Question Bank

Q1)What is Contract Of Indemnity ?

A1) Contract of indemnity

An indemnity contract is a legal arrangement between two parties in which one party agrees to pay another party for a loss or harm that meets certain requirements and conditions unless other circumstances are specified. It is a form of contingent contract which is characterized by all the essential elements of a valid contract.

In an indemnity contract, there are only two parties, as stated in:

The indemnifier: 

The promisor, who agrees to make up the damage caused to the other group, is called the Indemnifier.

The Indemnified:

The person who is assured of compensation for the damage incurred (if any) is referred to as the indemnity holder or the indemnified.

The mode of the compensation contract can be express or implied, i.e. if a person expressly agrees to save the other from damages, the mode of the contract will be stated, while if the contract is signified by the terms of the case, the mode of the contract will be implied.

Examples of the indemnity contract are given below:

Suppose John had sold Paul a house at Peter's direction. Afterwards it is revealed that Alex is the house's registered owner. Alex got back John's sum for selling his house. John will now recoup Peter's fee. This is an implicit form of an indemnity contract.

Beta Insurance Company entered into a deal with Alpha Ltd. To reimburse the company's stock of products up to Rs. 50,00,000 for a premium of Rs.1,00,000 for damages incurred by accidental fire. That is an explicit type of an indemnity contract.

Q2) What are the rights of indemnity holder?

A2) Rights of indemnity holder

Section 125 of the Indian contracts act states:

Rights of indemnity-holder when sued.

The promisee in a contract of indemnity, acting within the scope of his authority, is entitled to recover from the promisor:

All damages which he may be compelled to pay in any suit in respect of any matter to which the promise to indemnify applies.

All costs which he may be compelled to pay in any such suit if, in bringing or defending it, he did not contravene the orders of the promisor, and acted as it would have been prudent for him to act in the absence of any contract of indemnity, or if the promisor authorized him to bring or defend the suit;

All sums which he may have paid under the terms of any compromise of any such suit, if the compromise was not contrary to the orders of the promisor, and was one which it would have been prudent for the promisee to make in the absence of any contract of indemnity, or if the promisor authorized him to compromise the suit.

Q3) What are the Rights of the Indemnifier?                                                     A3)Rights of Indemnifier

After the indemnity holder is paid for the damage incurred, the compensator shall have all the rights to all the methods and services which can save the compensator from the damage.

The essence of the indemnity contract is the loss to the party, i.e. Indemnification can only be done if the loss to the other party is incurred, or if it is certain that the loss will incur.

The Indian Contract Act of 1872 does not provide for the time to commence the liability of the indemnifier under the contract.

But in this respect different high courts in India held the following rules:

The Indemnifier shall not be liable until the loss has been suffered by the indemnified person.

If the indemnified person has not discharged his liability, he may compel the indemnifier to make good his loss. In the leading case of Gajanan Moreshwar vs. Moreshwar Madan (1942), the judge made the observation that If the indemnified has incurred a liability and the liability is absolute, he is entitled to call upon the indemnifier to save him from the liability and pay it off.

Q4) Give the Recommendations of the law of commission of India?          A4)Recommendations of the law commission of India

The Indian Law Commission prepared and published its Thirteenth Report in 1958, under the chairmanship of Shri MC Setalvad, proposing changes to the various provisions of this act.

The most important of this commission's recommendations are:

Modification of the privity doctrine to require a third party to sue in such conditions in respect of a contract made for his benefit.

Change of consideration doctrine to make contracts enforceable without consideration, an obligation to hold a bid open for an indefinite period of time.

The recognition of principle of promissory estoppels

Wagering contracts and contingent deals to be made unlawful

To require fair restriction of the right to carry on trade

Include the rules relating to substantive modifications to papers.

The concept of coercion in the Indian contract act isn't exhaustive.

It can't refer to modern-day circumstances where violence can be caused in many ways. The Indian Contract Act defines coercion as:

The committing or threatening to commit, any act forbidden by the Indian Penal Code or the unlawful detaining or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.

The report suggested the phrase  forbidden by the Indian Penal Code should be replaced with a wider expression of the offences forbidden by law in India be included in the Section. The report suggested the following phrase instead:

Coercion is the committing or threatening to commit any act, when the committing, or threatening to commit such act is punishable by any law for the time being in force, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention to causing any person to enter into a contract.

