Contracts Project rights and responsibilities of finder of goods

DAMODARA M SANJIVAYYA NATIONAL LAW UIVERSITY

A PROJECT REPORT ON

FINDER OF GOODS RIGHTS, RESPONSIBILITIES, LIABILITIES – AN ANALYSIS

Submitted ByName: Harshvardhan Dhanik Class: 1

st

Semester, 5 Year B.A., LL.B. (Hons.) Hall Ticket No. : 201245

CONTENTS Serial no 1 2 3 4 5 6

TOPIC INTRODUCTION RIGHTS OF FINDER OF GOODS RESPONSIBILITIES OF FINDER OF GOODS LIABILITIES OF FINDER OF GOODS CONCLUSION BIBLIOGRAPHY

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INTRODUCTION Finder of goods is a unique topic on which I have presented my project. This project basically helped me understanding the rights liabilities and responsibilities of finder of goods. In respect of duty and liabilities a finder is treated at par with bailee. The finder’s position, therefore, has been considered along with bailment. Section 71 of Indian contract act lays down the responsibility of a finder of goods.

RIGHTS OF FINDER OF GOODS AS we know the rights of finder of goods is subject to the same responsibility as a bailee. A finder of goods is a bailee thereof and as such bound by the duty of reasonable care1. He does not have the right to sue the owner for compensation for trouble and expense voluntarily incurred by him to preserve the goods and to find out the owner. Early English cases disallowed not only any compensation, but also right to lien for expenses. Section 168 and 169; however, protect the interest of a finder in two ways. Section 168 allows the finder to retain the goods against the owner until he receives compensation for trouble and expense. Further, where the owner has offered a specific reward for the return of the goods lost, the finder may sue for such reward, and may retain the goods until he receives it. Section 169 allows the finder to sell the goods in certain circumstances. Where the thing found is commonly the subject of sale and if the owner cannot be found with reasonable diligence, or if he refuses to pay the lawful charges of the finder the finder may sell the goods in the following cases:  

When the thing is in the danger of perishing or of losing greater part of its value, or When the lawful charges of the finder in respect of the thing found, amount to two-third of its value.

Rights of the finder of goods are discussed below-

1. Right to compensation – the bailor is responsible to the bailee for any loss which the bailee may sustain by reason that the bailor was not entitled to make the 1 He is under no higher duty than that Isaack v. clark,(1615)2 bulstr 306.

bailment or to receive back the goods, or to give directions respecting them. If the bailor has no right to bail the goods or to receive them back or to give directions respecting them and consequently the bailee is exposed to some loss, the bailor is responsible for the same. Taken from the section 164 of the Indian contract act. 2. Right to expenses or remuneration- where by the conditions of the bailment, the goods are to be kept or to be carried, or to have work done upon them by the bailee for the bailor2, and the bailee is to receive no remuneration, the bailor shall repay to the bailee the necessary expenses incurred by him for the purpose of the bailment. A bailee is entitled to recover his agreed charges. But where there is no such agreement at all, section 158 comes into play. The section says that where the bailee is required by the terms of bailment to keep or carry the goods or to do some work upon them for the benefit of the bailor and the contract provides for no reward, the bailee has a right to ask the bailor for payment of necessary expense incurred by him for the purpose of the bailment. The American law is also the same. Where the bailment is gratuitous and the bailee is in no \way benefited, the bailor has to bear the expenses, if any, of the bailee for the keeping the chattel. It is akin to the lien of a warehouseman for claiming charges for the preservationof the goods.3 Where the bailment is for the benefit of the bailee, there, in reference to expenses, the following two propositions apply: If in using the thing, the borrower is put to any expense, this must be borne by himself. Thus for example, if a horse is lent to a friend for a journey, he must bear expenses of his food during that journey, and to getting him shod, if he should chance to require it , for it is a burden which is naturally attendant upon the use of horse. “the borrower is compellable to bear the ordinary expenses; for the loan being for his benefit he must be presumed to engage to bear the burden as an incident to the use.4 3. Right of lien- if the bailee’s lawful charges are not paid he may retain the goods. The right to retain any property until the charges due in respect of the property are

2 The person who delivers the goods is called the ‘bailor’ and the person to whom they are delivered is called the ‘bailee’. 3 WIILINGTON ON THE CONTRACTS as cited in ramachandran, THE LAW OF CONTRACT IN INDIA, 2266(vol.iii). 4 STORY ON BAILMENTS Ss. 256 and 273

paid is called the right of lien. The Supreme court5 cited the following passage from HALSBURY’S LAWS OF ENGLAND6 as to the nature of this right: “Lien is in its primary sense a right in one man to retain that which is in his possession are satisfied. In this primary sense it is given by law and not by contract.” Liens are of two kinds namely: 1. Particular lien, and 2. General lien.

4. Rights to sue- if a third person wrongfully deprives the bailee of the use or possession of the goods bailed, or does them any injury, the bailee is entitled to use such remedies as the owner might have used in the like case if no bailment had been made; and either the bailor or the bailee may bring a suit against a third person for such depravation or injury. Section 180 enables a bailee to sue any person who has wrongfully deprived him of the use or possession of the goods bailed or has done them any injury.7

5 Syndicate bank v. Vijay kumar,(1992) 2 SCC 330 : AIR 1992 SC 1066, 1068. 6 552, para 695, vol 20, 2nd edn. 7 Karnataka Electric Board v. Halappa ,(1987) 1 TAC 451, suit by bailee against carrier.

