Bailment

The term bailment refers to the transfer of personal property to another person for safekeeping, or for the other person to control or use temporarily. A bailment is a form of contractual relationship, even if no contract has been signed. The person receiving the property (the “bailee”) has possession and control over the property for a specific period of time, during which he or she is responsible to take reasonable care of the property. The original owner of the property (the “bailor”) retains ownership interest during this time. To explore this concept, consider the following bailment definition.

Definition of Bailment

  1. The delivery of property into the temporary custody and control of another for some purpose.

Origin

1545-1555 Anglo French bailement

What is a Bailment

Bailment is different from a contract for sale of the property, even where such contracts include seller-financing, or the making of payments for the property. This is because the intent of a contract of sale is to transfer ownership of the property to the buyer. In a bailment, ownership of the property does not transfer, and transfer is never an intended consequence.

In order for a bailment to exist, the bailee must have both the intent to possess the property, and actual possession the property. The bailor intends that the property will be returned to him at the end of a specified period of time, or after the purpose for which the property was given has been completed.

For example:

Kevin pulls up to the entrance of an upscale restaurant with his wife. The couple exits the car, and Kevin gives his keys to the valet, so he can park the car​​​​. In such a case, it is clear that the valet intends to take temporary possession of the car, and that Kevin expects to get his car back after dinner. While the car is in the valet’s possession, he is responsible for taking reasonable care of Kevin’s car.

Purposes of Bailment

Elements of a Bailment

  1. Delivery. The property must be delivered to the actual care and/or control of the bailee. Control of the property does not necessarily require actual physical possession in some cases, but by giving a means of access to the property, such as providing keys to a storage unit where the property is kept, the bailor engages in constructive delivery of the property.
  2. Acceptance. A bailee must knowingly accept possession and/or control of the property. This means that no one can unwittingly become a bailee, as, because a bailment is a type of contract, knowledge and acceptance of the bailment terms are essential elements.
  3. Consideration. Unlike a typical contract, in which both parties must receive something of value, only one party need receive something of value in a bailment. When a bailment is created for the sole benefit of the bailee, such as when one party loans the use of his car to another, just to be a good friend, a bailment is created, even though the bailor receives nothing of value.

For example:

George needs to go to several job interviews in the coming week, but his car is broken down. His friend Sam decides to let George use his second car, and surprises him by dropping it off at his house, parking it on the street while George is not home. A few minutes after Sam leaves, a drunk driver swerves and crashes into Sam’s car.

Sam wants George to pay for the damages to the car, saying he can wait until he has gotten a job. However, George had no idea that Sam intended to loan him his car, and had no intent of accepting use or control of the car when Same left it at his house. If the two men take the case to small claims court, Sam will not be able to prove that a bailment was created, and therefore that George had a responsibility to protect the car, as the three elements of a bailment did not occur. It is unlikely that the court would hold George liable for repairs to the car.

Rights and Responsibilities of a Bailee

Termination of a Bailment

Termination of a bailment occurs when its intended purpose has been achieved, or when the parties agree that it is ended. If a bailment is created for an undefined period of time, it may be terminated at will by either party by providing the other party with due notice of the intent to terminate. Following completion of the purpose for the bailment, the bailee has a responsibility to return the property to its owner.

In some cases, if return of the property is impossible, due to no fault of the bailee, the bailee is not held liable for non-delivery. This might occur if the property was destroyed in a fire that was not the bailee’s fault, or if the property blew away in a tornado. In all other situations, failing to return the property as scheduled or agreed, the bailee may be liable for the tort of conversion.

Real Life Cases of Responsibility Under Bailment

The issue of responsibility or liability for damage to, or loss of, property under bailment is a common subject of civil lawsuits across the U.S. In each of these cases, the judge must determine whether the three required elements of a bailment existed at the time of loss or damage occurred, as well as the value of the property lost, in order to make a judgment.

Hotel Loses Guest’s Valuable Jewelry

At Hotel in Minnesota, a guest left a valuable ring with the desk clerk, with instructions for the ring to be delivered to a jeweler. The desk clerk lost the ring, so it was never delivered to the jeweler, and he never reported to either his employer, or the guest, that it had been lost.

The guest sued the hotel as the bailee of the ring, as she had delivered possession of the ring to the hotel’s employee for the purpose of having it delivered to the jeweler. The guest proved to the trial court’s satisfaction that, as a bailee, the hotel was liable for the jewelry, and awarded damages in the amount of over $2,000.

The hotel appealed the decision to the Minnesota Supreme Court, arguing that, in order for a bailment to exist, there must be a mutual agreement between the parties. Since the hotel had never consented to become a bailee, it cannot be held responsible. The hotel also argued that, because it did not know the value of the ring in question, it was not a bailee. The hotel further argued that it received no consideration or benefit for taking care of the ring.

  1. The hotel’s desk clerk consented to a bailment on behalf of his employer
  2. The hotel’s desk clerk new that he had accepted control of a valuable ring
  3. The hotel took possession of the ring as part of its regular business services, and so generated good will and return guests as a result of those services

(See: Peet v. Roth Hotel Co. 191 Minn. 151, 253 N.W. 546 (1934))

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