To Constitute an Effective Bailment Contract there Must be Actual Tender and Delivery of the Goods and Acceptance Thereof by the Bailee. That is, Mere Putting into Possession of the Documents of Title Does Not Constitute Bailment of Goods.

On 28 September 2016, the High Court of Sindh, in Pakistan, has issued a judgment in favor of our client, in the case of Trading Corporation of Pakistan v. Punjab Trading Agency (Suit No. 571/1997).

The main claim in this case was that Plaintiff had alleged breach of bailment contract by the Defendant, whereby performance of contract comprised of handling of rice on the ‘Book Balance’ basis without any physical verification of the stock of rice, which was lying in the Plaintiff’s godown in dumped position, and that the claim as to shortage in stock was raised post satisfactory performance of the given contract.

The High Court ruled on this main litigated issue as follows:

- To constitute an effective bailment contract (within the meaning of Section 148 of Contract Act, 1872), it is obligatory on part of the bailor to put the bailee in possession of the goods. There must be actual tender and delivery of the goods and acceptance thereof by the bailee. There must be actual physical transfer of possession. Merely putting into possession of the documents of title does not constitute bailment of goods.

- In the present case the evidence leads to conclusion that the contract was awarded to the Defendant on the ‘Book Balance’ basis without any physical verification of the stock of rice which was lying in the Plaintiff’s godown in dumped position, and that no tangible and convincing evidence documentary or otherwise was brought on record by the Plaintiff for proving the exact quantity of rice stock handed over to the Defendant at the time of award of the contract.

- It is also an admitted position that despite various requests/letters by the Defendant no physical survey was conducted in respect of the stocks entrusted to the defendant either at the time of award of the contract or during the currency of the contract. The Plaintiff’s claim is mainly based on the survey report, which was conducted after the years of expiry of the contract.

- Accordingly, Plaintiff cannot claim breach of bailment contract by the Defendant because in effect the given contract is not a bailment contract; rather it was just a simple contract for handling of goods at Plaintiff’s godown without physical verification as to quantity of goods and without any physical delivery of goods.

 This precedent is a significant contribution to contract law jurisprudence in Pakistan.