A bailment occurs when someone temporarily transfers property to another person for a limited time and a specific purpose. However, ownership of the property is not transferred. This is what differentiates a bailment from a sale.
The person who delivers the article is referred to as the bailor. The person who takes the property is referred to as the bailee. Generally, the elements of delivery, acceptance, and consideration need to be present for an item to be bailed.
If money is not involved, then the fact that someone has transferred something they deem to be valuable usually will fill the consideration requirement.
Like, if a person gave up their watch so they can borrow another person’s car, then that will be considered enough consideration if both parties agreed to it. This is often a lesser requirement than consideration for contracts.
There are three different types of bailments:
- A Bailment that Benefits Both the Bailor and Bailee: An example of this would be parking your car in a paid parking lot. You would get the benefit of parking your car and the owner of the lot would get the benefit of the fee that is paid. A bailee can face liability for damaging the bailed items if they were negligent.
- A Bailment that Only Benefits the Bailor: This is referred to as a gratuitous bailment. Free valet service would be an example of this because the valet service (bailee) would not be receiving compensation for parking your car. A bailee can face liability for damaging the bailed items if they have been grossly negligent or acted in bad faith.
- A Bailment that Only Benefits the Bailee: A common example of this would be checking out a book or movie from the library. You would be the bailee in this situation because you would be taking the book or movie. The library (bailor) would receive no benefit from loaning out the book, but would still expect it to be returned at the end of the rental period. In this scenario, a bailee can face liability for basically any damage done to the bailed item. This is the highest standard of care required out of the three categories.
A bailment can be terminated in the following situations:
- When the Purpose of the Bailment has Ended: For example, if you remove your parked car from the lot it was parked in, the bailment will be terminated.
- At the End of a Fixed Term: If the parties agree that an item will only be bailed for a specific period of time, the bailment will be terminated when that time frame ends.
- If the Bailed Property is Destroyed: If there isn’t a property for the bailment, then the bailment will naturally end.
- If One Party Gives Notice of Termination: This only applies to bailments that have been set for an indefinite period.
If you are the bailee and the bailment period is over, then the bailor has a right to reclaim the item. But if the bailment ended after a fixed term, and the bailor hasn’t reclaimed the item, then the bailee has a right to say that the item has been abandoned.
If the bailor has made not attempts to reclaim the property and it was clearly understood that at a fixed time, the bailor would be the one to reclaim it, then common law applies. This means that the bailee can claim the property as their own.
However, the bailee should make a good faith effort to not conceal the property or to deceive the bailor in hopes that the property would be considered abandoned.
If you are a bailor and your property was destroyed or not returned, you may want to contact a local business attorney to recover of your item or any damages. If you are the bailee, you also may want to consult an attorney if you are sued for something going wrong with a bailment. In both situations, an attorney can advise you of your rights and defenses.