RESPONSIBILITIES OF FINDER OF GOODS 1. TO TAKE CARE OF THE GOODS ENTRUSTED – The first and most important duty of a bailee is to take care of the goods entrusted to him. The question as to the standard of care expected of a bailee or the degree of negligence , which should make him responsible, has been much debated. Roman law recognized three degrees of diligence (or of negligence) viz., high degree of diligence, ordinary and slight diligence. Common or ordinary diligence is that degree of diligence, which men in general, exert in respect of their own concerns. In the words of Sir William jones, it is the care which a person of common prudence and capable of governing of family, takes of his own concerns. High or great diligence is, of course, extraordinary diligence or that which very prudent persons take of their own concerns; and slight diligence is that which persons of less than common prudence take in their own concerns. In civil law, ordinary . Wslight diligence levissima diligentia. Conversely there are three degrees of negligence, lata culpa, gross fault or negligence, levis culpa,ordinary fault or negliugence and levissima culpa, slight fault or negligence.

2. DUTY NOT TO MIX WITH OWN GOODS- another obligation of the bailee is to keep the goods of the bailor separate from his own. But where the goodsd of the bailor and bailee become mixed such mixing may be with the consent of the bailor, or it may be the result of accident, mistake or inadvertence, or lastly, it may be willful or intentional. The law then seems to be that in cases of intermixture, if the goods are easily distinguishable and can be separated, each party may claim nhis proportionate share. But, if the mixture is indistinguishable, he who occasions the wrongful mixture, must bear the whole loss.8 Where however, a bailee, by accident or inadvertence, mixes the chattels confined to him by the bailor with his own, or where the accidental intermixture results from an act of God or of an unauthorized third party, the mixture if it is composed of substances similar in kind and quality, belongs to the bailor and bailee as

8 Spence V. Union marine Insurance Co.ltd., (1869) 3 CP 427

tenants in common in proportion as each contributed to the combination, any cost incidental to its separation into shares being borne by the bailee.9

3. DUTY NOT TO MAKE ANY UNAUTHORIZED USE – The bailee is under a duty not to use the goods in any unauthorized way.10The bailee therefore, precluded from using the chattel bailed, for his own personal advantage in any manner whatsoever, without, the consent of the bailor, express or implied, unless such use in needful for its preservation. Apart from such necessary use, if the bailee applied the chattel to any purpose other than that of bare custody he becomes responsible for any loss or damage resulting from his breach of good faith,11 except where the cause of the loss or damage is independent of his acts and is inherent in the chattel itself. Further, where the bailee acts in a manner inconsistent with the conditions of the bailment, the bailor gets a right to terminate the bailment as the possessory title reverts to the bailor and entitles him to maintain an action of trover.12

4. DUTY NOT TO SET UP ADVERSE TITLE – As a rule, the bailee is estopped from denying the bailors title or setting up against the bailor his own title or the right of a third party. But the estoppel ceases on actual eviction by title paramount.13mere knowledge of the third party’s title or an adverse claim on the jus tertii. He must however inform the bailor of the third party’s claim.14

9 Lupton V. White,(1808) 33 ER817:10 RR 101; SEE also Sandeman & son v. Tyzack, (1913) AC680. 10 Hafizullah v. Jayanarayan,(1961) 27 cut. LT 340 11 (Cf.) Re. Tidd v. overell,(1893) 3 ch.154 12 Morrison v. Shaw, (1916) 2 KB 783. 13 Biddle v. Bond,(1865) 122 ER 1470(Cf.) 14 Ramson v. Platt,(1911) 2 KB 291.

5. DUTY TO RETURN GOODS – a furher duty arises on the part of the bailee that he must return the goods, on the expiry of the time fixed or when the purpose is accomplished. If he does not, he becomes liable for damages occasioned by loss of use during the period for which it is detained. He is also responsible as an insurer, that is becomes absolutely liable even without any negligence on his part if the chattel is lost or destroyed, while it is so detained. Apart from an action for damages against the bailee for non-return of the goods, in case the bailee sells the goods bailed the bailor can follow the proceeds wherever they can be distinguished either by being actually kept separate or being mingled with bailees other funds.15in keeping with the provisions of Secs. 151 and 152, a bailee is excused from returning the subject matter of the bailment to the bailor where it has been taken away from him by authority of law exercised through regular and valid proceedings. Where the goods are lost without negligence the bailee need not return them or be responsible for the loss.

15 Re Hallett’s Estate, (1879) 13 Ch.d 696, 710.

LIABILITIES OF FINDER OF GOODS A little is known about the liabilities of the finder of goods which are as follows 1. To try and find out the true owner. 2. To take due care of the goods. Such a finder is entitled to the possession of such goods against all the world except the true owner.16 3. Such a finder is entitled to a lien, retain the goods even against the true owner until he is paid by the owner, compensation. For the custody, care and preservation, although he is not entitled to sue for such compensation. In English law once a finder accepts responsibility for the goods his liability is that of a gratitutious bailee.17

16 Hollins v. Fowler, LR 7 HL 757. 17 Newman v. Bourne & Hollings-worth (1951) 31 TLR 209