Q5) What is Contract of Guarantee?

A5)Contract of Guarantee

Section 126 of the Indian Contracts Act defines a contract of guarantee as A contract of guarantee is a contract to perform the promise or discharge the liability, of a third person in case of his default.

Furthermore, the section adds:

The person who gives the guarantee is called the surety, the person in respect of those defaults the guarantee is given called principal debtor, and the person to whom guarantee is given is called the creditor.

There are three parties in each guarantee contract, the principal creditor, the surety and the principal debtor.

A guarantee contract consists 3 contracts:

First, the principal debtor himself makes a commitment to fulfill a contract in favor of the creditor.

Second, if the principal debtor makes a default, the surety undertakes to be liable to the creditor.

Thirdly, the principal debtor's implicit promise in support of the assurance that, in the event that the protection is obliged to discharge the responsibility of the principal debtor's default, the principal debtor shall indemnify the protection for it.

Q6) Give the features of contract of guarantee?

A6)Main features of contract of guarantee

The contract can be either oral or in writing. Nevertheless, the assurance contract can only be in writing in English law.

The guarantee contract presumes a principal liability or a discharge duty on the part of the principal debtor. Even if there is no such principal liability, one party agrees to pay another under such situations, and the enforcement of this obligation is not contingent on anyone else's default, it is an indemnity contract.

Sufficient consideration is to support the principal debtor. It is not necessary to have clear consideration between the creditor and the assurance that it is appropriate that the creditor has done anything for the good of the principle debtor.

Assurance consent cannot be obtained by misrepresentation or cover of any material information relating to the transaction.

Q7) What are the liability of surety?

A7) Liability of surety

Section 128 of the Indian contracts act states the liability of the surety is co-extensive with that of principal debtor, unless it is otherwise provided by the contract

Surety's liability is the same as that of the principal debtor. A creditor can move directly against the surety. Without suing the principal debtor, a creditor may sue the surety directly. Surety is liable to make payment immediately after the default of any payment by the principal debtor.

Primary responsibility for making payment, however, is from the principal debtor, and the responsibility of the surety is secondary. In fact, if the principal debtor can not be held liable for any payment due to any document error, then surety is not responsible for such payment as well.

Q8) What are the rights of surety?

A8) Rights of surety

Broadly, the rights of the surety are classified into 3 types:

Rights against the principle debtor

Right to give Notice

Rights of Sub-rogation

Right of Indemnity

Right to get Securities

Right to ask for Relief

Rights against the creditor

Right to get Securities

Right to ask for Set-off

Rights of Sub-rogation

Right to advice to Sue Principal Debtor

Right to insist on Termination of Services

Rights against co-sureties

Right to ask for contribution: Surety can ask its co surety to add the sum when the principal debtor defaults. If they have issued commitments for equal quantities, they would have to make equivalent contributions. In the event that guarantee is given in equal quantities, the contribution style varies from England law to Indian law. According to England law payment in the ratio of assured sums is to be made. Nevertheless, according to Indian law, the sum of the deficit is to be allocated equally to all guarantees, and each promise must contribute a share of the deficit or pledge that is ever lower.

Right to claim share in securities

Q9) Explain continuing guarantee.

A9) Continuing Guarantee

One form of guarantee that extends to a series of transactions is a continuing guarantee. A continuing guarantee extends to all transactions that the principal debtor enters into before the surety revokes it. A continuing guarantee for future transactions may be withdrawn at any time by notice to the creditors. However, the responsibility of a surety for transactions completed prior to such revocation of guarantee is not diminished.

Q10) Explain discharge of surety.

A10)Discharge of a surety

By providing a revocation notice for future transactions (section 130).

The guarantee is revoked for all the future transactions under the circumstances of the death of the surety (section 131).

When there is a non-consensual change in terms and condition of the contract between the creditor and principal debtor.

In case the creditor releases the debtor or makes any omission due to which results in the discharge of principal debtor's liability (section 134).

When the complete payment is made by the principle debtor

The surety is also discharged when the creditor enters into an arrangement with the principal debtor for not to sue him or to provide extra time for payment of debt, (section 135).

When the creditor does any act, which is inconsistent with the rights of the surety.

Exceptions to the discharge of surety

The surety cannot be discharged, if the contract to provide time to the principle debtor is not made by the creditor with the principle debtor but with a third party.

In case of co-surety, if one is released by the creditor, the others do not stand discharged.

