Abstract
The paper analyses the relationship of contract law doctrines- bailment, agency and indemnity in relation to designer fashion supply chains in India. It uses doctrinal research to analyse the statutory provisions as well as case law and industrial practices. It analyses the legal uncertainties in managing designer items, transfer of risk, before recommending terms of contract for long term growth.
Keywords
Designer fashion, Supply chain, Bailment, Agency, Indemnity, Contract law
Introduction
The Fashion Industry is operating in complex commercial and legal relationships and undergoing a global transformation. The industry has evolved into a global network of suppliers, stylists, distributors, agents, and digital intermediaries from a single model where a designer would produce garments and sell them to consumers. The transformation has created tangled commercial relationships that need closer legal attention. In this evolving world, contract law steps in to assign duties, manage risk, ensure enforceability. India’s fashion industry, now worth more than Rs. 3.7 trillion is a beneficiary and a contributor to the expansion of the global supply chain. The backbone and foundation of all contractual relationships in the fashion supply chain is The Indian Contract Act, 1872. The specifications of the product, time of the delivery, arrangement for payments is ensured by the act. The Sale of Goods Act, 1930 addresses contracts of sale and the transfer of property. The Trademarks Act, 1999 and the Designs Act, 2000 protect intellectual property essential to brand identity and differentiation of aesthetic.
The three core legal concepts i.e. Indemnity, Bailment, Agency derive from this statute. Indemnity, given in Sections 124-125 of The Indian Contract Act, 1872 allocates risk among contracting parties, especially in relation to third party claims, defects, and IP disputes. Bailment, given in Sections 148-171 of The Indian Contract Act, 1872 regulates brief transfers of possession, including giving clothing, accessories, or samples to stylists, retail stores, or logistics partners. Agency, given in Sections 182-238 of The Indian Contract Act, 1872, is created when brands hire third parties to operate on their behalf such as, influencers, public relations firms, etc.
These doctrines are manifested in various ways in designer fashion. Bailment becomes important when designers give their items to showrooms, or stylists with the expectation of care and return. Agency is when fashion designers appoint public relations companies, or retailers to act on their behalf, with or without complete authority. Indemnity clauses are being used in contracts to mitigate legal risk with product failures, intellectual property infringement or regulatory compliance breaches. As fashion becomes increasingly international and digital, these doctrines are applied more frequently and put to test in new factual situations and jurisdictions.
While Indian law has strong theoretical basis, it has fallen behind the operational realities of today’s fashion industry. The interaction of legal doctrines and fashion practice especially in relation to these three doctrines, shows significant ambiguity. When does a stylist who styles a designer lehenga qualify as a bailee? Can a third-party distributor bind a brand using an apparent agency? How far may can an indemnity clause go in guarding against international IP liability?
The paper’s main problem is the lack of legal clarity when contract doctrines are applied to real-life fashion supply chain situations. The Indian Contract Act provides fundamental definitions and obligations but its applicability in contemporary commercial settings, particularly in international or digital transactions is lacking in practice as well as jurisprudence. For example, there is uncertainty about how courts interpret a breach of duty in a bailment when garments are destroyed in transit or how much an agent’s apparent power can bind a principal in contracts for fashion marketing. By examining indemnity, bailment, and agency from a doctrinal view in relation to the Indian fashion supply chain, this research seeks to bridge that gap. To identify the shortcomings, the paper also makes comparative references to international fashion legal practices. In the end, the paper makes the case that in order to meet the changing demands of the industry, traditional contract law doctrines need to be reinterpreted and strategically used.
RESEARCH METHODOLOGY
The paper uses a doctrinal legal research methodology, and the study examines the current legal framework, court rulings and legal commentary applicable to the contract law doctrines of indemnity, bailment, and agency in Indian designer fashion supply chains. The doctrinal approach is suitable for this research as it interprets and applies black-letter law i.e. Sections 124-125 (indemnity), 148-171 (bailment), and 182-238 (agency) of the Indian Contract Act, 1872. The fashion industry’s commercial strategies and risk structures such as outsourcing, internet retail is analyzed in terms of these doctrines.
