Bailment
Encyclopedia
Bailment describes a legal relationship in common law
where physical possession of personal property
, or chattel, is transferred from one person (the 'bailor') to another person (the 'bailee') who subsequently has possession of the property. It arises when a person gives property to someone else for safekeeping.
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. Bailment is a typical common law concept although similar concepts exists in civil law (Spain- Depósito).
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.
Moreover, unlike a security agreement
or pawn at a pawnbroker
, where the secured party is entitled to the possession and use of the property only on default
of payment, a bailor can demand
the return of the property at any reasonable time, without prior notice.
A common example of bailment is leaving your car with a valet
. Leaving your car in a parking garage is typically a license
, as the car park's intent to possess your car cannot be shown. However, it arises in many other situations, including terminated leases of property, warehousing (including store-it-yourself) or in carriage of goods.
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).
A bailor receives the sole benefit from a bailment when a bailee acts gratuitously (e.g. a restaurant, a bailee, provides an attended coatroom free of charge to its customers, the bailors).
A bailment is created for the sole benefit of the bailee when a bailor acts gratuitously (e.g., the loan of a book from a library).
bailee relationship.
damages. Plaintiff may elect also to sue for conversion
, either in the replevin
or trover
, although these are generally considered older, common law damages.
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
where physical possession of personal property
Personal property
Personal property, roughly speaking, is private property that is moveable, as opposed to real property or real estate. In the common law systems personal property may also be called chattels or personalty. In the civil law systems personal property is often called movable property or movables - any...
, or chattel, is transferred from one person (the 'bailor') to another person (the 'bailee') who subsequently has possession of the property. It arises when a person gives property to someone else for safekeeping.
General
Bailment is distinguished from a contract of saleContract of sale
A contract of sale is a legal contract an exchange of goods, services or property to be exchanged from seller to buyer for an agreed upon value in money paid or the promise to pay same...
or a gift
Gift
A gift or a present is the transfer of something without the expectation of receiving something in return. Although gift-giving might involve an expectation of reciprocity, a gift is meant to be free. In many human societies, the act of mutually exchanging money, goods, etc. may contribute to...
of property, as it only involves the transfer of possession and not its ownership
Ownership
Ownership is the state or fact of exclusive rights and control over property, which may be an object, land/real estate or intellectual property. Ownership involves multiple rights, collectively referred to as title, which may be separated and held by different parties. The concept of ownership has...
. To create a bailment, the bailee must both intend to possess, and actually physically possess, the bailable chattel. Bailment is a typical common law concept although similar concepts exists in civil law (Spain- Depósito).
In addition, unlike a lease
Lease
A lease is a contractual arrangement calling for the lessee to pay the lessor for use of an asset. A rental agreement is a lease in which the asset is tangible property...
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.
Moreover, unlike a security agreement
Security agreement
A security agreement, in the law of the United States, is a contract that governs the relationship between the parties to a kind of financial transaction known as a secured transaction...
or pawn at a pawnbroker
Pawnbroker
A pawnbroker is an individual or business that offers secured loans to people, with items of personal property used as collateral...
, where the secured party is entitled to the possession and use of the property only on default
Default (finance)
In finance, default occurs when a debtor has not met his or her legal obligations according to the debt contract, e.g. has not made a scheduled payment, or has violated a loan covenant of the debt contract. A default is the failure to pay back a loan. Default may occur if the debtor is either...
of payment, a bailor can demand
Demand
- Economics :*Demand , the desire to own something and the ability to pay for it*Demand curve, a graphic representation of a demand schedule*Demand deposit, the money in checking accounts...
the return of the property at any reasonable time, without prior notice.
A common example of bailment is leaving your car with a valet
Valet parking
Valet parking is a parking service offered by some restaurants, stores, and other businesses, particularly in North America. In contrast to "self-parking", where customers find a parking space on their own, customers' vehicles are parked for them by a person called a valet...
. Leaving your car in a parking garage is typically a license
License
The verb license or grant licence means to give permission. The noun license or licence refers to that permission as well as to the document recording that permission.A license may be granted by a party to another party as an element of an agreement...
