BAILMENT
The temporary placement of control over, or possession of, PERSONAL PROPERTY by one person, the bailor, into the hands of another, the bailee, for a designated purpose upon which the parties have agreed.
The term bailment is derived from the
French bailor, “to deliver.” It is generally consid-
ered to be a contractual relationship since the
bailor and bailee, either expressly or impliedly,
bind themselves to act according to particular
terms. The bailee receives only control or pos-
session of the property while the bailor retains
the ownership interests in it. During the specific
period a bailment exists, the bailee’s interest in
the property is superior to that of all others,
including the bailor, unless the bailee violates
some term of the agreement. Once the purpose
for which the property has been delivered has
been accomplished, the property will be
returned to the bailor or otherwise disposed of
pursuant to the bailor’s directions.
A bailment is not the same as a sale, which is
an intentional transfer of ownership of personal
property in exchange for something of value. A
bailment involves only a transfer of possession
or custody, not of ownership. A rental or lease of
personal property might be a bailment, depend-
ing upon the agreement of the parties. A bail-
ment is created when a parking garage attendant,
the bailee, is given the keys to a motor vehicle by
its owner, the bailor. The owner, in addition to
renting the space, has transferred possession and
control of the vehicle by relinquishing its keys to
the attendant. If the keys were not made avail-
able and the vehicle was locked, the arrangement
would be strictly a rental or lease, since there was
no transfer of possession.
A gratuitous loan and the delivery of prop-
erty for repair or safekeeping are also typical sit-
uations in which a bailment is created.
Categories
There are three types of bailments: (1) for
the benefit of the bailor and bailee; (2) for the
sole benefit of the bailor; and (3) for the sole
benefit of the bailee.
A bailment for the mutual benefit of the par-
ties is created when there is an exchange of per-
formances between the parties. A bailment for
the repair of an item is a bailment for mutual
benefit when the bailee receives a fee in exchange
for his or her work.
A bailor receives the sole benefit from a bail-
ment when a bailee acts gratuitously—for exam-
ple, if a restaurant, a bailee, provides an attended
coatroom free of charge to its customers, the
bailors. By virtue of the terms of the bailment,
the bailee agrees to act without any expectation
of compensation.
A bailment is created for the sole benefit of
the bailee when both parties agree the property
temporarily in the bailee’s custody is to be used
to his or her own advantage without giving any-
thing to the bailor in return. The loan of a book
from a library is a bailment for the sole benefit
of the bailee.
Elements
Three elements are generally necessary for
the existence of a bailment: delivery, acceptance,
and consideration.
Actual possession of or control over prop-
erty must be delivered to a bailee in order to cre-
ate a bailment. The delivery of actual possession
of an item allows the bailee to accomplish his or
her duties toward the property without the
interference of others. Control over property is
not necessarily the same as physical custody of it
but, rather, is a type of constructive delivery. The
bailor gives the bailee the means of access to tak-
ing custody of it, without its actual delivery. The
law construes such action as the equivalent of
the physical transfer of the item. The delivery of
the keys to a safe-deposit box is constructive
delivery of its contents.
A requisite to the creation of a bailment is
the express or implied acceptance of possession
of or control over the property by the bailee. A
person cannot unwittingly become a bailee.
Because a bailment is a contract, knowledge and
acceptance of its terms are essential to its
enforcement.
Consideration, the exchange of something
of value, must be present for a bailment to exist.
Unlike the consideration required for most contracts,
as long as one party gives up something of value, such action is regarded as good consideration.
It is sufficient that the bailor suffer loss of
use of the property by relinquishing its control
to the bailee; the bailor has given up something
of value—the immediate right to control the
property.
Rights and Liabilities
The bailment contract embodying general
principles of the law of bailments governs the
rights and duties of the bailor and bailee. The
duty of care that must be exercised by a bailee
varies, depending on the type of bailment.
In a bailment for mutual benefit, the bailee
must take reasonable care of the bailed property.
A bailee who fails to do so may be held liable for
any damages incurred from his or her NEGLIGENCE.
When a bailor receives the sole benefit
from the bailment, the bailee has a lesser duty to
care for the property and is financially responsible
only if he or she has been grossly negligent or
has acted in bad faith in taking care of the property.
In contrast, a bailee for whose sole benefit
property has been bailed must exercise extraordinary
care for the property. The bailee can use
the property only in the manner authorized by
the terms of the bailment. The bailee is liable for
all injuries to the property from failure to properly
care for or use it.
Once the purpose of the bailment has been
completed, the bailee usually must return the
property to the bailor, or account for it, depending
upon the terms of the contract. If, through
no fault of his or her own, the return of the
property is delayed or becomes impossible—for
example, when it is lost during the course of the
bailment or when a hurricane blows the property
into the ocean—the bailee will not be held
liable for nondelivery on demand. In all other
situations, however, the bailee will be responsible
for the TORT of conversion for unjustifiable
failure to redeliver the property as well as its
unauthorized use.
The provisions of the bailment contract may
restrict the liability of a bailee for negligent care
or unauthorized use of the property. Such terms
may not, however, absolve the bailee from all liability
for the consequences of his or her own
FRAUD or negligence. The bailor must have
notice of all such limitations on liability. The
restrictions will be enforced in any action
brought for damages as long as the contract does
not violate the law or public policy. Similarly, a
bailee may extend his or her liability to the
bailor by contract provision.
Termination
A bailment is ended when its purpose has
been achieved, when the parties agree that it is
terminated, or when the bailed property is
destroyed. A bailment created for an indefinite
period is terminable at will by either party, as
long as the other party receives due notice of the
intended termination. Once a bailment ends, the
bailee must return the property to the bailor or
possibly be liable for conversion.
FURTHER READINGS
Cross, Frank B., and Roger Leroy Miller. 1998. West’s Legal
Environment of Business: Test Cases, Ethical Regulatory,
and International Issues. St. Paul,Minn.:West.
Hall, Kermit L. 1991. A History of American Legal Culture:
Cases and Materials. New York: Oxford Univ. Press.
CROSS-REFERENCES
Bad Faith; Conversion; Damages; Negligence.