REVIEW OF LITERATURE
The paper examines how Indian courts have applied these doctrines in commercial contexts by using statutory analysis and Supreme Court of India and High Court judicial precedents. Syed Abdul Khader v Rami Reddy, AIR 1979 SC 553, related to agency liabilities and Bharati Knitting Co. v. DHL Worldwide Express Courier, AIR 1996 SC 2508, which provides the concept of bailee obligation, are important instances. The foundational legal work in Avtar Singh, Law of Contract and Specific Relief gives commentary on the Indian Contract Act, 1872. This paper interprets and applies to fashion based on Singh’s conceptual clarity, which helps in articulating the rights, duties, liabilities of parties in contractual relationships. Fibre2Fashion, “Apparel Supply Chain and Its Variants,” describes operational structures like the synchronized supply chains and the push-pull systems which is essential to examine the practical applications of legal doctrines in fashion logistics. The paper on “The Many Faces of Fault in Contract Law: Or How to Do Economics Right” discusses that contract doctrines such as indemnity clauses are tools for maximizing risk, performance, and cost rather than merely being legal formalities. Lexology, “Manufacture and Distribution of Fashion Goods in India” by Anand and Anand examine how statutes such as The Indian Contract Act, 1872, Sale of Goods Act, 1930, Consumer Protection Act, 2019, Foreign Exchange Management Act (FEMA), 1999, etc regulate the contractual relationships. It analyzes agency and indemnity in international contracts and brand protection. Scribd, “Duty of Care of Bailee” examines Section 151 of The Indian Contract Act, 1872 which defines bailee’s standard of care. The article uses it to examine how the law handles damage or any loss of designer goods during transportation or at stylists’ showrooms. The Intact One, “Agency and Bailment Contracts” provides brief descriptions of the ideas behind bailment and agency under Indian Law. It is helpful in clarifying basic terminology and legal standards related to fashion logistics. An article on LinkedIn by Nevily Mwashao discusses the use of bailment in international logistics and e-commerce. It provides a global view of fashion supply chain issues, to comprehend worldwide bailment liabilities.
METHOD
A. Bailment in Designer Fashion Supply Chains
According to Section 148 of The Indian Contract Act, 1872, Bailment is the delivery of goods to another person for a specific purpose with the understanding that they will be returned once the objective is achieved or disposed of to comply with the delivery party’s instructions. The bailor delivers the goods and the bailee receives them. According to Sections 151 to 161 of the Act, the bailee is supposed to take reasonable care of the goods, just as a responsible person would. If this duty is broken, the bailee is responsible for damages unless this loss was caused by force majeure events.
Bailment is common in designer clothing, though it is not explicitly recognized. Examples are, sending clothing to stylists or public relations firms for marketing events or shoots; using third party logistics providers to store inventories; submitting distinctive products under consignment agreements to retail businesses. In such agreements, the ownership is with the designer while the possession is being transferred. However, agreements in this sector lacks explicit bailment terms which creates uncertainty in the allocation of liability when goods are misplaced, destroyed or misused. This is in contrast to warehouse contracts in regular commerce. this creates room for uncertainty about the allocation of liability in the event that goods are misplaced, destroyed, or misused. The Supreme Court in Bharati Knitting Co. v DHL Worldwide Express Courier, observed that when negligence or a shift from accepted practices was shown, the transporters and caretakers handling expensive goods were held accountable. The case is related to logistics however, fashion bailment cases can benefit from the same legal logic about duty of care, especially where clothing is custom made or irreplaceable etc. According to scholarly view, if goods are given for a specified purpose, like marketing, and bailee uses them beyond the limit or gives them to a third party with no consent, that is considered unauthorized use and imposes liability under Section 154 ICA. Bailment can have a cross-border dimension in global fashion industry. For example, garments from a Delhi-based designer might pass through several jurisdictions, and middlemen when it is shipped to global fashion week. This can be challenging in determining who is legally liable in these chains, especially if the bailment was unrecorded, as Nevily Mwashao pointed. This raises questions about the burden of proof, dispute settlement, and enforcement of duty of care. Unless contracts explicitly outline custody, obligations and logistics tracking measures are in place, the designers might find it difficult to prove a breach. To overcome the obstacles, contracts with stylists, shipping companies etc. should contain explicit provisions on bailment, as per designers. The agreements need to state the extent and goal of the use, the instructions for handling or storage, duties concerning insurance, terms of liability and return. An example of a clause is, “The clothing given here must remain the exclusive property of the bailor. By the (date), the bailee promises to return them in the original condition. strict liability will apply to any loss, damage, abuse if not proven differently.