Q11)  Give the difference between contract of indemnity and contract of guarantee?

A11)Difference between contract of indemnity and contract of guarantee

There are two parties in a contract of indemnity whereas a contract of guarantee has three parties.

Three contracts exist in contracts of guarantee whereas in contracts of indemnity, there is just one contract

The liability of the indemnifier in the contract of indemnity is primary whereas for a contract of guarantee the liability of the surety is secondary and the primary liability is of the debtor.

A contract of indemnity serves the purpose of saving the other party from suffering loss. However, in a contract of guarantee, the purpose is to assure the creditor that either the contract will be performed, or liability will be discharged.

The liability in a contract of indemnity only arises when the contingency occurs while in the contract of guarantee, the liability already exists

The promisor cannot file the suit against third person, in a contract of indemnity, until the promisee relinquishes his right in favour of the promisor whereas the surety does not require any relinquishment for filing of suit in a contract of guarantee.

Q12) Explain Bank Guarantee

A12) A bank guarantee is a tripartite arrangement between the bank, the receiver and the individual or client, whereby the bank gives an undertaking to pay the receiver a definite amount of money or arranges the fulfilment of the customer's obligations in the event of his default. Banks are usually approached for having the financial resources to meet these obligations. It is simply a kind of absolute obligation to pay the balance if the guarantee holder requests it.

A bank guarantee arrangement between the beneficiary and the creditor is distinct and separate from the underlying contract that subsists. It is particularly relevant when assessing the banks' responsibility in the event of debtor default. It is simply for the free flow of trade as a guarantee provided by the bank, it protects the borrower from the loss and also gives the borrower the right to claim debt in the event of a default without going through the tiresome and prolonged process of litigation.

There are two types of bank guarantee:

Advance payment guarantee: Buyers of goods and commodities generally use this type of guarantee to secure and protect the advance payment that they make in exchange of the goods. Advance guarantee paid can be recovered as it is the primary obligation of the bank which is giving the guarantee.

Payment guarantee: it is a more secure form of guarantee that makes it compulsory for the debtor to pay.

Q13) What is agency? What are the characteristics of agency?

A13) An agency is a comprehensive word which is used to describe the relationship that arises where one person is employed by another in order to bring the latter into legal relations with a third person.

The terms ‘agent’ and ‘principal’ are contained in Section 182 of the Indian Contract Act, 1872. Accordingly, an agent is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is represented, is called the principal.

Characteristics of Agency

A contract of agency has all the essentials of a contract with some special features of its own.They are as follows:

1.The essential characteristic of an agency is that the agent can render the principal answerable to the third-party.                                                                                                            2.The relationship of agency being based on confidence between the principal and agent, no consideration is necessary.

3.The principal must delegate the power to the agent to act on his behalf.

4.Principal must be a person capable of entering into a valid contract.

5.Agent may be a minor also.

6.The object of appointment must be to establish relationship between principal and third parties.

Q14) What is the difference between agent and servant? 

A14) Difference between Agent and Servant:

An agent creates legal relations with third party. But the servant does not create any legal relations between the employer and the third persons.

A principal has a right to direct agent for a particular work. But master of a servant has a right to direct and say how to do the work.

A principal is liable for the wrongs of his agent done within the scope of his authority. A master is liable for the wrongs of the servant which are done during the employment.

An agent is paid commission whereas servants are paid salary.

An agent may work for several principals at the same time, but servant usually services only one mastermaster at a time.

Q15) Classify agents.

A15) Classification of agents

2.     Specific agent: A special agent is one who is appointed to perform a particular act or to represent his principal in some particular transaction. For example, an Auctioneer.

3.     General agent: A general agent is one who has authority to do all acts conducted with a particular trade, business or employment. For example, the manager of afirm.

4.     Universal agent: - A universal agent is one whose authorityis unlimited. He has authority to do all acts which the principal can lawfully do and can delegate.

Classification according to nature of work:

2.     Factor: An agent entrusted with the goods for the purpose of selling them is known as factor. He enjoys discretionary powerin relation to the sale of goods and also to pledge the goods.

3.     Broker: A broker is an agent who is employed to buy or sell goods on behalf of another. He is not entrusted with the possession of goods in which he deals and cannot act or sue in his own name and also has no right of lien.

