Bailment describes a legal relationship in common law where physical possession of personal property, or chattel, is transferred from one person (the 'bailor') to another person (the 'bailee') who subsequently has possession of the property. It arises when a person gives property to someone else for safekeeping.
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Bailment is distinguished from a contract of sale or a gift of property, as it only involves the transfer of possession and not its ownership. To create a bailment, the bailee must both intend to possess, and actually physically possess, the bailable chattel. Bailment is a typical common law concept although similar concepts exists in civil law (Spain- Depósito).
In addition, unlike a lease or rental, where ownership remains with the lessor but the lessee is allowed to use the property, the bailee is generally not entitled to the use of the property while it is in his possession.
Moreover, unlike a security agreement or pawn at a pawnbroker, where the secured party is entitled to the possession and use of the property only on default of payment, a bailor can demand the return of the property at any reasonable time, without prior notice.
A common example of bailment is leaving your car with a valet. Leaving your car in a parking garage is typically a license, as the car park's intent to possess your car cannot be shown. However, it arises in many other situations, including terminated leases of property, warehousing (including store-it-yourself) or in carriage of goods.
There are three types of bailments:
A bailment for the mutual benefit of the parties is created when there is an exchange of performances between the parties (e.g. a bailment for the repair of an item).
A bailor receives the sole benefit from a bailment when a bailee acts gratuitously (e.g. a restaurant, a bailor, provides an attended coatroom free of charge to its customers, the bailee).
A bailment is created for the sole benefit of the bailee when a bailor acts gratuitously (e.g., the loan of a book from a library).
Sir William Jones in his 1781 work An Essay on The Law of Bailments, divided bailments into five sorts, namely:
No matter how a bailment arises, the bailee will incur some liability in the taking of a bailment. Different jurisdictions maintain different standards of care.
The old common law held a bailee strictly liable for the bailment. The exception to this rule was the case of involuntary bailments (see below), when the bailee is only held to a standard of due care.
In many Jurisdictions the system of strict liability has been replaced by a tiered system of liability that depends on the relationship of the bailee to the bailor. The bailee is generally expected to take reasonable precautions to safeguard the property, although this standard sometimes varies depending upon who benefits from the bailment.
Some jurisdictions have held bailees to a standard of normal care regardless of who benefits in the bailor/
bailee relationship.
An exception to all the above is the case of an involuntary bailee, one who by not intentional acts is made a bailee. For example, if one is given a stock certificate but it turns out to be the wrong certificate (intended for someone else), he is an unintentional bailee, he has made no intentional act to become a bailee. He is therefore entitled to divest himself of the certificate regardless of a duty of care, so long as he does no malicious or intentional harm to another.
Plaintiffs will be able to sue for damages based on the duty of care. Often this will be normal tort damages. Plaintiff may elect also to sue for conversion, either in the replevin or trover, although these are generally considered older, common law damages.
Bailment can arise in a number of situations, and is often described by the type of relationship that gave rise to the bailment. Several common distinctions are: