Question

A delivers several promissory notes to the government treasury for cancellation and consideration into one note. However, the government servant misappropriated the notes. A sues the State as bailee in the current transaction. Which is the likely outcome?

• A. The individual servant should be liable as a bailee and not the State.
• B. It is not a contract of bailment as it does not satisfy the requirement of bailment.
• C. It is a contract of bailment and hence the State is responsible for reasonable care.
• D. Misappropriation is not a breach of a bailment.

Hint:

In bailment, the bailee is responsible for reasonable care of goods and is vicariously liable for wrongful acts of servants committed during the course of employment.

Answer 1

The Correct Option is C

Step 1: Identifying the existence of bailment.
A bailment is created when goods are delivered by one person to another for some purpose, upon a contract that the goods shall, when the purpose is accomplished, be returned or otherwise disposed of. Here, A delivered promissory notes to the government treasury for cancellation and consolidation, which clearly establishes delivery for a specific purpose.
Step 2: Role of the State as bailee.
The promissory notes were delivered to the government treasury, an instrumentality of the State. Therefore, the State assumes the role of a bailee and is responsible for the custody and care of the goods through its servants.
Step 3: Effect of misappropriation by a government servant.
Misappropriation by a servant does not absolve the State of liability. Acts done by a government servant in the course of employment bind the State, and such misappropriation amounts to a failure to take reasonable care of the bailed goods.
Step 4: Examination of options.
(A) Incorrect, because the State, as bailee, is vicariously liable for the acts of its servant.
(B) Incorrect, since all essential elements of bailment are satisfied.
(D) Incorrect, as misappropriation clearly constitutes a breach of bailment.
Step 5: Conclusion.
Since a valid bailment existed and the goods were misappropriated while in the custody of the State, the State is liable as a bailee for failing to take reasonable care. Hence, option (C) is the correct answer.