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Bailment

From Academic Kids

Bailment describes a legal relationship where physical possession of personal property (chattels) is transferred from one person (the 'bailor') to another person (the 'bailee') who subsequently holds possession of the property. However, it is distinguished from a contract of sale or a gift of property, as it only involves the transfer of possession and not its ownership. In addition, unlike a lease or rental, where ownership remains with the leasor 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 in a parking garage. However, it arises in many other situations, including terminated leases of property, or warehousing (including store-it-yourself). No matter how a bailment arises, the bailee is expected to take (as a minimum) reasonable precautions to safeguard the property. Moreover, a bailee may be liable in conversion if the property is not returned upon the request of the bailor, or if the property is used without permission of the bailor.

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 v. Involuntary. In a voluntary bailment, the bailor agrees to accept responsibility for possession of the goods. In an involuntary bailment, the bailor has possession of the goods without intention 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 v. gratuitous. If a person agrees to accept a fee or other good consideration for holding possesion 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 v. 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 bailor also acquires a contractual or statutory right to dispose of the goods to satisfy overdue rent; a lawful conversion of bailed goods.
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