martin & Sons Ltd . This case gave way to the legal relationship between an owner of the goods and the sub bailee. However it was the pioneer container case which seized the opportunity to expound the doctrinal basis of sub-bailment,

With this I open the scope of my project doctrinal basis of sub-bailment. In order to understand the doctrinal basis of sub-bailment it will be pertinent to define that what does a doctrine mean? And what would we mean when we talk about the doctrinal basis of sub-bailment. The answer to first question would lead us to answering the second question hence help us in having an impeccable understanding of the topic which is of uttermost necessity for an in depth analysis of the topic.

Now, a doctrine can be said to be a rule or a principal while doctrinal is a neutral term, which means relating to a doctrine. Therefore the obvious answer, which emerges for the second question is that the doctrinal basis of sub-bailment would mean the rule or principal basis of sub-bailment. Hence, in this project we shall attempt to analyse the rule or principal basis of sub-bailment.

Although sub-bailment has been a commercial commonplace, the law has been rather slow to define the critical aspects of sub-bailment, the relationship of the parties and the nature of the contract. To understand the concept of sub-bailment it becomes necessary to have an excellent understanding of the concept of bailment as sub-bailment has its roots with the concept of bailment.

If goods are lost or damaged whilst in the possession of the sub-bailee then the relationship between the owner and the sub-bailee is thrown into the frame of focus. The owner may have no action against the principle bailee but against the sub-bailee the owner may have the right to sue. The question that arises now is that whether the owner has that right against the sub-bailee (the sub-bailee being the third party) directly. Though there may be two contracts existing one between the bailor and the principal bailee and one between the principal bailee and the sub-bailee with the principal bailee being the only common party to both the contracts. And their being no privity of contract between the principal bailor and sub-bailee the question that remains is that whether there will be an independent cause of action that can be maintained by the principal bailor against the sub-bailee under the law of bailment, on the assumption that the contract of bailment is sui generis or in other words governed by its own principles. Thus, if the doctrinal basis of sub-bailment is made clear then the answer to these fundamental questions would become easier.

Despite bailment having an old history fundamental question on the issue of sub-bailment like the one raised above have been made clear only recently with certain cases which would be talked about later in the project.

Thus in this project we shall be talking about the principal of sub-bailment in detail and we shall try to make an attempt to see how this principal of sub-bailment has been incorporated in the Indian Contract Act. Further, we shall analyse the cases of Morris v. C.W. Martin & Sons Ltd, which brought into light the concept of sub-bailment and the Pioneer Container case which seized the opportunity to expound the doctrinal basis of sub-bailment. Now, sub-bailment is a term the courts are none too familiar with, but the doctrinal basis for the same, though dealt with by the courts, was never really defined until the famous Pioneer Container case and the Morris case. These cases therefore earn their place in the initial stage of the project as they were the first to define the doctrinal basis of sub-bailment and are inherently inseparable from the basic premise of this project.

Through these cases we shall try to analyse the doctrinal basis of sub-bailment and its importance in the current scenario. A passing reference will also be made to the concept of Bailment in order to have comprehensible understanding of the notion of sub-bailment.

BAILMENT- ‘DEFINED AND EXPLAINED’

Bailment can be said to be the delivery of a thing entrusted for some special object or purpose upon a contract, express or implied, to confirm to the object or the purpose of the trust. A bailment, traditionally defined, is a delivery of personal chattels on trust, usually on a contract, express or implied, that the trust shall be duly executed, and the chattels redelivered in either their original or altered form, as soon as the time or use for, or condition on, which they were bailed shall have elapsed or been performed . Under modern law modern bailment arises whenever one person is voluntarily in possession of goods belonging to another person.

Bailment involves a change of possession. It might mean any kind of handing over though it is a technical term used in common law. It implies a sort of a relationship in which the personal property of one person temporarily goes into the possession of another. The ownership of the articles or goods is in one person and the possession in another. This can happen in numerous circumstances.

A bailment can arise without an enforceable contract also. Further bailment is a relationship sui-generis and unless it is sought to increase or diminish the burdens imposed upon the bailee by the very fact of bailment, it is not necessary to incorporate it into law of contract and to prove a consideration. The legal relationship of the bailor and bailee can exist independently of any contract, and is created by the voluntary taking into custody of goods, which are the property of another, as in cases of sub-bailment. Bailment can be voluntary as well as involuntary.

