A bailment is a temporary transfer of property to another for a fixed time and a precise purpose. The transfer of property in a bailment is only about possession, not ownership. The bailor is the owner of the transferred property. The bailee holds the transferred property. The property is held in trust for the benefit of the bailor. A bailment is entirely different from a bail bond.
Bailments are standard in our everyday lives, including in our relationships with our banks. Bailments are also daily in finance, where the owner of securities moves them to another party for short selling. Since they are contractual agreements, failure to live up to the terms and conditions can lead to legal conflicts.
How Bailment Works
A bailment is an arrangement in common law that comes into effect when someone entrusts an asset to someone else for safekeeping. As earlier noted, the bailor is the asset owner and temporarily renounces it to the bailee. Although the bailor gives possession to the bailee, the bailor maintains legal ownership of the asset. Bailments only start once the property is in the hands of the bailee.
The bailor is typically not allowed to use the property while the bailee holds it. Leaving your automobile with a valet is a typical form of bailment. At the same time, parking in an isolated garage is a lease or the license of a parking space, as the garage cannot demonstrate intent to maintain the car.
Bailments are legal courses of action separate from contract or tort. To make a bailment, the bailee must intend to possess the bailable chattel physically. The bailor generally obtains a written contract, a receipt, or a chit, which you get when you drop your coat off at a coat check. The bailee agrees to guard it using reasonable care by taking possession of the property. Legal conflicts can occur if anything happens to the asset while in the bailee’s possession.
Types of Bailment
There are three types of bailments—those that benefit both parties, those that help only the bailor, and those that only help the bailee.
Bailments That Benefit Both the Bailor and Bailee
This kind of bailment is referred to as a service agreement bailment. For example, parking your automobile in a paid parking lot benefits both parties because the bailor can park their car in a safe lot while the lot owner is reimbursed for the service. In service bailments, a bailee is liable for any damage to the bailed items if they are negligent in their responsibilities.
Bailments That Only Benefit the Bailor
This is referred to as a gratuitous (free) bailment. Complimentary valet service would be an example because the valet service (in this circumstance, the bailee) doesn’t obtain payment for parking your automobile. A bailee can face liability for damaging the bailed items if they are grossly negligent or act in bad faith while protecting the asset.
Bailments That Only Benefit the Bailee
These bailments are called constructive bailments. Checking a book out of the library is a typical example. When you check the book out, you become the bailee while the library is the bailor, who gets no advantage from the relationship. However, it still anticipates that you will return the book at the end of the rental period.
In this type of bailout, the bailee encounters liability for any damage to the bailed item. This is the most elevated standard of care required out of the three categories.
Rights and Liabilities in a Bailment
Bailments come with specific rights for both parties. Bailors can expect that bailees will take care of their assets to the best of their command using the most reasonable amount of caution. After the relationship terminates, bailors can expect to get their property back in its original state. If this isn’t feasible, bailees must account for any actions that led to damage or loss.
Bailors have the right to terminate the agreement and to legal recourse, including compensatory damages, if the bailee can’t produce the asset when the agreement ends. On the other hand, bailees can expect to be paid for their services, take action against any other parties that damage the asset, or exercise liens if the bailor doesn’t live up to their end of the deal. All of these rights, of course, depend on the nature of the bailment.
The liabilities hinge on the type of agreement, as well. In service agreement bailments (where both parties benefit), bailees must take reasonable steps to confirm that the asset is well cared for, or they may be liable for damages resulting from their negligence.
The burden of responsibility decreases narrowly when the bailor is the only one who benefits. In gratuitous bailments, the bailee has a responsible duty of care but is only liable if they are grossly negligent in their duties. On the other hand, Constructive bailments carry the highest standard of care and, therefore, the greatest liability to the bailee. That’s because they are the only ones who profit from this relationship.
What Are the Rights of the Bailor?
The bailor is the owner of the transferred property. As the bailor, you have the privilege to obtain your property back in an acceptable manner. For instance, your car should be returned to you in the same condition you left it if you valet parked it. What is considered acceptable returned property by the bailee depends on the situation.
What Are the Duties of the Bailee?
The bailee must return the property to the owner (bailor) in an acceptable manner. Otherwise, the bailee can be responsible for the property’s full value. Vicarious liability often makes the employer of the bailee the responsible party. For instance, if a valet attendant at a resort crashes your automobile, the hotel may be responsible for the damage to the car rather than the employee.
How Long is the Property to be Held?
There are two types of terms: indefinite and fixed.
An indefinite term means that there was never an agreement on how long the property was to stay in the bailee’s possession. Therefore, even if the property is left in the bailee’s possession for a long time, the property is not considered abandoned unless the bailee gives notice to the owner.
A fixed-term means that an owner has deposited their property with the bailee for a set period. If the owner does not come back to reclaim the property within a set time, the property is deemed abandoned.
Can Someone be Forced to Hold Property?
Bailments can be voluntary or involuntary. In a voluntary bailment, another individual accepts responsibility for the items. In an involuntary bailment, someone ends up with the goods without ever planning to accept responsibility. Involuntary bailments most commonly happen with dry cleaners and auto repair shops. In these circumstances, the holder of the items must take care of the property for a reasonable time.
Can the Bailee be Paid for Holding Property?
If a bailee expects to be paid, they are holding the property for consideration. If the bailee is holding property for consideration, they will be held to a more elevated degree of care and responsibility than someone who does it for gratis.
Do I Need a Lawyer?
If a bailee is holding your property and you cannot reclaim your property, you should contact a lawyer immediately. If your property was returned to you by a bailee in an unacceptable fashion, an attorney could make sure you are compensated in full. An experienced products and services attorney can defend you if you were a bailee and not at fault for destroying or damaging a bailor’s property. Contact a lawyer to learn about your rights and defenses for your situation.