B. Agency in Fashion Contracts
According to Section 182 ICA, an agent is a person who is hired to perform an act on behalf of another or to act on behalf of another in interactions with third parties. The principal is the person for whom the act is being performed. In the fashion industry, where operations are usually outsourced, agency relationships are common. these relationships might develop through implicit authority or can be official. Understanding the different types of authority i.e. actual, implicit and apparent, is important for establishing if the principal can be held accountable for agent’s acts. Agency partnerships take the following forms in the fashion industry: PR and marketing firms that handle appearances in the public or negotiate advertising contracts; Influencers promoting brands or acting as brand ambassadors; Franchisees that work in retail and promote a brand without owning the intellectual property; International fashion houses are represented by sales representatives. These situations raise inquiries regarding the extent of power and legally enforceable agreements that are made by agents. For example, depending on how the third parties perceive the agent’s authority, the principal can still be held liable if a PR firm executes an unauthorized endorsement agreement or an influencer misuses brand image. The principal’s accountability for actions by the agent without express authority is an issue in agency law. Even if there was no actual authority, a principle is still liable for an agent’s actions under Section 237 ICA if the principal provides the impression that agent has authority through words/actions. This is in accordance with the concept of apparent authority which courts have recognized in Syed Abdul Khader v Rami Reddy case. Here, the principal was found accountable for making false statements on the agent’s authority. This idea is important in the industry, where agents operate independently, and other parties may not be able to read the fine print of internal agency agreements. In the case of Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd., it was said that if a firm misrepresents an individual as having authority, it is barred from not accepting liability. This is in line with Indian views. It highlights the need for designers to regulate public perceptions of their agent’s authority. In the United States, the Restatement (Third) of Agency makes distinctions between authority types and stresses risk management in agency relationships. These show the global component of risk in agency, particularly for Indian brands which operate in overseas markets via agents. To reduce risk and ensure there is clarity, the fashion agency contracts should have the following: Specific responsibilities and powers to establish clear authority limits; Agents must disclose their status when interacting with other parties; There must be indemnity clauses, agents must indemnify the brand if there is any improper conduct. There must be termination rights which ensure that contracts explain the circumstances and methods to terminate agency. An example of a clause can be, that the Agent cannot obligate the principal more than the extent mentioned in Schedule A which includes contractual, financial, and legal obligations. Such acts will be ultra vires and will be considered as a personal liability for the Agent.