For a bailment to exist there are certain circumstances, which must exist. They are:

1) A specific movable property

2) Delivery of possession

To constitute a bailment, its owner or possessor must vacate the actual or constructive possession of specific movable property, or his agent duly authorised for that purpose, in favour of another person in order that the latter may keep the same or perform some act in connection therewith, for which such actual or constructive possession of the goods is necessary, thereafter returning the identical subject matter in its original or an altered form. Possession is central to bailment. In order to constitute a bailment change of possession is essential . There must be a transfer of the exclusive right of possession .

The obligation of the bailee to return the goods or to deal with them according to the direction is the essence of bailment . It is the bailee’s duty to deal with the goods according to the order of the bailor and is incidental to the contract of bailment. It also becomes the duty and the responsibility of the bailee to return the goods after the job, which he was required to do, is done or after a reasonable period of time. Even if the contract is silent about it, there is an implied contract in a bailment to return the articles in a reasonable period of time or after the purpose are served. There is no bailment unless there is an obligation to return back the bailed goods identical in subject matter or in an altered for as demanded by the bailor.

On the whole, bailment may be described as a delivery on condition, to which the law usually attaches an obligation to redeliver the goods, or otherwise deal with them as directed, when the condition is satisfied.

In the Indian Contract Act bailment finds its place under section 148 of the Act, which reads as below:

‘Bailment,’ ‘Bailor’ and ‘Bailee’ defined – A ‘Bailment’ is 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’. The person to whom they are delivered is the bailee

From sections 148 to sections 171 the Indian Contract Act deals with bailment.

Now there might be a bailment even when the owner of the goods has not consented to their possession by the bailee at all. For e.g. in case of wharfingers who take possession of the goods unloaded at the quayside . Or for that matter in case of the contract of sub-bailment.

There can be various types of bailment. They are classified as under:

1) Gratuitous Bailment

2) Bailment for consideration

3) Sub-Bailment

4) Bailment other than under contract.

In this project we shall be restricting ourselves to the study of sub-bailment and to understand its doctrinal or the rule or principle basis. Sub-bailment shall be dealt with in the next chapter.

SUB-BAILMENT AND ITS DOCTRINAL BASIS

If goods are lost or damaged in the possession of a sub-bailee then the relationship between the sub-bailee and the principal bailor is thrown dramatically into focus. Now, if we look at the principal or the rule of sub-bailment, a sub-bailee is a person to whom the actual possession of goods is transferred by someone who is not himself the owner of goods, but has a present right to the possession of them as bailee of the owner . Further, the authority to sub-bail may be inferred from the knowledge of commercial practices in vogue that can be imparted to the parties. For e.g. a carrier might sub-bail by engaging another carrier as sub-contractor and in such case the sub-bailee would be treated as the bailee of the original bailor , a post office may engage an airline to carry its mail.

Further where there is actual or apparent consent to the sub-bailing, the relationship of bailment will arise directly between the original bailor and the sub-bailee . This means to say that the bailor may take advantage of the rules of bailment against the sub-bailee . Where the bailee sub-bails the goods with the authority of the owner, the relationship between the owner and the sub-bailee is that of a bailor and bailee, and the owner is bound by the terms on which the goods are sub-bailed, if he has impliedly consented to the bailee making the sub-bailment containing those conditions and not otherwise. Further more if the sub-bailee voluntarily receives into his custody the goods of the owner, and assumed towards the owner the responsibility of a bailee, the effect of Sub-bailment is that the owner is taken to have authorised, to the extent that he consented towards the terms of the sub-bailment, the bailee to regulate the duties of the sub-bailee in respect of the goods entrusted to him, not only towards the bailee but also towards the owner. Conversely, the sub-bailee, by voluntarily taking the owners goods into custody, ipso facto becomes the bailee vis-à-vis the owner and the owners right against sub-bailee were only subject to the terms of the sub-bailment if the owner consented to them i.e. if he authorised the bailee to entrust the goods to the sub-bailee on those terms. Moreover the original bailor may not need to rely on any contract of sub-bailment . The relationship of bailment will arise between the original bailor and the sub-bailee where the latter voluntarily received the goods from the bailee knowing that another person is “interested in the goods”. Thus, by relying on the fact that there is sub-bailment, the original bailor need not prove a duty of care owed by the sub-bailee since the sub-bailee will owe him all the duties of a bailee. Further, if the sub-bailee accepts the possession of goods, he assumes the obligations of a bailee towards the original bailor. The bailor has a right of action against the sub- bailee for breach of any of his duties, either if the bailor has the right to immediate possession of goods, or if they are permanently injured or lost. The relationship between the bailor and the sub-bailee exists independently of any contract between them.