4.     Commission agent: He is anagent who buys or sells goods for the principal on the best possible terms in his own name and who receives commission for his labour. He may or may not have possession of the goods.

5.     Auctioneer: - An auctioneer is one who is authorized to sell the goods of his principal by public auction. He keeps goods in his possession. He always auctions goods in his double capacity, i.e., up to the sale, he is an agent of the seller and after the sale, he is the agent of the buyer.

6.     Del credre agent: A del credreagent is one who, in consideration of an extra commission,guarantees his principal that the persons with whom he enters into contract on behalf of the principal shall perform their obligation.

7.     Non-mercantile agent:Non-mercantile agents include legal practitioners, attorneys, insurance persons, clearing and forwarding agents and wife etc.

Q16) What are the different Modes of Creation of Agency?

A16)

An agency may be created in different ways. It need not be created expressly. It is created from circumstances and conduct of the parties.

Agency by express bond: A contract between the principal and agent may be created by an express bond.

Agency by implied bond: Implied agency comes from the accomplishment, conditions or bond of parties. Implied agency may be of following types:

(a)Agency by estoppel: In many cases an agency may be implied from the conduct of the party, though no express authority has been given. Where the principal knowingly permits a person to act in a certain business on his behalf, such principal is stopped from denying the authority of the agent.

(b)Agency by holding out: This agency is based on the ‘doctrine of holding out’ which is a part of the law of estoppels. In this case also the alleged principal is bound by the acts of the supposed agent, if he has induced third parties to believe that they are done with his authority. But unlike an ‘agency by estoppel’, this kind of agency requires some positive act or conduct by the principal to establish agency subsequently.

(c)Agency by necessity: In certain urgent circumstances, the law confers an authority on a person to act as an agent for the benefit of another, there being no opportunity of communicating with the other. Such agency is called an ‘agency of necessity’.

Agency by Ratification: Ratification means subsequent adoption and acceptance of an act originally done without instruction or authority. Thus, where a principal affirms or adopts the unauthorized act of his agent, he is said to have ratified that act and there comes into existence an agency by ratification.

Agency by operation law: Sometimes an agency arises by operation of law. For example, partners of firm, promoters of a company.

Q17) Discuss the Duties of an Agent.

A17) Duties of an Agent.

To act according to principal’s directions: It is the duty of the agent to act according to the directions given by his principal. If the agent does not act according to the principal and the principal suffers losses, the agent is liable for such loss. And the agent must account for all profits arising in the general course of the business of the principal.

To act with reasonable skill and diligence: An agent must perform his duties with reasonable care and diligence.

2.     Duty to communicate: An agent must communicate to his principal and obtain necessary instructions whenever he is acting on behalf of the principal. When communication is impossible, the agent must act in the interest of the principal.

3.     Duty not to deal on his own account: The agent cannot deal on his own account without the consent of the principal and if he does so, the principal can terminate the transaction.

4.     Duty not to use any information against the principal: The agent must not use any information obtained in the course of the agency against the interest of the principal.

5.     Not to set up adverse title: Agent has no rights to transfer ownership rights of goods of the principal to anyone, including himself, without the consent of the principal.

6.     Duty not to delegate: An agent cannot employ a sub-agent to get the work done. The contract of agency is based on fiduciary relationship between the principal and the agent and thus the agent cannot further delegate the trust reposed on him by the principal.

7.     Duty to protect interest: If the principal dies, becomes insolvent or lunatic, the agent must act on his behalf and preserve the interests of the principal.

Q18) Discuss Rights of an agent

A18) Rights of an agent

2.     Right of retainer: The agent may retain all money, property or documents of the principal, which are in his possession, until his claims are satisfied.

3.     Right of lien: The agent may retain possession of goods, property, documents or accounts of principal until all his remuneration, commission or lawful expenses are paid by the principal.

4.     Right to be indemnified for lawful acts: The agent must be indemnified by the principal for the lawful acts done by him, within the scope of his authority, for his principal.

5.     Right to be indemnified for acts done in good faith: When an agent does something in good faith (except criminal acts) for the principal and the act causes injury to the rights of the third person, then the agent is still indemnified for such acts by the principal.

6.     Right to compensation: Where due to the negligence of the principal, the agent suffered any loss, the agent must be compensated for such loss by the principal.

Q19) What are the rights and duties of the principal?

