Bailment

Last updated August 07, 2024

Bailment is a legal relationship in common law, where the owner transfers physical possession of personal property ("chattel") for a time, but retains ownership.^[1] The owner who surrenders custody of a property is called the "bailor" and the individual who accepts the property is called a "bailee".^[2] The bailee is the person who possesses the personal property in trust for the owner for a set time and for a precise reason and who delivers the property back to the owner when they have accomplished the purpose that was initially intended.^[3]

General

Bailment is distinguished from a contract of sale or a gift of property, as it only involves the transfer of possession and not its ownership. To create a bailment, the bailee must both intend to possess, and actually physically possess, the bailable chattel for example a car mechanic business when a car has been dropped off for repair. Although a bailment relationship is ordinarily created by contract, there are circumstances where lawful possession by the bailee creates a bailment relationship without an ordinary contract,^[3] such as an involuntary bailment. A bailment relationship between the bailor and bailee is generally less formal than a fiduciary relationship.^[3]

In addition, unlike a lease or rental, where ownership remains with the lessor but the lessee is allowed to use the property, the bailee is generally not entitled to the use of the property while it is in his possession. However, a lease of personal property is the same as a bailment for hire, where the bailee gains the right to use the property.^[4]

A common example of bailment is leaving one's car with a valet. Leaving a car in an unattended parking garage, however, is typically a lease or license of a parking space rather than a bailment, as the garage does not take possession of (i.e. exercise dominion or control over) the car. However, bailments arise in many other situations, including terminated leases of property, warehousing (including store-it-yourself), or in carriage of goods.

Governing law

In the United States, bailments are frequently governed by statute.^[3] For example, the UCC regulates personal property leases.^[5] State bailment for hire statutes may also regulate the rights and duties of parties in the bailment relationship.^[3]^[6] The Malay States' ordinance of 1950 on contracts stated that:

104. In all cases of bailment the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality, and value as the goods bailed.
105. The bailee, in the absence of any special contract, is not responsible for the loss, destruction, or deterioration of the thing bailed, if he has taken the amount of care of it described in s 104 of this Ordinance.^[7]

Bailment is a typical common law concept, although similar concepts exist in civil law.^[8]

Purposes

There are three types of bailments, based on the purpose of the relationship:^[3]

for the benefit of the bailor and bailee
for the sole benefit of the bailor; and
for the sole benefit of the bailee.

Examples

A bailment for the mutual benefit of the parties is created when there is an exchange of performances between the parties (e.g. a bailment for the repair of an item when the owner is paying to have the repair accomplished).

A bailor receives the sole benefit from a bailment when a bailee acts gratuitously (e.g. the owner leaves the precious item such as a car or a piece of jewelry in the safekeeping of a trusted friend while the owner is traveling abroad without any agreement to compensate the friend).

A bailment is created for the sole benefit of the bailee when a bailor acts gratuitously (e.g., the loan of a book to a patron, the bailee, from a library, the bailor).

Damages

Plaintiffs will be able to sue for damages based on the duty of care. Often this will be normal tort damages. Plaintiff may elect also to sue for conversion, either in the replevin or trover, although these are generally considered older, common law damages.

Terms

Bailment can arise in a number of situations and is often described by the type of relationship that gave rise to the bailment. Two common distinctions are:

For consideration versus gratuitous. If a person agrees to accept a fee or other good consideration for holding possession of goods, they are generally, although not always,^[9] held to a higher standard of care than a person who is doing so without being paid (or receives no benefit). Consider a paid coat-check counter versus a free coat hook by the front door and the respective obligations of the bailee. Some establishments even post signs to the effect that "no bailment" is created by leaving your personal possessions in their care, but local laws may prevent unfair enforcement of such terms (especially attended car parks).
Fixed-term versus indefinite-term. A bailor who leaves property for a fixed term may be deemed to have abandoned the property if it is not removed at the end of the term, or it may convert to an involuntary bailment for a reasonable time (e.g., abandoned property in a bank safe, eventually escheats to the state, and the treasurer may hold it for some period, awaiting the owner). However, if there is no clear term of bailment agreed upon, the goods cannot be considered abandoned unless the bailee is given notice that the bailor wishes to give up possession of the goods. Frequently, in the case of storage of goods, the bailee also acquires a contractual or statutory right to dispose of the goods to satisfy overdue rent.

Cases

Coggs v Bernard (1703)

Related Research Articles

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A lease is a contractual arrangement calling for the user to pay the owner for the use of an asset. Property, buildings and vehicles are common assets that are leased. Industrial or business equipment are also leased. In essence, a lease agreement is a contract between two parties: the lessor and the lessee. The lessor is the legal owner of the asset, while the lessee obtains the right to use the asset in return for regular rental payments. The lessee also agrees to abide by various conditions regarding their use of the property or equipment. For example, a person leasing a car may agree to the condition that the car will only be used for personal use.

<span class="mw-page-title-main">Hire purchase</span> Form of arrangement

A hire purchase (HP), also known as an installment plan, is an arrangement whereby a customer agrees to a contract to acquire an asset by paying an initial installment and repaying the balance of the price of the asset plus interest over a period of time. Other analogous practices are described as closed-end leasing or rent to own.