Under sub-bailment the original bailee remains responsible for the goods as a bailee and retains the right to possession of the goods when the sub-bailment expires . The sub-bailee also owes concurrently the same duties to original bailee, whose obligation to the bailor is not extinguished by the sub-bailment.

Thus, in this chapter we have seen what is sub-bailment and the principles or rules of sub-bailment in detail. We have seen the relationship between the bailor and the bailee and the sub-bailee and how the relationship arises. Basically in this chapter we have dealt with the intricacies of the contract of sub-bailment. In the next chapter we shall be dealing with the doctrinal basis of sub-bailment as expounded by the courts for the first time.

SUB-BAILMENT ‘THE DOCTRINE AS TAKEN UP BY COURTS

The case laws in Indian courts as regards sub-bailment have been rather grim. In India sub-bailment has not achieved that status which it has attained abroad. Hence the case laws, which we will be relying on this chapter are cases dealt by the English courts. Further, the reason for relaying on these case laws can be attributed to the fact that these two case laws were pioneers in expounding the concept of sub-bailment and giving the doctrinal basis of sub-bailment.

The legal relationship between the owner of the goods and a sub-bailee to whom they have been entrusted was canvassed more than 38 years ago in the leading case Morris v. C.W. Martin & Sons Ltd. This decision affirmed that a sub-bailee may be directly accountable to the owner and that the latter was correspondingly bound with the terms of the sub-contract to which he/she had expressly or impliedly consented. Further in the Pioneer container case the Privy Council has recently seized the opportunity to expound he doctrinal basis of sub bailment.

First we will be dealing with the case of Morris v. C.W. Martin & Sons Ltd.

Morris v. C, W. Martin & Sons Ltd.

First the facts of this case in brief:

The plaintiff sent her mink stole to a furrier for cleaning where she was told by the furrier that he did not do cleaning, but would arrange for the fur to be cleaned by the defendants to which the plaintiff consented. The defendant also knew that the fur coat, which came to them, belonged to a customer of the furrier but did not to whom it belonged. This arrangement made by the principal bailee was subject to the conditions of trade of which the principal bailee was aware. Whilst in the possession of the defendants an employee of the defendants stole the coat. The plaintiffs sued the defendants.

The question that came forth in this case is that can the plaintiff themselves sue the defendants directly. Lord Denning gave the answer to this question as affirmative. It was held that the sub-bailee’s owed the plaintiff a duty to take reasonable care of the fur. Further, it was said that the legal relationship between the bailor and the bailee could exist independent of any contract. Further it was also said that the exemption clause in the agreement was not relevant to the facts. It was held that the owner is bound by the conditions if he has expressed or implied his consent to the bailee making a sub-bailment containing those conditions and not otherwise.

This case further gave a consensual model. It established that a sub-bailee owes duties not only to the intermediate bailee but also the principal bailor, despite the absence of any direct contractual relationship. The corollary to this is that the principal bailor is bound by those terms to which he has consented. The notion of consent in sub-bailment has gained general acceptance if not universal acceptance.

There has been broad support for the primary proposition of this case that the sub-bailee may be directly responsible to the principal bailor. The concept of sub-bailment on terms has been more problematic, casting uncertainty as to the respective right of the owners and the sub-bailee under collateral bailment,

The most significant development in this area since this case has been the Privy Council recently seizing and opportunity to expound the doctrinal basis of sub-bailment in the Pioneer container case which is discussed below.