A19)

2.     The duties of the agent are the rights of the principal, such as:

3.     To ask for all accounts.

4.     To seek damages for loss suffered due to agent’s neglect.

5.     To demand all money received by agent on his account

6.     To demand all secret profit from agent, if any.

7.     Right to injunction from court for restraining the agent to use any information against the principal.

8.     Right to be indemnified for setting an adverse title to the goods.

Duties of Principal

The duties of the principal are the rights of the agent, such as:

2.     Duty to indemnify the agent for lawful acts.

3.     Duty to indemnify the agent for acts done in good faith, except criminal acts.

4.     Duty to compensate the agent for loss suffered by him due to the principal’s negligence.

Q20) What are the Liabilities of the principal and agent towards third parties?

A20)

When agent is acting for a named principal: When the third party knows the name, identity and existence of the principal and that the agent is working for the principal, that principal is called named principal and his liabilities are as follows:

Agent working within the scope of his authority: The principal is liable for all lawful acts of the agent done within the scope of his authority.

Agent exceeding his authority: If the agent works beyond the limit of his authority and such act can be separated from the authorized act, then the principal is liable only for the authorized act. However, if such act cannot be separated from the authorized act, the principal may repudiate or terminate the whole transaction.

Principal is bound by notice given to the agent: A notice served to the agent in normal course of business conducted by him as authorized by the principal shall be presumed to be served on the principal and shall be binding on him.

When agent is acting for unnamed principal: Where the agent does not disclose the name of his principal to the third party, such principal is known as unnamed principal and is liable for all lawful acts of the agent.

When agent is acting for an undisclosed principal: Where a third party enters into a contract with the agent without knowing that he is merely an agent of some principal, then the agent will be personally liable to the third party. The principal may intervene any time and demand the third party to perform.

Liability of agent towards third party

An agent working in good faith, on behalf of the principal, and disclosing that he is merely an agent, cannot be held liable towards third parties. However, the agent is liable for any criminal acts done by him.

Q21) Write a note on Termination of agency.

A21)

According to Sec. 201, the various modes of termination of agency are as follows:

Termination of the agency by an act of the parties:-

2.     Revocation by the principal: A principal has an authority to terminate the agency at any time before the agent has exercised his authority, so as to bind the principal unless the agency is irrevocable.

3.     Revocation by the agent: An agency may also be terminated by the agent after giving a reasonable notice to the principal.

Termination of organization by operation of law:

2.     Death and insanity: When the agent or the principal dies or becomes insane, the agency is terminated.

3.     Destruction of subject matter: An agency which is created to deal with a certain subject matter comes to an end by the destruction of the subject matter.

4.     Principal becoming an alien enemy: When the agent and the principal are alien enemies, the contract of agency is void until the countries of the principal and the agent are at peace. If war breaks out between the two countries, the contracts of agency are terminated.

5.     Termination of sub-agents’ authority: The termination of an agent’s authority puts an end to the sub-agent’s authority.

6.     Dissolution of a company: If the principal or agent is an incorporated company, the agency automatically ceases to exist on dissolution of the company.

7.     Termination by subsequent impossibility: When the implication of an agency becomes unlawful due to subsequent change of law, the agency automatically gets terminated.

Q22) What is Bailment?

A22) Meaning of Bailment

The word ‘bailment’ is derived from the French word ‘bailer’ meaning ‘deliver’. A bailment is the delivery of commodities by an individual to another for specific purpose, on the condition that after the purpose is accomplished, the commodities have to be returned. Common examples of bailment are- hiring of commodities, furniture, or cycle etc. delivering of cloth to a tailor for making suit, delivering of car or scooter for maintenance, depositing luggage etc.

According to Section 148 of the Indian Contract Act, a bailment is the delivery of commodities by one individual 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 direction of the person delivering them. The person delivering the goods is called the ‘Bailor’and the one to whom they are delivered is called the ‘Bailee’. The transaction is called ‘bailment’. Bailment involves change of possession & not transfer of ownership.

Q23) What are the Characteristics of Bailment?

A23)  Characteristics of Bailment

2.     Delivery of commodities/possession:A bailment involves delivery of commodities from one person to another. Delivery includes only change in possession of the commodities and not the ownership. Delivery or possession may be actual or constructive.

3.     For some specific purpose: The delivery of the commodities from the bailor to the bailee must be for some specific purpose. Delivery by mistake to a person is not a bailment.

