Bailments in the United States

Introduction to Bailments

Bailment, bailee, bailor, deliver, benefit, sale, grain and class

1. Definitions.—Bailment has been defined as a delivery of a thing by one person to another for a certain purpose, upon the promise that the bailee shall return the same thing to the bailor, or deliver it to someone in accordance with the bailor’s instructions, after the pur pose has been fulfilled.

The contract may be express or it may be implied. All kinds of movable or personal property may be the subject of a bailment. Altho the word is derived from a French word, meaning “to deliver,” the delivery may be actual, constructive or by operation of law. It is not necessary that the bailor be the owner of the property; it sometimes happens that a bailee himself becomes a bailor as toward some new bailee. The new bailee is not regarded as the bailee of the true owner, and his obligations are toward his immediate bailor. Thus A finds an unregistered bond of the X Company, Limited, which has been lost by B. A borrows money from C, and puts up the bond as security. By operation of law, A is B’s bailee, and, by actual delivery, C is A’s. C could not refuse to return the bond to A when the debt was paid on the ground that A did not own it; but if C did make a delivery to B, he would be protected.

2. bailment must be distinguished from a sale. A sale transfers the title or ownership of the thing sold. In the case of a bailment, only the possession of the thing changes. This distinction is unsatisfactory, as it is frequently difficult to say whether the title as well as the possession is trans ferred. It has been held, for instance, that when a farmer delivers wheat to a miller to be ground into flour, this is only a bailment, and the miller’s creditors cannot seize the flour or the wheat.

The distinction between a bailment and a sale or barter is important when we consider that, in the case of a bailment, if the goods bailed are destroyed accidentally, the loss falls upon the bailor; in the case of a barter or exchange, as where A delivered to B certain oats for B’s horses, the loss would fall upon B. A frequent instance of a bailment is the storage of grain in elevators. A number of owners may store their grain in the same elevator, the various deliveries being mixed together. The owner of the elevator is the common agent or bailee of them all. In such a case the owner of any part of the grain so stored may sell his interest in the undivided mass, and, as we have seen, a valid sale may be made of such an interest without dividing the portion from the bulk, the order on the warehouseman to deliver the quantity so sold, and the acceptance of this order by the warehouseman or elevator owner being sufficient.

Instead of being a bailment, however, the trans action may be a sale, when, for example, the ware houseman, by agreement with the various owners, is entitled to sell any part of the grain stored with him, provided that he substitutes an equal quantity of sim ilar grain of his own, or of other persons.

3. Classification of bailments.—Various classifications of bailments will be found in the different text books on the subject. The most practical classifica tion for our purpose, however, may be set out as fol lows:

(a) Those which are for the sole benefit of either the bailor or bailee.
(b) Those which benefit both bailor and bailee.

Further classification may be made, viz.: (1) Gratuitous bailments, (2) Bailments for reward.

Class (a) or class (1) would include deposits, gratuitous loans for use, and mandates. Class (b) or class (2) would include what are called pledges and hirings.

A bailment may be in the nature of a deposit, as when A delivers a thing to B to be kept for him. A may lend goods to B to be used by him without charge. A may deliver goods to B to be used by him for hire. Again, A may deliver goods to B as a pawn, or as security for money borrowed : this is a pawn or pledge. A may deliver goods to B who is a carrier, or in order that B may do something to them or with them, and B is to be paid for his services. A, on the other hand, may deliver goods to B, to carry them or do something about them or with them, without any charge for his work or carriage. So if A, who is going away for the summer, delivers to B some valuable plants to be kept and cared for by him, this is a bailment for the sole benefit of A, the bailor. It is a deposit. If A borrows B’s automobile,.this is a gratuitous loan for the sole benefit of A, the bailee. If A borrows one hundred dollars from B, and gives B as security for the loan five shares of stock, this is a bailment for the benefit of both parties, and is a pledge. If A hires a horse and carriage from B, and agrees to pay B two dollars, B gives A the use of his property for compensation, and this is a bailment in the nature of a hiring. If A stores his household furniture with B at ten dollars a month, this also is a bailment, and for the benefit of both parties. A gives B a trunk to take to C, and agrees to pay B one dollar. This is a bailment in the nature of a contract for carriage for hire.

4. . Extraordinary goods are en trusted by a guest in a hotel to the care of the proprietor, and when goods are delivered to a common carrier for transportation, the liability of the hotel proprietor and of the carrier as bailees is greater than that imposed upon the ordinary bailee. These will be considered more particularly later.

.3. Contract of persons capable of making a contract of bailment are those who have the usual capacity to contract. Thus an infant could not be a party to a bailment, unless it is a necessity.

If the contract is not in express terms, an implied contract will be sought in the presumed intention of the parties as disclosed by their acts and deeds, and by the surrounding circumstances. Thus, it may be clear from the surrounding circumstances that a given bailment is not gratuitous, but was entered into by the bailee in the expectation of a reward.

