Chapter 2: Bailment Flashcards
Bailment
- Transfer of possession of personal property without the transfer of ownership.
- Normally the property will be returned.
Who is the bailor?
The owner of the property
Who is the bailee?
That one that holds possession of the property.
Types of Bailment
Contractual and non-contractual
Non-contractual bailment types
- Gratuitous: There is no exchange taking place. There is only a benefit to one party.
- Involuntary: There could be a lack of intention to create a bailment relationship.
- It may be for the benefit or either or both parties.
What makes a contractual bailment?
- Contractual bailment benefits both parties
- There is some sort of exchange, likely commercial relationship between the parties that exist surrounding the bailment arrangement.
Three elements need to be present in order for…
a bailment relationship to exist.
Three elements of bailment
- Delivery of possession: The bailee has to take possession of the property at some point. Not necessarily comes from the bailor, it can come from a third party, but that bailee does take possession of the property.
- No intention to transfer title.
- Intention that the property will be returned to the bailor.
When might the three elements of bailment not be as necessary?
If we are dealing with a contractual bailment, the parties might explicitly set out in the contract the nature of the relationship and the duties of the parties. If that is the case, then these elements may not necessarily be relevant in establishing what type of relationship is between the parties. However, if it is a situation where it is non-contractual then these elements become critical to determining if it is really a bailment relationship or if it is some other scenario.
When is sub-bailment possible
If dealing with contractual bailment there is probably going to be terms in the contract relating to potential sub-bailment
- Permission from the bailor should be sought
- Sometimes permission is implied: Could be implied from the terms in the contract. If it is apparent from the terms that at some point the bailee will be transferring possession to another person or entity (for example, if it is implied that at some point based on the nature of the agreement the bailee will have to ship the property, or put it in the mail, etc., simply hand over possession to another person or entity), then it is going to be implied that sub-bailment is possible.
Duty of bailee
Bailees have a duty to care for the property bailed to them.
When is the duty of care established?
Once the bailment relationship has been established either through contract, or the three bailment characteristics.
How are exemption clauses related to bailment?
- They are related to contractual bailments.
Contractual bailments may include exception clauses - liability limited by contract. - Exception clauses will be strictly construed against bailee (whenever someone is exempting rights or placing a limitation on liability, courts will interpret them narrowly. They will be constructed narrowly and against the bailee).
Is the standard of care always the same?
No the standard of care varies by the type of bailment.
Where is the standard of care the highest?
The standard is highest for gratuitous bailment for benefit of bailee.
- Ex. Friend borrows a truck to move.
- Where the bailment is not for the parties’ mutual benefit, but the bailee is getting some benefit of value of holding the relationship or the property, then the standard of care for the bailee is highest.
When is the standard of care the lowest?
Standard is lowest for gratuitous bailment for benefit of bailor.
- Ex. Storing furniture for a friend and not getting paid for it.
- If there is only a benefit or value flowing to the bailor in a relationship, then the bailee is going to have the lowest standard of care.
- The benefit there is for the bailor and the bailee is not getting anything.
What is bailment for value?
There is a mutual flow of benefit in the relationship, flowing in both directions.
What is the standard of care for bailment for value?
The standard of care is to take care of goods as a prudent and diligent person should take of goods belonging to those with whom she transacts business and in the circumstance.
- Standards of care and assessment is similar to when looking at negligence.
What are the remedies for bailee?
- Damages
- Lien
- Right of Sale
Explain damages as remedy for bailee.
Generally contractual damages. So if the bailee has a contract for services and the bailor has not paid the invoice, they can sue for damages.
Explain lien as a remedy for bailee.
- A lien is available where bailee still has good in its possession.
- Payment must already be due.
- Common law lien can arise over property where services performed.
Lien can arise by contract.
For lien as a remedy, explain that payment must already be due.
- A lien only arises when services have been performed but payment is due. If services have been performed but payment due date hasn’t arisen yet, then a lien is not available yet.
- The effect of a lien is so that the bailee can continue to hold property and refuse transfer possession back until payment has been made.
Explain how common law lien can arise over property where services performed.
- For example, bailee might be holding the property for the purposes of a service arrangement. For example, if one leaves their car with a mechanic, generally the shop is a bailee and the car is a bailment property. And a lien can arise over that property with respect to the fees for services that have been performed on that car.
- So it’s not necessarily related to the storage of the property. It could be that the bailee is holding property for the purposes of services and not storage.
- It can also arise in other scenarios where there are professional services (legal services). If a lawyer has performed legal work for a client, and then the client transfers work to another lawyer and they want to take their file, the lawyer can exercise a lien over the file until invoices are paid.
Explain how liens can arise by contract
If the parties agree that a lien is available for the bailee and it might change the common law scenario, so the bailee for example, the lien could arise prior to payment being due if that is what is in the agreement, or the contract might say no lien is available. They are contracting outside of common law liens so that the bailee cannot rely on holding the property as incentive for payment.