4.     Return of specific commodities: After completion of the purpose, the commodities are returned or disposed of according to the directions of the bailor. If the commodities are not to be returned, there is no bailment.

5.     Bailment is concerned only with commodities: According to Sec. 2 (1) of the Sale of Commodities Act, 1930, commodity means every kind of moveable property other than money and actionable claims. Bailment is concerned only with commodities.

6.     Ownership: - In bailment, bailor continues to be the owner even if the commodities are in possession of the bailee.

Q24) What are the rights and duties of a bailor?

A24)

Rights of Bailor

The rights enjoyed by the bailor are:

2.     Right to terminate bailment: The bailor has the right to terminate the bailment if the bailee does any act which is inconsistent with the terms of the bailment.

3.     Right to demand return of goods: When the goods are lent without reward, the bailor can demand their return whenever he pleases even though he lent them for a specified purpose or time and the bailee is not guilty of wrongful use.

Duties of Bailor

The bailor has the following duties:

2.     Duty to repay necessary expenses in case of gratuitous bailment: When goods are delivered to any bailee without paying remuneration, it is the duty of the bailor to pay any extraordinary expenses incurred by the bailee in respect of such goods.

3.     Duty to indemnify bailee: The bailor is bound to indemnify the bailee for any cost which the bailee may incur because of the defective title of the bailor for the goods bailed.

4.     Duty to receive back the goods: It is the duty of the bailor to receive back the goods when the bailee returns them after the time of bailment has expired or the purpose of bailment has been accomplished. If the bailor refuses to take delivery, the bailee can claim compensation for all necessary expense of, and incidental to the safe custody.

Q25) What are the rights and duties of a bailee?

A25)

Rights of Bailee

The rights enjoyed by a bailee are as follows:

2.     Claim damages for loss arising from the undisclosed facts in the goods bailed.

3.     Claim reimbursement for extraordinary expenses incurred in relation to the goods bailed.

4.     Be indemnified for any loss suffered by reason of defective title of the bailor to the goods bailed.

5.     To claim compensation for expenses incurred for the safe custody of the goods if the bailor has wrongfully refused to take delivery of them after the term of bailment is over.

6.     Right to deliver goods to one of the several joint bailers: when goods have been bailed by several joint owners, the bailee has a right to deliver the goods to one of the several joint owner without the consent of all, in the absence of any agreement to the contrary.

7.     Right to deliver goods, in good faith, to bailor: If the bailor has no title to the goods, and the bailee delivers them back to the bailor in good faith, the bailee is not responsible to the true owner in respect of such delivery.

8.     Right of action against third party: if a third party wrongfully deprives bailee of the use or possession of the goods bailed, he ha s a right of action against such third party in the same manner as the true owner has against the third person.

9.     Right of lien: The bailee has a right to claim his lawful charges and if they are not paid, he is given the right to retain the goods until the charges due in respect of them are paid.

Duties of Bailee

The bailee owes the following duties:

2.     Duty not to make unauthorized use of the goods: It is the duty of thebailee not to make any unauthorised use of the goods bailed to him.

3.     Duty not to mix bailed goods with his own goods: It is the duty of the bailee not to mix the bailed goods with his own goods, without the consent of the bailor. If he does so, thebailee will have to bear the expenses incurred due to such mixture.

4.     Duty to return the goods: It is the duty of the bailee to return the goods according to the bailor’s directions, as soon as the time for which they were bailed has expired, or the purpose for which they were bailed has been accomplished.

5.     Duty to deliver any accretion to the goods: It is the duty of the bailee to deliver to the bailor any natural increaseor profit accruing from the goods bailed, unless there is a contract to the contrary.

Q26) How does termination of Bailment take place?

A26)

A contract of bailment terminates under the following circumstances:

2.     If the bailment is for aspecific purpose, it terminates as soon as that purpose is fulfilled.

3.     If the bailee does not act with regard to the goods bailed which is inconsistent with the terms of the bailment, the bailment may be terminated by the bailor even though the terms of bailment has not expired or the purpose of bailment has not been accomplished.

4.     A gratuitous bailment can be terminated by the bailor at any time, even before the specified time or before the purpose is achieved, subject to the limitation that where such termination causes loss in excess of benefit actually derived by the bailee, the bailor must indemnify the bailee for the amount in which the loss occasioned exceeds the benefit derived.

5.     A gratuitous bailment is terminated by the death of either of the parties.