Responsibility of the Finder of Goods

By | December 16, 2020
Responsibility of the Finder of Goods

An individual who finds the goods of another person probably not knowing the true owner at the time is the finder of goods. The question now is what is missing, and how is it lost? The answer is that where the owner has mistakenly parted with the ownership of the goods and that he is unaware of their place, the goods are lost. However, if the owner purposely puts the goods somewhere so that in due time it can be found again but the owner eventually forgets where it was put, it can be assumed that the goods are lost.

A person who discovers missing goods does not gain full possession of the goods. Similarly, when the items are in someone’s hands, he should not be known as the goods’ finder. The one who acquires ownership of lost goods is the best owner and has superior rights over all- even the true owner of the goods.

In this case, only the apparent owner is the finder. On the finding of the rightful owner, whose title in it is untouched by the fact that the items have been lost, the finder’s claim on the merchandise can be forfeited. The title of a finder is dependent on the true owner’s potential discovery. The finder is then unable to pass the title to another person. [1]

I. Introduction

Finder of lost goods: The underlying interpretation of the term is the one who presumably does not know the true proprietor of the goods of another person. In contract law, the founder of lost goods does not gain full possession over the goods but retains superior rights to someone other than the actual owner of the goods over the goods.

On the finding the real owner whose ownership over the goods is unaffected merely by the fact that the goods were lost, the finder’s title over the goods could be forfeited. The finder of lost goods has been put at Pari Passu with the bailee on some terms and forms a quasi-contract under Indian contract law.

Since there is no contractual arrangement between the finder and the owner, a duty, a liability in the eyes of law, as specified in Section 71 of the Indian Contract Act, has been fixed on the finder of goods as a bailee [2]. The bailee of the goods or the founder in broader interpretation owes a general duty of care according to the standards of a prudent man in accordance with section 151 of the Indian Contract Act [3].

Although the Indian law does not lay down any other particular contractual duty with regard to the finder of missing goods and involves it in the preview of the bailment law, the two have the same form although distinct and may often be variably inseparable, however, there are acute nuances that vary from the other two and the same discrepancy in the further text ahead and its significance will be laid down [4].

Another problem that occurs is the degree to which a finder has the right to possession or enrichment of the aforementioned goods and what his moral responsibilities to the true owner of the goods are. Since the Indian Contract Act means the same duty as a bailee to the finder of missing goods, however in the case of Kanhya Lal Sain v. Registrar Examination, R.H.C., it was held that the aforementioned provision does not specifically lay down the finder’s rights and thus a bailee may be interpreted as a finder of lost goods; however, the two are not the same. [5]

II. What are Quasi Contracts?

Quasi-contracts are fictitious contracts which are recognised by the statute and can be articulated or implied. Its key aim is to keep one side from benefiting unfairly from the situation at the expense of the other party. It describes a party’s responsibility to another party where the other is in the hands of the property of the former even though they do not have a previous arrangement in this regard.

In the case of West Bengal State v. B. K. Mondal, it was held that a quasi-contract is not a consensual contract resulting from a consensual relationship to a transaction but something which, irrespective of the consent of the parties, is brought into being by a fiction under the rule.

The three fundamental elements of a quasi-contract are a person provides another with a tangible good or service with the implication or intention that payment will be rendered, the other party agrees or recognises the receipt of the item and the last is the unjust enrichment on the part of the other party that he must repay the former party [6].

III. Quasi Contractual Situation

The role of the finder of the lost goods emerges from the quasi-contractual condition under the Indian Contract Act, but not under any contractual circumstances. There is no partnership or affinity with the term quasi-contract with a contract, rather inferred by statute.

As a person of ordinary prudence, the finder of the lost goods is obligated to take care of the goods. In reality, even that case is not a contract in the true sense of the word, but it poses some relationships that imitate those generated by the contract. The rights and obligations of the finder do not derive from the contract although those relationships under which the parties become bound are established by the terms.

A quasi-contract is not a consensual contract resulting from a transaction’s consensual relationships, but something forced into being by the statute by a fiction independent of the parties’ consent. This type of agreement was established on the basis of some terms which do not constitute a quasi-contract by consensus. In the case of a finder of missing goods, he owes an obligation to the owner to ensure that the finder does not unlawfully benefit himself from the goods, and in exchange has the locus to claim a certain bundle of rights.

As this is a quasi-contract, the obligation is irrespective of the arrangement and rests on justice, honesty and good faith. It is because of this that Lord Mansfield preferred to apply the principle that “unjust enrichment” must be prohibited by statute. The quasi-contract or restitution was retained in India as the third form of law that was not based on contract or tort. [7]

IV. Bailment [8]

In accordance with Section 148 of the Indian Contract Act 1872, bail and bailee are specified as,

“A bailment is the delivery of goods by one person to another for some purpose under a contract to be returned or otherwise disposed of when the purpose is accomplished in accordance with the instructions of the person delivering them and the person to whom they are delivered is called the bailee.[9]

A bailment is a type of contractual arrangement regulated by statute law that has a legal premise. By bailment, only the legitimate possession is passed to the bailee for a specified period of time and the bailor still has the estate. A bailee is entitled to all expenses borne in the management of the bailed goods and under section 158 of the Indian Contract Act, 1872 may recover the same from the bailor [10].

