Bailment describes a legal relationship in common law where physical possession of personal property, or a 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, and is a cause of action independent of contract or tort.
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. 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.
A common example of bailment is leaving your car with a valet. Leaving your car in an unattended parking garage is typically a lease or license of a parking space rather than a bailment, as the car park's intent to possess your car cannot be shown. However, bailments arise in many other situations, including terminated leases of property, warehousing (including store-it-yourself) or in carriage of goods.
There are three types of bailment:
- for the benefit of the bailor and bailee
- for the sole benefit of the bailor; and
- 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 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).
- deposit (depositum);
- gratuitous agency (mandatum);
- loan for use (commodatum);
- possessory pledge (pignori acceptum);
- loan for hire (locatum or locatio et conductio), this is subdivided into:
No matter how a bailment arises, the bailee will incur liability in the taking of a bailment in some cases insuring the goods. Different jurisdictions maintain different standards of care.
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.
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. (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 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 negligence.
Some jurisdictions have held bailees to a standard of normal care regardless of who benefits in the bailor/bailee relationship.
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.
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.
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 cleaning, 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 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.
- Coggs v Bernard (1703)
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- "Practical Law UK Signon". uk.practicallaw.thomsonreuters.com. Retrieved 2017-09-18.