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Chapter IX - Of Bailment

Section 154

Section 154: Unauthorised use of bailed goods

Unauthorised use exposes the bailee to compensation for damage arising from or during that use.

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Need advice on Section 154?

This article is for general information. Refer to the Indian Contract Act, 1872 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.

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Statutory text

Bare law

If the bailee makes any use of the goods bailed which is not according to the conditions of the bailment, he is liable to make compensation to the bailor for any damage arising to the goods from or during such use of them.

Illustrations

(a)A lends a horse to B for his own riding only. B allows C, a member of his family, to ride the horse. C rides with care, but the horse accidentally falls and is injured. B is liable to make compensation to A for the injury done to the horse.

(b)A hires a horse in Calcutta from B expressly to march to Benares. A rides with due care, but marches to Cuttack instead.

The horse accidentally falls and is injured. A is liable to make compensation to B for the injury to the horse.

Rule and business relevance

The statutory illustrations impose liability even where the unauthorised user exercises care and the injury is accidental. Permission and the scope of use are therefore crucial.

Limits and related provisions

Do not rely solely on careful handling when use itself falls outside the agreed conditions. Identify the damage and its connection with the period of unauthorised use.

Hypothetical business example

Hypothetical example: Equipment hired for one permitted operation is used for another and accidentally damaged during that use. The bailee cannot answer the claim only by asserting careful operation.

Practical decision flow

Compare actual use with the conditions.

Identify when and how damage occurred.

Preserve permissions, usage logs and repair evidence.

Check the applicable legal framework

This guide explains the central provision. Applicable State amendments, the agreement, transaction date and other governing laws can affect its application. Check the current legal framework before relying on it for a commercial decision.

Practical checklist

Do

  • Compare actual use with the conditions.
  • Identify when and how damage occurred.
  • Preserve permissions, usage logs and repair evidence.

Avoid

  • Do not rely solely on careful handling when use itself falls outside the agreed conditions. Identify the damage and its connection with the period of unauthorised use.

Glossary

Unauthorised use
Use not according to the conditions of bailment.
Compensation
Payment for the damage described by the provision.

Frequently asked questions

Does careful use always prevent liability?

No. The illustrations involve careful but unauthorised use.

Must damage result only from careless operation?

The wording covers damage arising from or during the unauthorised use.

What is the first factual check?

Whether the use complied with the bailment conditions.

Need help applying this provision to your situation?

Contact Bizeneed

Last updated 10 October 2026