V. The Relation between Finder of Lost Goods and Bailment

In the case of Ashu Kumar Pathak v. Rajasthan High Court Jodhpur, the Honorable Court interpreted Section 71 of the Indian Contract Act, 1872 and established that:

“Section 71 does not provide that the position of the finder of missing goods is equivalent to that of a bailee because it clearly provides that he is liable to the same duty as a bailee. The Indian Contract Act places on the bailee the duty of the finder of lost goods at Pari passu to ensure that the finder of such goods does not benefit unlawfully or arbitrarily from the possession of another person and does not categorically mention the finder of lost goods as a bailment contract.”

The underlying misunderstanding emerges in Indian law as the responsibility of the finder of lost goods is regulated by the same liability as that of a bailee and thus both can be used interchangeably in various conditions, however, the courts have specifically ruled that the bailment contract is not normally a quasi-contract and that the finder of lost goods cannot be legitimately held to be a bailee [11].

VI. Responsibility of the Finder of Goods

“Section 71 of the Contract Act, 1872 establishes that a person who discovers goods belonging to another and takes them into his custody is entitled to the same duty as the bailee.”

Section 71 of the Contract Act, 1872 states that a person who finds goods belonging to another and takes them into his custody is subject to the same obligation as the bailee’s goods. In respect of the goods found, he must take the same degree of precaution and vigilance as the bailee has in respect of the goods bailed to him. The person who finds goods belonging to another is entitled unless he receives compensation from him to hold the goods against the owner.

He has the right to lien on the goods for the costs suffered by him in the secure possession of the goods, but this does not grant him the right to sue the finder for the trouble and expenses he has incurred. For the incentive, if a particular reward has been given, he will sue the owner. As against anyone but the actual owner, the finder of the goods is entitled to his ownership.

Thus, for example, on the floor of Y’s store, X picked up a diamond and handed it to Y to hold it to the owner, emerged. No one seemed to claim it, despite extensive ads in the newspapers.

For some time, X tendered the publicity and reimbursement bond costs to Y and begged him to refund the diamond, but Y declined to do so. Y was held liable for damages; and X was held entitled, with the exception of the true owner, to obtain possession and retain the goods against anyone. He is guilty of fraudulent misappropriation of land if a finder dishonestly appropriates his own use while he knows the owner or has the means to reveal the true owner.

But he is not guilty of any offence as he takes the property for the purpose of protecting it or returning it to the owner. In addition, a person who takes possession of the goods after locating missing goods is called the finder of the lost goods, and his position is that of bailee of goods (Sec. 171 of the Contract Act, 1872).

The finder is obliged to take care of the goods, as a man of common prudence would take care of his own goods in comparable circumstances. Secondly, he is obligated to send the products back to the actual owner. These are the quasi-contractual commitments of a finder of goods.

VII. Rights of the Finder of the Lost Goods [12]

The following are his rights as envisaged by sections 168 and 169 of the Indian Contract Act:

  • He is entitled to maintain ownership of the goods as long as it is not asserted by the true owner, because the finder of the lost goods is the strongest owner in comparison to the rest of the world, with the exception of the true owner.
  • He is entitled to be paid for the difficulties and costs suffered willingly by him in saving the goods and locating the owner, but he has no right to sue the owner for restitution for those expenses (Sec. 168). For payment of these costs, he has a clear lien on certain items, i.e.; he will fail to return the goods until the costs and issues are accounted for.
  • If offered by the owner to return the lost goods; he can sue for certain rewards. Where the owner has provided a particular incentive for the return of goods lost, the finder of goods which keep the goods against the owner, so it must be in his contemplation that the owner offers the reward. The finder may sue for such a reward before he receives it and may keep the goods.
  • If the goods found are usually the subject-matter of the sale, and if the owner cannot be found with due diligence, or if he declines to pay the finder’s lawful costs upon request, he may sell them when:
  1. they are in danger of perishing or of losing the greater part of their worth, or of losing the greater part of their value.
  2. where the finder’s lawful costs amount to two-thirds of their worth (Sec. 169).

VIII. Duties of the Finder of Goods

The duties and liabilities of the finder of the goods shall be concerned with at the stage of the bailee. So along with bailment, the finder’s role was considered. Since it is known as the bailee, the obligations of the bailee are the duties of the finder of goods under the bailment contract, as follows:

  • To Take Care of the Goods:

A bailee’s primary obligation is to take as much care of the bailed goods as a fair and responsible person takes of his own goods. There are three degrees of neglect and three degrees of vigilance under English law which according to the circumstances of each case, can be practised by the bailee of goods. But there is only one quality of vigilance or consideration under Indian law, and that is the care of a reasonable or prudent man to be practised by the bailee, whether the bailment arrangement is gratuitous or non-gratuitous.  (Sec. 151)

  • Bailee Should Not Make Unauthorized Use of the Goods Bailed:

Section 154 points out the responsibility of a bailee who makes unauthorised use of bailed items. It says that If the bailee makes any use of the bailed goods that is not in accordance with the bailment conditions; he is responsible for compensating the bailor for damage caused to the goods from or during such use of them. The liability for unauthorized use of the goods arises even if the bailee is not guilty of any negligence while using and even if the damage is the result of an accident.

