Bailment

Bailment is a legal relationship in common law, where the owner transfers physical possession of personal property ("chattel") for a time, but retains ownership. The owner giving up custody is the "bailor" and person who takes is "bailee".[1] The bailee holds the personal property in trust for a specific purpose and delivers the property back to the bailor when the purpose is accomplished.[2]

"Bailor" redirects here. For the baseball player, see Bob Bailor.
"Bailee" redirects here. For the unisex name, see Bailey (given name).
Property law
Part of the common law series
Types
Acquisition
Estates in land
Conveyancing
Future use control
Nonpossessory interest
Related topics
Other common law areas
Higher category: Law and Common law

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. 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,[2] such as an involuntary bailment. A bailment relationship between the bailor and bailee is generally less formal than a fiduciary relationship.[2]

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.[3]

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.[2] For example, the UCC regulates personal property leases.[4] State bailment for hire statutes may also regulate the rights and duties of parties in the bailment relationship.[2][5]

Bailment is a typical common law concept, although similar concepts exists in civil law.[6]

Purposes

There are three types of bailment, based on the purpose of the relationship:[2]

  1. for the benefit of the bailor and bailee
  2. for the sole benefit of the bailor; and
  3. 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).

Transactions that create bailment

Bailment may also be created in the following types of transactions where property is delivered to the bailee:[2]

  • a lease agreement to personal property, where the bailee gains the right to use the bailor's property;
  • an agreement to repair the bailor's property;
  • the lending of bailor's property for use;
  • the storage, transportation, or safekeeping of the bailor's property;
  • a consignment of property for sale;
  • the keeping of an arrestee's property, after the arrest.

Modifying the earlier opinion of Lord Holt (Coggs v. Bernard, 92 Eng. Rep. 107 (K.B. 1704)), Sir William Jones in his 1781 An Essay on The Law of Bailments divided bailments into five sorts, namely:

  • deposit (depositum);
  • gratuitous agency (mandatum);
  • loan for use (commodatum);
  • possessory pledge (pignori acceptum);
  • loan for hire (locatum or locatio et conductio).

Liability

No matter how a bailment arises, the bailee will incur liability in the taking of a bailment, in some cases effectively insuring the goods. Different jurisdictions maintain different standards of care.

Strict liability

The old common law held a bailee strictly liable for the bailment. The exception to this rule was the case of involuntary bailments (see below), when the bailee is only held to a standard of due care.

Tiered system

In many jurisdictions the system of strict liability has been replaced by a tiered system of liability that depends on the relationship of the bailee to the bailor. The bailee is generally expected to take reasonable precautions to safeguard the property, although this standard sometimes varies depending upon who benefits from the bailment.[1]

  • If both bailor and bailee are found to benefit from the relationship, such as watch repair, then the bailee is held to a standard of ordinary, or reasonable care.[1] (mutual-benefit bailment).
  • If the bailment is to the primary benefit of the bailor, such as finding a lost wallet, the bailee must be found grossly negligent to be liable for damage done to the bailment.
  • If the bailee primarily benefits, such as if one borrows a neighbor's rake to clean his lawn, the bailee must exercise highest care, i.e. is liable for any damages arising from slight negligence.

Reasonable care

Some jurisdictions have held bailees to a standard of reasonable care without a formal distinction based on who benefits. The standard of reasonable care will vary in part according to who benefits from the bailment.[1]

Involuntary bailment

In a voluntary bailment, the bailee agrees to accept responsibility for possession of the goods. In an involuntary bailment, the bailee has possession of the goods without intent to do so, e.g. due to accident or mistake.

A common situation that creates voluntary bailment is when a person leaves goods with someone for service (e.g., dry cleaning, pet grooming, car tune-up). The bailee must hold the goods safe for the bailor to reclaim within a reasonable time.

An example of involuntary bailment is where a lost purse or car keys are found and need to be protected until properly redelivered––a bailment is implied by law. Another example is if one is given a stock certificate but it turns out to be the wrong certificate (intended for someone else), he is an unintentional bailee, he has made no intentional act to become a bailee. He is therefore entitled to divest himself of the certificate regardless of a duty of care, so long as he does no malicious or intentional harm to another.

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. Several common distinctions are:

  • For consideration vs. gratuitous. If a person agrees to accept a fee or other good consideration for holding possession of goods, they are generally 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 vs. 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; a lawful conversion of bailed goods.

Cases
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See also

References
  1. Merrill, Thomas W. (2010). Property. Smith, Henry E. New York: Oxford University Press. ISBN 978-0-19-971808-5. OCLC 656424368.
  2. Gordon, Noah J.; Surette, Eric C. "Bailments". American Jurisprudence. 8A (2d ed.).
  3. Gordon, Noah J.; Surette, Eric C. "Bailments § 5. Transactions constituting bailments". American Jurisprudence. 8A (2d ed.).
  4. 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.
  5. 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).
  6. "Practical Law UK Signon". uk.practicallaw.thomsonreuters.com. Retrieved 2017-09-18.
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