C. Indemnity in Fashion Supply Chains
According to Section 124 of The Indian Contract Act, 1872, an indemnity contract is an agreement in which one party promises to protect the other party from loss that is caused by the promisor or any other third party’s actions. Section 125 of The Indian Contract Act, 1872, describes the indemnified party’s rights, which includes the recovery of damages, fees, legal expenditures that were paid because of the claims from the indemnified subject matter. Indemnity acts as a risk allocation method which is required for contractual relationships with uncertainty, third party claims, operational hazards, which are common in fashion supply chains. Contracts in the fashion industry have indemnity clauses. The main areas of application are Manufacturer liability i.e. if a designer outsources manufacturing and the manufacturer produces products which are infringing intellectual property then the designer faces litigation etc. Misrepresentation in Agency happens when public relations agencies or brand representatives for example, make false statements; Retail issues i.e. franchisees which fail to meet brand requirements result in customer complaints. Each of the situations involves risks that arise from third parties, which makes indemnity clauses a requirement in fashion contracts. Indian courts have not studied the jurisprudence of indemnity in this industry however, they have recognized that the clauses must be definitive and clear. In the case of Osman Jamal & Sons Ltd. v Gopal Purshottam, it was said that the indemnifier’s liability emerges only when the indemnity-holder faces real damage and not only the threat of loss. This view differs from the English law that allows indemnity enforcement which is based on anticipated liability. This provides the indemnity-holder with an effective shield. This difference is relevant for the designers who are operating in international domain since the counterparties require greater indemnity protection. In the complex fashion operations, contracts must address: The scope of indemnity i.e. what kinds of losses are covered; Triggering conditions i.e. stating when does the indemnity apply; the procedural requirements should be addressed i.e. the notice requirements, liability limitations etc. An example of a clause will be, “The manufacturer should pay and hold innocent the designer from all loses, liabilities and costs that are resulting from defective goods or copyright infringement.” The Global Fashion Contracts which involve manufacturing or retail distribution incorporate indemnity terms that are borrowed from The United Kingdom or The United States of America (common law nations). Indian fashion businesses collaborating with these contracts should ensure that their indemnity clauses align with legal enforceability in India. International indemnities are protected by regulating law and provisions of arbitration. The failure to negotiate clear conditions can result in unenforceable commitments, mainly when working with complicated supply chains across various legal systems.
Suggestions
The research shows that, even though the Indian Contract Law has a strong foundation for controlling fashion supply chains, its implementation in the digitized and globalized industry is still immature. To bridge the gaps, there are some legislative recommendations that are proposed, that are, Indian designers that are small and emerging, should include adapted legal clauses that address the doctrines of bailment, agency and indemnity. These clauses should also include the return obligations and liabilities for transfer of clothing (bailment). The agent’s sales and promotional authority should be put in limit. There should be clear indemnity clauses for intellectual property, defects, and breaches. The design councils should create standard contract resources for fashion companies to prevent risky agreements. Since disputes in bailment often include damage, the designers should use digital tracking technology for example, a blockchain based stock record. They provide recorded logs of delivery, possession and return which is essential evidence in the claims of breach of duty. There are fashion professionals with limited legal knowledge. The institutions should provide legal education programs on the Indian Contract Act, indemnity, bailment clauses, and also acts of the unlawful agency. Such programs can be conducted by NIFT, FDCI, and fashion entrepreneurs, working together with law schools. When employing foreign agents or manufacturers, the Indian firms should match their governing law clauses with the suitable forum for enforcement. Conflict of law provisions should be included to ensure that Indian terms of indemnity are followed internationally. Arbitration clauses should be chosen along with international recognition (such as UNCITRAL norms). These reduce the enforceability gap between Indian contract norms and international systems. Legal changes in India can include implementing sector specific recommendations for industries with high risk such as fashion and entertainment. A model fashion contract regulation can unite the contract conditions for creative work, distribution, intellectual property licensing, which are similar to the industry rules in film and music industries.
Conclusion
The designer fashion industry is thriving both creatively and commercially, however, it is subject to legal uncertainty. This research has shown that the doctrines in contract law are not only applicable but necessary for negotiating business relationships that characterize the fashion supply chains. While these legal concepts are established in theory, their application in real world operations is often ignored. Bailment is commonly misunderstood, agency relationships lack clear authority limitations, and indemnity clauses are either very broad or narrow to be enforceable under the Indian norms. The international expansion of fashion trade creates dangers that Indian contract law is not prepared to handle. International distribution agreements, influencer alliances expose Indian firms to legal concerns. The study asks for improved legal standards and contractual literacy to reconcile commercial operations with doctrinal objectives. Improved contract writing, education campaigns can help the fashion industry safeguard its growth.
ANUSHKA PALIT -Second Year (B.B.A. L.L.B (Hons.))
O.P. JINDAL GLOBAL UNIVERSITY, SONIPAT