A bailment is a legal arrangement where one of the parties temporarily transfers possession, but not ownership, of their personal property to another party for a specific purpose, pursuant to an agreement or understanding. A bailee has a duty to safeguard and return the property that they were entrusted with once the purpose of the bailment is accomplished or the term of the bailment has expired.
Bailment laws govern the rights and responsibilities of both the bailor and bailee. These laws are derived from common law statutes and principles.
How Does Bailment Work?
Bailment is used when an individual temporarily transfers their personal property to another individual for a limited time and for a specific purpose. The ownership of the property, however, is not transferred, as noted above.
This is what makes a bailment different from a sale. An individual who delivers the property is called the bailor.
The individual who receives the property is called the bailee. In general, the elements of delivery, acceptance, and consideration must be present for an item to be bailed.
If money is not involved in the bailment, the fact that an individual transferred something they believe to be valuable will typically satisfy the consideration requirement. For example, assume that an individual gave up their watch so they could borrow another individual’s vehicle. In that case, that would be sufficient consideration as long as the parties agree on it.
Typically, this is a lesser requirement than that needed for consideration for contracts.
What Are the Different Types of Bailments?
There are three different categories of bailments, including:
- A bailment that benefits both the bailor and bailee: One example of this would be parking your car in a paid parking lot. The individual would get the benefit of parking their car, and the owner of the lot would get the benefit of the fee that is paid;
- It is important to note that the bailee may face liability for damaging the bailed items if they were negligent;
- A bailment that only benefits the bailor: This is also called a gratuitous bailment. Free valet service is an example because the valet service, or bailee, would not receive compensation for parking the individual’s vehicle;
- The bailee may face liability for damaging the bailed items if they have been grossly negligent or if they acted in bad faith; and
- A bailment that only benefits the bailee: One common example would be checking out a movie or book from a library. The individual checking out the item would be the bailee in this situation because they would be taking the book or movie. The library, or bailor, receives no benefits from loaning out the item but would still expect it to be returned at the end of the rental period;
- In this situation, the bailee may face liability for basically any damage that is done to the bailed item;
- This category has the highest standard of care of the three categories.
What Are Some Common Examples of a Bailment?
Common bailment examples include, but may not be limited to:
- Storage: An individual stores their belongings in a rented storage unit or deposits their clothes at a dry cleaner;
- Repair or service: A vehicle owner leaves their vehicle at a repair shop, or an individual leaves their watch at a shop for repair;
- Rental or lease: Renting equipment or tools or borrowing a book from a library;
- Parking or valet: Leaving a vehicle in a parking garage or with valet service;
- Consignment: An artist consigns their artwork to a gallery for exhibition and sale; and
- Shipping or transportation: An individual sends a package through a delivery service, or a shipping company transports goods for a client.
When Is a Bailment Terminated?
A bailment may be terminated in the following situations:
- When the purpose of the bailment has ended: An example of this would be when an individual removed their parked vehicle from the parking lot, the bailment would terminate;
- At the end of a fixed term: If the parties agreed that the property would only be bailed for a certain period of time, the bailment will be terminated when that time period ends;
- If the bailed property is destroyed: If there is not a property involved in the bailment, then it will naturally terminate; and
- If one party gives notice of termination: This only applies to a bailment that has been set for an indefinite period.
What Happens if the Item Is Not Claimed by the Bailor?
If an individual is a bailee and the bailment period has ended, the bailor has a right to reclaim their property. If the bailment ends after a fixed term and the bailor has not reclaimed the item, the bailee has a right to say that the item has been abandoned.
If the bailor has not attempted to reclaim their property and it was clear that the bailment was for a fixed time and that after that time, the bailor would have to reclaim it, common law will apply. This means that the bailee would be able to claim the property as their own.
The bailee, however, should make a good faith effort not to conceal the bailor’s property or to deceive them in hopes that their property would be considered abandoned.
Is a Bailment a Contract?
Bailment may be considered a contract, especially in cases where it is based on an express or implied agreement between the bailor and the bailee. Bailment agreements outline the terms and conditions under which the property is transferred, which includes:
- The purpose;
- The duration;
- Any limitations on its use.
Bailment agreements may be oral or written. They may also be legally binding, depending on the circumstances of the case.
Why Is Bailment Important?
Bailments are important because they facilitate various everyday arrangements and transactions, including storage, repair, rental, and transportation of goods. They provide the legal framework for protecting the interests of both the bailor and the bailee. This helps to ensure that the property is both safeguarded and returned as the parties agreed.
Breach of a bailment occurs when either a bailor or a bailee fails to fulfill their obligations under the bailment agreement or as required by law. Examples of a bailor or bailee failing to fulfill obligations may include:
- A bailee failing to take reasonable care of the property;
- A bailor’s failure to compensate the bailee as agreed;
- Either party failed to return the property as required.
If a breach occurs, the affected party may be able to seek legal remedies, including damages, specific performance, or an injunction. These remedies depend on the nature of the breach and the applicable laws.
Should I Contact an Attorney?
If you are a bailor or a bailee and you have any issues, questions, or concerns related to a bailment, it is important to consult with a consumer lawyer. If you have had issues with your property, such as it being destroyed or not being returned, your lawyer can assist you with these issues.
If you were a bailee who has been accused of doing something wrong with property, your lawyer can protect your rights. No matter which side of the bailment you were on, your attorney can advise you of your rights and possible available defenses.