6. Use and care of bailed law, a bailee mast give reasonable care to the thing entrusted to him. When there is an express contract, how ever, which defines the use and care which the bailee is to make or give, he will be bound strictly by the con tract. If he fails in this respect and causes loss or damage, be will be liable in an action for damages for breach of contract. If he goes further, and acts as tho he owned the thing entrusted to him, he may be guilty of conversion.

7. Obligations of bailor in a bailment for his sole bailor, when the bailment has been made for his sole benefit, must recoup the bailee for what he may have spent in the preservation of the thing, the expense so incurred being regarded as an extraordinary and necessary expense, urgent in its na ture. The bailor must also notify the bailee of any defect in the thing which may cause in jury. He must notify the bailee of unapparent risks. Thus, if A requests B to take care of a parcel for him, and B accidentally drops it and the contents of the parcel explode, A will be liable for damages, unless he notified B of the dangerous qualities of the contents of the parcel; and if B undertakes to care for A’s horse for a month while A is away and to charge nothing for his trouble, B will be entitled to reimbursement for the extraordinary expense which he may be put to if the horse becomes ill and a veterinary surgeon has to be called in.

8. Obligations of bailee in a bailment for the sole benefit of the bailor.—We will suppose that A has gratuitously undertaken to keep certain goods en trusted to him by B. A must exercise reasonable care and diligence in keeping the goods. By reasonable care and diligence is meant such care and diligence as a person would ordinarily use in connection with his own property, and such skill as he is possessed of. In other words, he is bound to take such care as a reasonable, prudent and careful man might fairly be expected to take of his own property. Generally speaking, the bailee will not be answerable except for gross negligence, unless he is in bad faith.

Gross negligence might consist in the failure to exercise reasonable care, skill and diligence, or in the absence of ordinary care, or in the failure to perform an undertaken duty. If B allows A to place an automobile in his stable for the winter, B will not be responsible if A has left water in the cooling apparatus, which freezes and cracks part of the machinery; but B must not use the automobile, as to do so would be contrary to the spirit of the bailment, and if he used it and damage resulted he would be responsible. B would be liable for gross negligence if he were to leave the automobile outside the stable overnight and it were stolen.

The bailor must return the thing, with any profit or increase derived from it. Thus if B agrees to care for and pasture A’s cow, and during the period of the bailment a calf is born, B must hand back at the ex piration of the bailment both the cow and the calf.

9. Bailment for the sole benefit of the will suppose that the bailee is a person who has bor rowed an automobile. In this case the bailee will be held to exercise greater care than in other cases of bailment. As we have seen, if the bailment is for the sole benefit of the bailor, the bailee is held only for reasonable care and diligence. In the present case, however, he must exercise great care. Great care would be that care which a very cautious and vigilant man would take of his own property. The borrower in such a case will he liable for the least neglect. Thus, if B borrows A’s automobile, and upon going to his garage B finds that there is not room for it, B will be bound to remove his own automobile to make room for A’s, unless he can store A’s automobile in some other place.

10. Termination of bailment for sole benefit of one general rule is that when a bailment is made for the benefit of one party only, it may be terminated by either at any time.

The bailment may be determined or ended if the bailee, the depository in the case we are considering, acts inconsistently with the terms of the bailment.

It is said that when a bailment is made for the sole benefit of the bailor, it is terminated by the death or insanity of either party. The same rule would apply when the bailment was made for the sole benefit of the bailee, except that if the bailment had been made for a definite period, the death or insanity of the bailor would not interrupt the bailment until the period fixed had elapsed.

11. Creation, of a pledge or pledge is a contract by which a thing is placed in the hands of a creditor, or being already in his possession, is retained by him with the owner’s consent as security for his debt. The words pledge and pawn are synonymous, tho pledge includes pawn which is generally used in a particular sense. A pawnbroker is a pledgee, but the word pawnbroker is usually used to describe a person who carries on the trade of pawnbroking. The word pledge is frequently applied to the article which is pledged. When the customer of a bank hands over securities to the bank to guarantee a loan, the pledge is known as collateral security.

It has been held that the relation of pledgor and pledgee arises between a broker and his customer when the former buys stock for the latter, and the latter puts up margin which he agrees to keep good. The same relation does not arise between a commission merchant and his customer for whom he buys grain for future delivery on margin, which the custo mer promises to keep good up to the time of delivery. In the former case the stocks are actually bought by the broker, but in the second case the merchant has a mere executory contract of sale. In an ordinary stock transaction on margin, the broker buys the stock outright; if he does not do so it is a bucket-shop transaction.

