Bailments and Documents of Title

Question 1

Bailment law decides:

Answer 1

who is liable for loss or damage to personal property that we deliver to another for some purpose (without transferring title) - to have the property repaired, store or as an accommodation to one who wants to borrow it.

Question 2

Definition of bailment relationship

Answer 2

1. Transfer (actual or contructive) of control of personal property
2. To a bailee from a bailor (who may or may not have title)
3. Pursuant to an agreement (may or may not be a contract)
4. With the property to be returned to bailor or to whom the bailor directs after purpose of bailment is accomplished

Question 3

If bailee does not meet required level of care =>

Answer 3

then bailee is liable to bailor

Question 4

Classifications and level of care to be exercised by bailee:

Answer 4

1. For bailor’s sole benefit (you let me store my car in your garage while I’m on vacation) - low level of care required of bailee
2. For bailee’s sole benefit (you loan your friend your computer) - high level of care required of bailee
3. Mutual benefit bailment (you take your clothes to the drycleaner) - ordinary level of care required of bailee

Question 5

Bailee not an insurer

Answer 5

Bailee is not absolutely liable if property is damaged or lost

Question 6

There is a presumption that bailee is liable if bailed property is damaged or lost:

Answer 6

but bailee can overcome (rebut) this presumption if bailee shows that the required level of care was met

Question 7

Bailee absolutely liable:

Answer 7

1. fails to insure property after agreeing to do so
2. deviates from the purpose of the bailment
3. delivers the bailed property to wrong person

Question 8

Exculpatory clause

Answer 8

• not responsible for loss or damage to clothing left for dry cleaning

Question 9

Effect of exculpatory clause:

Answer 9

Was the clause made part of the agreement? Was it brought to the attention of bailor? If not, probably unenforceable

Also, typical public policy defenses to exculpatory clauses would apply

Question 10

When are documents of title generated?

Answer 10

When goods are shipped by common carrier or stored in a public warhouse

Question 11

Utility

Answer 11

Transfer of a document of title represents transfer of the goods without the necessity or inconvenience of the physical transfer of the goods themselves

Question 12

Types of documents of title that may be relevnt to a sale of goods transaction:

Answer 12

Warehouse receipt - issued by person engaged in the business of storing goods

Bill of lading - issued by a common carrier

Question 13

Purposes served by the documents of title

Answer 13

1. Receipt for the goods
2. evidence of the contract between bailor and bailee
3. Creates rights and obligations of the parties under Article 7

Question 14

Negotiability of Documents of Title

Answer 14

A. A document of title is negotiable if the goods are to be delivered “to order” or delivered “to bearer”

All others are nonnegotiable

Question 15

If a document of title is negotiable, it is transferred by negotiation

Answer 15

1. if order form - negotiation requires endorsement and delivery
2. If bearer form - negotiation requries delivery alone

Question 16

If a document of title is nonnegotiable, it is:

Answer 16

transferred by assignment and assignee/buyer takes the document of title subject to defenses and claims that may exist in the chain of title

Question 17

Negotiation -

Answer 17

transferee of the document receives it free and clear of defenses that may have been available against the transferor

Transferee gets the following:

• title to the document
• title to the goods
• the direct obligation of the issuer to abide by the document
• all other rights arising under the document or atrticle 7