Replevin or claim and delivery is a legal remedy which enables a person to recover personal property taken wrongfully or unlawfully, and to obtain compensation for resulting losses.

In tort law, detinue is an action to recover for the wrongful taking of personal property. It is initiated by an individual who claims to have a greater right to their immediate possession than the current possessor. For an action in detinue to succeed, a claimant must first prove that he had better right to possession of the chattel than the defendant, and second, that the defendant refused to return the chattel once demanded by the claimant.

Accession has different definitions depending upon its application.

In common law jurisdictions, an implied warranty is a contract law term for certain assurances that are presumed to be made in the sale of products or real property, due to the circumstances of the sale. These assurances are characterized as warranties regardless of whether the seller has expressly promised them orally or in writing. They include an implied warranty of fitness for a particular purpose, an implied warranty of merchantability for products, implied warranty of workmanlike quality for services, and an implied warranty of habitability for a home.

Trover is a form of lawsuit in common law jurisdictions for recovery of damages for wrongful taking of personal property. Trover belongs to a series of remedies for such wrongful taking, its distinctive feature being recovery only for the value of whatever was taken, not for the recovery of the property itself.

Anticipatory repudiation or anticipatory breach is a concept in the law of contracts which describes words or conduct by a contracting party that evinces an intention not to perform or not to be bound by provisions of the agreement that require performance in the future.

Repossession, colloquially repo, is a "self-help" type of action in which the party having right of ownership of a property takes the property in question back from the party having right of possession without invoking court proceedings. The property may then be sold by either the financial institution or third party sellers.

Kosmopoulos v Constitution Insurance Co of Canada is a leading Supreme Court of Canada decision on the court's ability to pierce the corporate veil—to impose an interest or liability, that is, upon the shareholders of a company instead of the company itself. It was held that the veil can only be lifted where it would be "just and equitable", specifically to third parties.

A hell or high water clause is a clause in a contract, usually a lease, which provides that the payments must continue irrespective of any difficulties which the paying party may encounter, usually in relation to the operation of the leased asset. The clause usually forms part of a parent company guarantee that is intended to limit the applicability of the doctrines of impossibility or frustration of purpose. The term for the clause comes from a colloquial expression that a task must be accomplished "come hell or high water", that is, regardless of any difficulty.

Jus tertii is the legal classification for an argument made by a third party which attempts to justify entitlement to possessory rights based on the showing of legal title in another person. By showing legitimate title in another person, jus tertii arguments imply that the present possessor’s interest is illegitimate or that the present possessor is a thief.

The following outline is provided as an overview of and introduction to tort law in common law jurisdictions:

Conversion is an intentional tort consisting of "taking with the intent of exercising over the chattel an ownership inconsistent with the real owner's right of possession". In England and Wales, it is a tort of strict liability. Its equivalents in criminal law include larceny or theft and criminal conversion. In those jurisdictions that recognise it, criminal conversion is a lesser crime than theft/larceny.

Coggs v Bernard (1703) 2 Ld Raym 909 is a landmark case both for English property law and contract law, decided by Sir John Holt, Chief Justice of the King's Bench. It sets out the duties owed by a bailee – someone in possession of property owned by another.

Morris v CW Martin & Sons Ltd [1966] 1 QB 716 is an English tort law case, establishing that sub-bailees are liable for the theft or negligence of their staff. Both Lord Denning and Diplock LJ rejected the idea that a contract need exist for a relationship of bailor and bailee to be found. Accordingly, it established an authority in vicarious liability, that employers are fully liable for the thefts - by employees - of goods that they have a duty to take care of.

This page is a glossary of law.

References

↑ "BAILMENT Definition & Legal Meaning". Black's Law Dictionary (2nd ed.). Retrieved March 10, 2023.
↑ Merrill, Thomas W. (2010). Property. Smith, Henry E. New York: Oxford University Press. ISBN 978-0-19-971808-5. OCLC 656424368.
1 2 3 4 5 6 Gordon, Noah J.; Surette, Eric C. "Bailments". American Jurisprudence. Vol. 8A (2d ed.).
↑ Gordon, Noah J.; Surette, Eric C. "Bailments § 5. Transactions constituting bailments". American Jurisprudence. Vol. 8A (2d ed.).
↑ U.C.C. §§ 2A-101 to 2A-604. As to the regulation of personal property leases under U.C.C. §§ 2A-101 et seq., see §§ 269 to 343.
↑ See Mark Singleton Buick, Inc. v. Taylor, 194 Ga. App. 630, 391 S.E.2d 435, 12 U.C.C. Rep. Serv. 2d 84 (1990).
↑ Contracts (Malay States) Ordinance of 1950, sections 104-105, quoted in Privy Council, Port Swettenham Authority v TW Wu & Co (M) Sdn Bhd, reported 19 June 1978, accessed 21 September 2023
↑ "Bailment". uk.practicallaw.thomsonreuters.com. Retrieved 2017-09-18.^{[ failed verification ]}
↑ Privy Council, Port Swettenham Authority v TW Wu & Co (M) Sdn Bhd, reported 19 June 1978, accessed 21 September 2023