Pioneer Container case

The facts of the case are given below in brief:

The plaintiffs contacted with freight carriers for the carriage of the plaintiffs goods by container from Taiwan to Hong Kong. Bills of lading issued by the carriers to plaintiffs, provided that the carrier was entitled to sub-contract on any terms the whole or any part of the handling, storage or carriage of the goods. The defendants issued feeder bills of lading containing an exclusive jurisdiction clause stipulating that Chinese laws will govern the bills of lading and dispute arising will be determined in Taiwan. The vessel carrying the containers was involved in a collision and sank with loss of all cargo.

Here the term of sub-bailment assumed critical importance. The plaintiffs commenced proceedings against the defendants in Hong Kong by issuing a writ in rem against a sister ship Pioneer container. The defendants moved for the stay of the proceedings in Hong Kong, but by the time matter was heard, it became time barred in Taiwan. The court of appeal in Hong Kong granted the stay to the defendants. The plaintiffs appealed in the Privy Council against this decision.

Turning to the nature of relationship between the principal bailor and the sub-bailee the Privy Council affirmed that a sub-bailee owed a duty of care to a non -contractual bailor. Further in this case it was specifically acknowledged that the rights and the obligations under the relationship were independent of contractual doctrines. Sub-bailment’s origin lies in the law of bailment, which does not depend for its efficacy either on the doctrine of privity of contract or on the doctrine of consideration. Further it was also emphasised in this case that the relationship of bailment arises automatically when the party voluntarily takes possession of another’s goods. An integral element of the relationship is the assumption of a duty to the owner, and direct accountability for any breach . The owner realises on the fact of bailment and not on the contractual basis on which it arose . This case firmly espouses the consensual model of sub-bailment on terms as given in the case of Morris v. C.W. Martin & Sons Ltd.

This case asserts that it is the fact of possession rather than the owner’s consent, which establishes sub-bailment, and with it, the associated obligations of a bailee. Yet the owner’s consent is required to infuse the collateral bailment with the terms of the sub-bailment. Thus, while voluntary possession of another’s goods will ipso facto create obligations to their owner, it does not necessarily follow that the ultimate bailee will enjoy the recourse to contractual defences under the sub-bailment.

Thus, in this chapter we have dealt with the courts view on the doctrinal basis of sub-bailment. We have dealt with the case of Morris v. C. W. Martin & Sons Ltd. , which was one of the first cases to define the concept of sub-bailment. Then we dealt with the Pioneer container case, which was the leading case in expounding the doctrinal basis of sub-bailment. Therefore in this chapter we attempted to learn the principal of sub-bailment through the two leading cases on sub-bailment. No Indian cases have been referred to in this chapter, as there is a paucity of case laws on the concept of sub-bailment in the Indian context.

CONCLUSION

Thus, in this project we have dealt in detail with the concept of sub-bailment and its doctrinal basis. To understand the concept of sub-bailment we also looked in brief on the concept of bailment. We also made an attempt to understand the relationship between the principal bailor and the sub-bailee and the legal relationship between them. We pondered over the circumstances that whether the principal bailor has the right to sue to the sub-bailee directly or not.

In this project we also dealt with two important cases, which brought into existence the concept of sub-bailment and expounded the doctrinal basis of sub-bailment. We saw how the pioneer container case took a resolute step in defining the doctrinal basis of bailment in general, and sub-bailment in particular. Further it could be seen that the consensual model given in the Morris case was also affirmed. We realised that how the relationship between the owner and sub-bailee requires a careful balancing of interests. Moreover it was seen that voluntary assumption of possession engenders a duty to the owner. further in the case of Pioneer containers the Privy Council recognised the ostensible authority as a basis for sub-bailment on terms. This concept if embraced will ensure that the collateral bailment between the owner and the sub-bailee is an accurate reflection of the interests of both parties.

During the course of the research a reference to the duty of the sub-bailee towards the principal bailor was also made. An integral element of the relationship between them is the assumption of a duty to the owner, and direct accountability for any breach. This relationship of bailment arises automatically when the party voluntarily takes possession of another’s goods.

Thus, through this project we attempted to have an in depth understanding of the concept of bailment. We have made an attempt to understand the doctrinal basis of sub-bailment and the legal relationship between the Bailor and the sub-bailee.