, as the car park's intent to possess your car cannot be shown. However, it arises in many other situations, including terminated leases of property, warehousing (including store-it-yourself) or in carriage of goods.
Purposes
There are three types of bailments: (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.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).
A bailor receives the sole benefit from a bailment when a bailee acts gratuitously (e.g. a restaurant, a bailee, provides an attended coatroom free of charge to its customers, the bailors).
A bailment is created for the sole benefit of the bailee when a bailor acts gratuitously (e.g., the loan of a book from a library).
Types
Sir William Jones in his 1781 work An Essay on The Law of Bailments, divided bailments into five sorts, namely:- Depositum, or depositDeposit accountA deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the...
. - MandatumContract of mandateContract of mandate is a contract of bailment of goods without reward, to be carried from place to place, or to have some act performed about them....
, or commission without recompense. - Commodatum, or loan for use, without pay.
- Pignori acceptum, or pawn.
- Locatum, or hiring, which is always with reward. This last is subdivided into locatio rei, or hiring by which the hirer gains a temporary use of the thing, locatio operis faciendi when something is to be done to the thing delivered and locatio operis mercium vehendarum when the thing is merely to be carried from one place to another.
Liability
No matter how a bailment arises, the bailee will incur some liability in the taking of a bailment. 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.- If both bailor and bailee are found to benefit from the relationship, such as sending a package, then the bailee is held to a standard of ordinary, or reasonable, care.
- If the bailment is to the primary benefit of the bailor, such as finding a lost wallet, the bailee must be found grossly negligentNegligenceNegligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...
to be liable for damage done to the bailment.
- If the bailee primarily benefits, such as if you borrow your neighbor's rake to clean your lawn, the bailee must exercise highest care, i.e. is liable for any damages arising from slight neligence.
Normal care
Some jurisdictions have held bailees to a standard of normal care regardless of who benefits in the bailor/bailee relationship.
Involuntary bailees
An exception to all the above is the case of an involuntary bailee, one who by not intentional acts is made a bailee. For example, 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 tortTort
A tort, in common law jurisdictions, is a wrong that involves a breach of a civil duty owed to someone else. It is differentiated from a crime, which involves a breach of a duty owed to society in general...
damages. Plaintiff may elect also to sue for conversion
Conversion
-Economy and Finance:* Currency conversion or exchange rate* Conversion , one of the options strategies* Economic conversion-Law:* Conversion , conversion by taking a chattel out of the possession of another with the intent of exercising a permanent or temporary dominion over it, despite the...
, either in the replevin
Replevin
In creditors' rights law, replevin, sometimes known as "claim and delivery," is a legal remedy for a person to recover goods unlawfully withheld from his or her possession, by means of a special form of legal process in which a court may require a defendant to return specific goods to the...
or trover
Trover
Trover is a form of lawsuit in common-law countries 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...
, 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:- Voluntary vs. Involuntary. 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. A common situation that creates voluntary bailment is when a person leaves goods with someone for service (e.g., dry cleaningDry cleaningDry cleaning is any cleaning process for clothing and textiles using a chemical solvent other than water. The solvent used is typically tetrachloroethylene , abbreviated "perc" in the industry and "dry-cleaning fluid" by the public...
, pet grooming, car tune-up). The bailee must hold the goods safe for the bailor to reclaim within a reasonable time. An involuntary (or constructive) bailment occurs when a person comes into possession of property accidentally or mistakenly, as where a lost purse or car keys are found and need to be protected until properly redelivered – a bailment is implied by law.
- For considerationConsiderationConsideration is the central concept in the common law of contracts and is required, in most cases, for a contract to be enforceable. Consideration is the price one pays for another's promise. It can take a number of forms: money, property, a promise, the doing of an act, or even refraining from...
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 careStandard of careIn tort law, the standard of care is the degree of prudence and caution required of an individual who is under a duty of care.The requirements of the standard are closely dependent on circumstances. Whether the standard of care has been breached is determined by the trier of fact, and is usually...
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 escheatEscheatEscheat is a common law doctrine which transfers the property of a person who dies without heirs to the crown or state. It serves to ensure that property is not left in limbo without recognised ownership...
s 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.