What is a Bailment?
The word "bailment" was originally derived from a French
word meaning "to deliver". In law
, a bailment occurs where one person voluntarily delivers chattels
to another person on trust that they will be returned in their original or altered form, and without any transfer of ownership of the chattels
occurring. In other words, it is where one person gives property to another person, expecting to get it back. The test is if the transaction has the following four elements (1):
1) The delivery of the exclusive right of possession by the bailor
2) Voluntarily accepted by the bailee
3) With an assumption of the responsibility by the bailee
to keep the goods safe,
4) and the obligation to return the thing bailed
In a bailment, the person delivering the property is called the bailor, and the recipient of the property is the bailee. Under certain circumstances it is also possible for a sub-bailment to exist, where the bailee then bails the goods to another person, who becomes a sub-bailor.
In one of the first bailment cases, the definition was said to cover six kinds of relationship (2):
1) Gratuitous Safekeeping (depositum): where the goods are delivered by the bailor to the bailee to keep the goods safe without charge.
2) Gratuitous loan (Commodatum): where the goods are delivered to the bailee to make use of, without any charge to them.
3) Hire (Locatio Rei): where the bailee provides consideration in exchange for the goods being delivered to them to make use of.
4) Pledge (Vadium): where goods are delivered by the bailor as security. (eg in a pawn)
5) Contract for Work (Locatio Operas): where the goods are delivered to the bailee for them to perform work on in exchange for consideration. (eg having a car repaired)
6) Gratuitous Work (Man Datum): where the goods are delivered to the bailee for them to perform work on, without requring any consideration.
Since that time, a seventh category of safekeeping for reward has been suggested.
It should also be noted that there is generally no such thing as a bailment of money, but that such a transaction is instead a loan. The key point is that in a bailment the exact same goods are expected back, and as far as the law is concerned money is not fungible, so unless the money is handed over under the understanding the exact same coins and notes be returned, it is not a bailment.
Duties of a Bailee
The duties of a bailee with regards to bailed goods are to:
1) Take care of the goods
2) Retain possession of the goods
3) Not to use/misuse the goods
4) Return the goods
Originally, the standard of care owed by a bailee to a bailor in taking care of goods depended upon the type of bailment entered into. In a gratuitous bailment for the benefit of the bailor (eg gratuitous work), the bailee would only be liable for gross negligence. In a gratuitous bailment for the benefit of the bailee (eg gratuitous loan), the bailee could be held liable for even the slightest negligence. Then, in the categories of bailment for reward, the standard of care was held to be to take reasonable care of the goods.
However, since then the law has evolved to say that the standard of care is equal for all categories of bailment, such that the standard of care expected of a bailee is to use such care a careful and vigilant person would exercise in the custody of his or her property of the like character and in the like circumstances. (3) In addition, it should be noted that in bailment cases the onus of proof is on the bailee to demonstrate that they were not negligent in losing or damaging the property.
With regards to the other duties of a bailee, it has been found that the bailee does not have the automatic right to create a sub-bailment, though this depends on the circumstances (4) As for the duty not to use the goods unless permitted to do so, if a bailee does use the goods, they may be sued in the tort of conversion. Lastly, the requirement to return the goods can depend on the form of the bailment. In a contractual bailment, the contract will specify the time at which the goods will be returned, whereas in a "bailment at will" (ie no set length of time), the goods must be returned immediately on demand of the bailor.
Also, there is an exception to these duties if the bailee is a common carrier. At least within the common law of the Commonwealth, a common carrier (being any business who holds themselves out as willing to carry goods for anyone willing to pay for the service) has almost absolute liability. The carrier can then only avoid liability if they can show the loss or damage was caused by (5):
1) an act of God,
2) an act of the Crown's enemies (ie an act of war)
3) the fault of the consignor (person sending the goods)
4) an inherent fault in the goods
As such, it is generally preferable for a carrier to be a private carrier. This means they then have the right to refuse to carry goods if they so choose, and are only liable according to the normal rules of bailments. However, it should be noted that there has also been legislative reform reducing the liability of common carriers (in Australia the Common Carriers Act 1902).
In a bailment, if goods are damaged, the bailor is entitled to bring an action of trespass to goods against the bailee. If the goods are instead lost or destroyed, then the applicable remedies lie in the torts of conversion or detinue. Also, it is possible to take action against the person liable for the goods if it is not the bailee themselves (6).
Duties of a Bailor:
Generally in a bailment, most of the duties lie with the bailee. However, the bailor does nonetheless have certain duties.
Their primary duty relates to the nature of the goods being bailed. For example, if the goods are being bailed for transport, the bailor must package the goods adequately , and the bailee is in no way liable for not pointing out this lack (7). Also, the bailor must tell the bailee if the goods are dangerous, or they may be liable for damage caused (8).
It should be noted that this is just a very rough overview of an extremely complex area of law, and is written from the point of view of Australian law. However, the same principles should be valid throughout the Commonwealth, and to a large extent in American law as well.
(1) Halsbury's Laws of Australia 40-5
(2) Coggs v Bernard (1703) 92 ER 107
(3) Nobali v Sweeting Denney Pty Ltd (1989) Aust Torts Rep 80-258
(4) Edwards v Newlands & Co (1950) 2 KB 534
(5) Halsbury's Laws of Australia 70-360
(6) The Winkfield 1900 3 All ER Rep 346
(7) Gould v SE & C Rly Co 1920 2 KB 186
(8) Grant Northern Rly v LEP Transport Co 1922 2 KB 742