Bailment Explained

Bailment is a legal relationship at common law, where the owner of personal property ("chattel") transfers physical possession of that property to another, who holds the property for a certain purpose, while the transferor 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 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, such as an involuntary bailment. A bailment relationship between the bailor and bailee is generally less formal than a fiduciary relationship.

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.^[5] 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. For example, the UCC regulates personal property leases.^[6] State bailment for hire statutes may also regulate the rights and duties of parties in the bailment relationship.^[7] The Malay States' ordinance of 1950 on contracts stated that:

Bailment is a typical common law concept,^[8] although similar concepts exist in civil law.^[9]

Purposes

There are three types of bailments, based on the purpose of the relationship:

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

ExamplesA 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.^[10] 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. In US jurisdictions, the measure of care required by the bailee in a mutual benefit bailment is "ordinary care" or "due care".^[11]

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,^[12] 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^[13] (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)

References

Book: Garner . Bryan A . Black's law dictionary . 2009 . West . St. Paul, MN . 978-0314199492 . 162 . 9th.
Book: Merrill, Thomas W.. Property. 2010. Oxford University Press. Smith, Henry E.. 978-0-19-971808-5. New York. 656424368.
Book: American Jurisprudence. Gordon. Noah J.. Surette. Eric C.. 2d. 8A. Bailments.
Book: American Jurisprudence. Gordon. Noah J.. Surette. Eric C.. 2d. 8A. Bailments § 5. Transactions constituting bailments.
Book: Cheeseman, Henry R. . Business Law: Ethical, International & E-commerce Environment . 2001 . Prentice Hall . 978-0-13-087913-4 . 928 . en . It is clear that parking lots and garages are bailees of automobiles once they assume control and possession of the automobile. Thus, if a valet parking attendant parks the car and keeps the keys, it is relatively certain that a court will recognize the existence of a bailment and hold the garage liable if the vehicle is stolen..
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).
Book: Story, Joseph . Commentaries on the Law of Bailments: With Illustrations from the Civil and the Foreign Law . 1839 . J. Richards . 227 . en . And in the common law, it would be treated as a case of bailment, only when the stock or materials belong to the employer. And, where the principal materials belong to the employer, the case would still be treated as a bailment, although the workman might furnish some accessorial materials or ornaments..
Web site: Bailment. uk.practicallaw.thomsonreuters.com. en-GB. 2017-09-18.
Book: James . Nickolas . Business and Company Law, 3rd Edition . Chapple . Ellie (Larelle) . Baumfield . Richard . Copp . Richard . Cunningham . Robert . Kamalnath . Akshaya . Floyd . Louise . 2024-04-08 . John Wiley & Sons . 978-1-394-23528-5 . 119 . en . The person in possession of the goods (the bailee) owes a duty of care to the owner of the goods (the bailor) to take reasonable care of the goods. If the bailee fails to take reasonable care of the goods, they will be liable for loss or damage to the goods..
Book: American Jurisprudence: A Modern Comprehensive Text Statement of American Law, State and Federal . 1962 . Lawyers Co-operative Publishing Company . 167, 637 . en . Observation: The common-law duty of ordinary care in a mutual benefit bailment has been codified by statute in some jurisdictions, and has been modified by other bailment-for-hire statutes. The degree of care required of a bailee for mutual benefit is defined as ordinary care, or due care, or the degree of care which would be exercised by a person of ordinary care in the protection of his or her own property,....
[Privy Council (United Kingdom)|Privy Council]
Book: Burrows, Andrew . Principles of English Commercial Law . 29 April 2016 . Oxford University Press . 978-0-19-106328-2 . 278 . en . Where a bailee is left in possession of goods for a period longer than that contemplated, various doctrines may enable him to lessen his responsibility. At one extreme, the court may find that he has become an involuntary bailee and no longer owes any duty to take care to safeguard the goods from theft or other physical hazard. This conclusion will be easier to reach where the bailment was for a fixed period, though even in that event the court may imply a period of grace before the duties of the bailee determine..