  • Bailee Should Not Mix Bailed-Goods with other Goods:

The bailee’s duty is not to mix the bailor’s goods with his own goods. If the bailee mixes its own goods with those of the bailor, the following laws shall apply:

  1. If with the consent of the bailee, the bailee mixes the bailor’s own goods with those of the bailor, the bailor and the bailee shall have a stake in the mixture in proportion to their respective shares (Sec. 155).
  2. If the bailed goods have been combined with their own goods without the consent of the bailor and the goods are separable or divisible, the property in the goods shall remain with the parties, respectively; but the bailee shall bear the costs of separation or partition and any loss resulting from the combination shall be paid by the bailee (Sec. 156).
  3. If the combination is inseparable without agreement and so the bailed goods cannot be recovered, the bailee must pay the bailor for the loss of the goods.
  • Duty to Return the Goods Bailed:

It is the duty of the bailee to return or deliver the goods at the expiry of the bailment term or when the object has been satisfied in compliance with the bailor’s order. However, if the bailee fails to return or offer the goods at the proper time to the bailor, the bailee shall be liable as an insurer for any loss, damage or degradation of the goods after that time (Sec. 161).

  • Duty to Return Increase to the Goods bailed:

Section 163 of the Act states:

“In the absence of any contract to the contrary, the bailee is obliged to deliver any increase or profit that may have accrued from the bailed goods to the bailor or according to his directions.”

  • Duty Not to Set Up Jus Tertii

It is the responsibility of the bailee that as necessary by the bailor, he should not put up an adverse title to the goods. On re-delivery to the owner without title, the finder of goods is not liable.

IX. Conclusion

The basic theory of law is defined by the key outlines of the article, even if a finder of lost goods is liable for taking care of the goods like that of a bailee, but the finder of lost goods should not be considered a bailor, and there is no bailment arrangement between the finder and the owner. However, a fabric of rights and obligation surrounding the finder and the owner is established based on the concepts of justice, good faith and wrongful enrichment law, thereby establishing a non-consensual quasi-contract between the two.

Like any other type of contract, a quasi-contract gives rise to a collection of rights and obligations of the parties and provides the power to sell the products with respect to the finder if the true owner is unable to locate or declines to pay the finder the full fee to which he is entitled.

However, the finder is unable to sue the owner for the compensation or the expense borne in the upkeep of the found goods and is responsible for taking care of the found goods within a prudent man’s expectations and must not allow any improper use of the said property and is responsible for paying for any harm that happens when the goods are used.

The finder merely has the right to own the goods and his title is dependent on the true owner’s possible discovery. Therefore, he is unable to transfer title to another person.

In Indian law, the finder of lost goods has its traces but may not have a formal law in this respect and has been held as the third form of law not dependent on contract or tort. This also causes misunderstandings between the bailment definition and the discovery of missing goods that can also be used interchangeably. Therefore, in this respect, the procedural legislation leaves a margin for more study and calls for positive reinforcement.


References

[1] Ominsky, Harris. 2002. “Finders Keepers? First Impressions and Ancient Wisdom”

[2] Section 71, Indian Contract Act, 1872.

[3] Section 151, Indian Contract Act, 1872.

[4] West, Mark D. 2003. “Losers: Recovering Lost Property in Japan and the United States.” Law & Society Review 37 (June): 369–423.

[5] Kanhya Lal Sain v. Registrar Examination R.H.C, 2015 OnLine Raj 4161.

[6] State of West Bengal v. B.K. Mondal, A.I.R. 1962, SC.

[7] State of West Bengal v. B.K. Mondal, A.I.R. 1962, SC

[8]  Avtar Singh, Law of Contract & Specific Relief, (12th edition Reprinted, EBC 2018).

[9] Section 148 of the Indian Contract Act 1872

[10] Section 158 of the Indian Contract Act, 1872 which reads as follows – “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 bailor, 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. —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 bailor, 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.”

[11] Ashu Kumar Pathak v. Rajasthan High Court Jodhpur, 2015 OnLine Raj 4161.

[12] Patra, A. C. (1962). HISTORICAL BACKGROUND OF THE INDIAN CONTRACT ACT, 1872. Journal of the Indian Law Institute, 4(3), 373-400.


  1. Law Library: Notes and Study Material for LLB, LLM, Judiciary and Entrance Exams
  2. Master Your Judicial Services Preparation
Author: Vatsala Sood

Student at Symbiosis Law School, Pune

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.