Bailments Flashcards
There are 3 elements to create a bailment
1) The bailee must take physical possession of the property and have the intent to control the property
2) The bailee must agree to the bailment
3) The bailee must know of the contents of the personal property
A consignment is not a bailment——A sale is not a bailment (when the personal property doesn’t have to be returned)
Use of employers property during employment does not create a bailment
Bailee Standards of Care
Solely for the benefit of the bailor = bailee owes a standard of slight diligence, and will only be liable if he acts with gross negligence
Bailment for mutual benefit of bailor and bailee= The bailee is held to a standard of ordinary care
Bailment solely for the benefit of the bailee- the bailee is held to a standard of great diligence, and will be liable for slight negligence
When Bailee is Strictly liable
A bailee is strictly liable for the loss or damage to the bailed goods if:
The bailie uses the bailed goods for some purpose outside the bailment
The bailie moves the property from the agreed palace of storage
The bailie who agrees to return the bailed property in exactly the same condition it was at the start of the bailment fails to do so
A failure to return to return the property or mis delivery of the property
However, the bailee will be excused from the delivery requirement if:
1) The bailie buys the bailed property from the bailor
2) the bailee is notified that a third party has bought the property from the bailor
3) The bailed property is taken from the bailor by court order
Measure of Damages
Bailed property lost/destroyed= FMV of property at time of loss or destruction
Bailed property damaged= FMV of undamaged goods- FMV of damaged goods
Bailees Rights in the Bailed property
The right of exclusive possession during the term of the bailment, unless the terms state otherwise.
The bailee can bring an action against any other person who interferes with the right of possession, including the bailor
The bailee’s right of possession trumps everyone else’s (if bailor takes from bailee that is conversion)
The bailey has a cause of action against any 3rd party who interferes with with the bailees right to possession, and if they recover more than the value of bailees interest, the excess must go to the bailor
Bailee’s limitation liability
Public policy frowns on a bailie’s attempt to waive or limit liability and will be construed strictly against the bailee.
A bailee may limit liability only if:
1) Bailor knew or should have known of the limitation at the time the bailment was created
2) and the bailor agreed to the limitation
Bailor’s rights in the bailed property
Can bring suit against the bailee if the bailee returns the property in damaged condition
However, can sue the bailee on a theory of interfering with a right to current possession once the bailment is over
The bailor can sue a 3rd party on a theory of interfering with a right to current possession once bailment is over
The bailie can sue a third party on a theory of interfering with right to future possession immediately
Bailor Causes of action
Conversion=
Can seek a detinue (return of the item) OR
Damages –Either Trover (value of of the item) OR Either Trespass (seeking payment incurred by not having possession
Negligence
Breach of contact
(The bailor is not liable if the bailee harms 3rd party with bailed property)
Compensation
When both the bailor and bailee benefit, usually agreement will set out compensation
There is no legal obligation to pay for a bailment solely for the benefit of the bailor or the bailee
In the case of a compensation bailment, ordinary and customary expenses incurred by the bailee fall to the bailee
However, extraordinary expenses incurred by the bailie are charged to the bailor
Defects in bailed property
In a compensated bailment, the bailor is obligated to inform the bailie of any defects in the bailed property that the bailor knows or should know about.
In a gratuitous bailment, the bailor must inform the bailee of any known defects
