A bailment happens when a person delivers personal property to another person for a specific purpose, such as storage or repair, and no transfer of title occurs. The person who delivers the personal property in a bailment is the bailor, and the person who receives it is the bailee. Generally, parties create a bailment by written or oral agreement, but one can also be implied.Gratuitous bailment is a type of bailment where the bailee is not receiving compensation, such as when letting a friend borrow a vehicle. In this case, the bailee would only be liable for loss or damage to the car if they engaged in gross negligence while borrowing it. In non-gratuitous bailment, there is consideration between the bailee and the bailor. For example, if a valet attendant is paid a fee to park a vehicle at an expensive hotel, there is some presumption that the valet attendant is providing some care to ensure the safety and security of the vehicle while it is in their possession, and they will be responsible for damages if the vehicle is damaged or stolen at the hotel. The bailor has the right to receive their property in good condition by the agreed date. Once the bailor has delivered the property, the bailee has the primary right to possession of the property. If the bailee misuses the property, then they may be liable for a tort of conversion. Hence, the bailee is responsible to redeliver the property as designated by the bailor. If the bailee fails to use adequate care, then the bailor can recover damages from the bailee.
Bailments can be created for the benefit of the bailor, bailee, or both. The level of care that the bailee owes to the bailor depends on who receives the benefit of the bailment.
When the bailment is created for the sole benefit of the bailee, then the bailee must exercise extraordinary care with the property. However, the bailor must notify the bailee of any known defects in the property.
When a bailment is created for the sole benefit of the bailor, the bailee need only exercise slight care. The bailee can be liable for lost or damaged property only if the loss or damage was caused by the bailee's gross negligence. Gross negligence is a conscious, voluntary act or omission wherein a person fails to exercise reasonable care that is likely to cause a foreseeable harm.
When a bailment is created for mutual benefit, then the bailee need only exercise the type of care that a reasonably prudent person would exercise in that situation. The bailor must notify the bailee of any known defects in the property that the bailor could have discovered by using reasonable diligence. An example of a mutually beneficial bailment includes car rental agreements. The car rental company (bailor) benefits from the fee it charges the customer (bailee), and the customer benefits from using the car.
Elements of Bailments
The property may be delivered either actually or constructively, but the bailee must know that they received delivery and possession of it. Actual delivery is when the bailor hands over physical possession of the property to the bailee. Constructive delivery is when the bailor hands over something to the bailee signifying a transfer when actual delivery is impossible. For example, a constructive delivery happens when the bailor transfers a car title or key to the bailee instead of the actual car.
The last element of a bailment requires that it be in writing if it is to last more than a year. This requirement is imposed by the statute of frauds, a law that requires that certain contracts that cannot be completed within a year must be in the form of a written document. The document must contain the elements of a contract—such as the identity of the parties, the identity of the property, and a discussion of the terms of the agreement—and it must be signed by the party to be charged.
A bailment ends when either the intended purpose is achieved or the date agreed upon by the parties arrives. If the bailment was indefinite, then either party may terminate it as long as they give proper notice to the other party.One example of a bailment is if an individual rents a safe-deposit box from a bank in order to store valuables. In this case, the bank is agreeing to charge them a monthly fee to store their items safely and securely. If the items in the safe-deposit box are stolen or damaged, the bank may be liable for damages.