12. Construction and operation of pledge.—It is clear from the definition already given that a pledge is a delivery of goods to a creditor as security for his debt. The right to the property vests in the creditor

only in so far as it is necessary to secure the debt. The general property remains in the pledgor; the special property is in the pledgee until the debt is paid. The pledge, therefore, is a privilege or lien over the goods pledged for the payment of the debt, together with interest and reasonable expenses incurred in car ing for the goods pledged. The lien or privilege sub sists only while the thing pledged remains in the hands of the creditor or person appointed by the par ties to hold it, unless it is otherwise agreed, when the particular debt is paid which the pledge was given to secure, that the creditor can retain it to secure some other debt. Naturally, the pledgor warrants that he has a title to the thing pledged, otherwise the security would be illusory.

13. Rights and duties of the bailor.—The person who rents goods and chattels is presumed to warrant his title and peaceable possession. He must furnish things which are reasonably fit and proper for the purpose intended. Generally speaking, he is an in surer against all defects or against such defects as can be guarded against by reasonable care and skill. Thus, if A rents a carriage and it breaks down on the journey, he is liable and not the person who is using it. He is supposed to have rented a carriage fit and proper for the journey.

The bailor is bound to exercise vigilance and care to discover defects in the thing rented, and if defects exist, should notify the bailee of any danger or risk unapparent to the bailee. Thus, in an On tario case, in which a person rented a portable engine and boiler to another, which exploded as soon as it was first used, and while it was in charge of a compe tent engineer, it was held that, as the lettor of the chat tel for hire impliedly warrants that it is reasonably fit for the purpose for which it is let, the plaintiff (the lettor, who sued for the value of the engine and boiler) , in the absence of negligence on the part of the defendant, could not recover.

14. Rights and duties of bailee.—We have already seen that the bailee must take such reasonable care of the property of his bailor in his possession as a prudent man would of his own property. If A sends his horse to B to be kept at B’s stable, and, the stable not being locked at night, the horse is stolen, B will not be excused because he shows that he did not lock the stable while his own horses were therein. It could not be said that, in leaving the stable door unlocked, even tho his own horses were inside, he was acting as a prudent man would in the care of his own property.

If the bailment of the thing is made for a special purpose, we have also seen that the bailee must use the thing for that special purpose, and he is liable for loss or damage arising during or because of any other use or employment of the thing. Thus, it has been held, that when a person hires from another a horse and wagon with seats for two persons, and he places three seats therein, and the horse during the journey sickens and dies,,he will be liable for the misuser; or when B hires a Horse to drive to the county fair, but instead drives to market, where the horse is accidentally killed, B is liable for the value of the horse.

The bailee or lessee is not ordinarily responsible when the thing leased is destroyed by fire without his fault. Thus, when goods are leased, under a covenant by the lessee to restore them to the lessor at the expiration of the term in as good order as they then were, reasonable wear only excepted, and the goods during the term were destroyed by fire without the lessee’s fault, it was held that the absolute words of the covenant were controlled by the implied condi tion that the goods should continue to exist, and that the lessee was not liable on the covenant for not re storing them at the end of the term.

15. Warehousemen and wharfingers.—A ware house is a storehouse for goods. A warehouseman is a bailee who owns or keeps a warehouse in which he keeps goods in storage for hire. A wharfinger is one who owns or keeps a wharf for the purpose of receiv ing goods for a compensation. The contract between the bailor and the warehouseman is generally evidenced by a warehouse receipt which is handed to the bailor. Such a receipt may be of prime importance if a doubt arises whether there has been a sale or a bailment. In its absence, or if it is ambiguous, the circumstances surrounding the transaction will be carefully examined. Thus, it was held in an Ontario case in which wheat was left with a warehouse man by a farmer •(the owner), and the sale price was to be thereafter fixed; the fact that the risk of fire was to be borne by the farmer and the wheat to be kept in a separate bin, was strong evidence that no sale was In a Manitoba case it was held that, when wheat is received in a warehouse or elevator nominally on storage for the person delivering it, but on such terms that the identical goods are so mixed up with others that they cannot be returned, and the well-understood course of the business is that, unless a price is agreed on, the party delivering the goods can only require an equivalent amount of the same kind and quality to be accounted for to him, the contract is really one of sale and not of bailment, whether the vendor is to receive the price in money or an equal quantity of goods, or has an option to do either, as the property in the goods has passed to the warehouseman.’ But ordinarily, when the grain of different owners is stored and mixed in one bin, each bailor becomes an owner in common of his share of the whole. The elevator owner is then bound to keep in his bins sufficient grain to enable him to make delivery of the share of each bailor. Otherwise he may be held for conversion. [1]

Bailments (Marinas)

This section introduces, discusses and describes the basics of bailments. Then, cross references and a brief overview about Marinas is provided. Finally, the subject of Admiralty Law in relation with bailments is examined. Note that a list of cross references, bibliography and other resources appears at the end of this entry.

Resources

Notes

1. Walter Johnson, “Commercial Law” (New York, 1917)

See Also

Further Reading

Resources

Further Reading

• Information about Bailments in the Gale Encyclopedia of American Law.