Copyright © 2004 McGraw-Hill Ryerson Limited 1 PART 5 – SPECIAL CONTRACTUAL RELATIONSHIPS  Chapter 21 – The Law of Bailment Prepared by Douglas H. Peterson, University of Alberta

Copyright © 2004 McGraw-Hill Ryerson Limited 2 THE LAW OF BAILMENT Nature of Bailment Types of Bailment Innkeepers

Copyright © 2004 McGraw-Hill Ryerson Limited 3 NATURE OF BAILMENT Bailment – transfer of a chattel by the owner to another for some purpose, with the chattel to be later returned or dealt with in accordance with the owner's instructions A temporary transfer of possession of personal property Car rental, repair of goods, storage of goods Bailor – the owner of property in a bailment Bailee – the person who gains possession in a bailment

Copyright © 2004 McGraw-Hill Ryerson Limited 4 THE LAW OF BAILMENT THE SIMPLE BAILMENT RELATIONSHIP BAILORBAILEE Obligation to Return Chattel Transfer of Possession of Chattel Owner of Chattel Title to Chattel Remains in Bailor Possesses Chattel for Use, Storage, Transport, etc.

Copyright © 2004 McGraw-Hill Ryerson Limited 5 NATURE OF BAILMENT Three elements Delivery of goods by the bailor Possession of the goods by the bailee for a specific purpose Return of the goods to the bailor at a later time, or disposition of goods according to bailor’s wishes

Copyright © 2004 McGraw-Hill Ryerson Limited 6 SUB-BAILMENT Sub-Bailment – bailment within a bailment Sub-bailor and sub-bailee Requires special agreement between bailee and bailor or a custom or practice of the trade Sub-bailment allowed Auto repairs, carriage of goods, storage of goods Not allowed if bailor relying on special skill of bailee Terms of sub-bailment must be consistent with original agreement

Copyright © 2004 McGraw-Hill Ryerson Limited 7 BAILOR-BAILEE RELATIONSHIP Normal ingredients of a bailment contract The services to be provided by the bailee The bailee’s price and payment requirements The extent to which the bailee is liable for damages or loss The remedies of the parties for failure to perform

Copyright © 2004 McGraw-Hill Ryerson Limited 8 BAILOR-BAILEE RELATIONSHIP (Requirements) Delivery into hands of bailee (possession by bailee Constructive possession can be a problem Retention of title by bailor Bailee receives possession only, title never passes Bailee can sue for interference with property or damage to property by third parties Return of goods to bailor Same goods must be returned Fungibles – interchangeable commodities such as grain, fuel, oil, gasoline Must return same grade or quality, and same quantity

Copyright © 2004 McGraw-Hill Ryerson Limited 9 LIABILITY FOR LOSS OR DAMAGE Different standards for different forms of bailment Standard of care depends on type of bailment Onus on bailee to show standard of care required of particular bailment was met Loss not a result of bailee’s culpable negligence

Copyright © 2004 McGraw-Hill Ryerson Limited 10 LIABILITY FOR LOSS OR DAMAGE General principles Bailee must return goods Bailee must return goods in same condition No damage, normal wear and tear allowed Onus on bailee to show no negligence Only bailee can give evidence of such Must provide reasonable explanation otherwise is liable Principle of res ipsa loquitur

Copyright © 2004 McGraw-Hill Ryerson Limited 11 TYPES OF BAILMENT Gratuitous Bailment Bailment for Reward Storage of Goods Warehouse Storage Parking Lots Bailment for Repair or Service Hire or Rental of a Chattel Carriage of Goods Pledge of Personal Property as Security

Copyright © 2004 McGraw-Hill Ryerson Limited 12 GRATUITOUS BAILMENT For the benefit of the bailee or the bailor, or both Without monetary reward Liability varies with respective benefits received by the parties to the bailment Unless parties have specified a standard of care Benefit for Bailor Bailee’s liability is minimal Depends on nature of goods

Copyright © 2004 McGraw-Hill Ryerson Limited 13 GRATUITOUS BAILMENT Benefit for Bailee Higher standard of care Liable for any damage caused by negligence of bailee bailors must exercise reasonable care to ensure that they are aware of defects and must inform their bailees of the existence of such defects Benefit for Both Standard of an ordinary person, how one would take care of their own goods

Copyright © 2004 McGraw-Hill Ryerson Limited 14 BAILMENT FOR REWARD Various scenarios For storage For deposit Repair shops Rental of a chattel Carriage of goods Pledge of goods for security

Copyright © 2004 McGraw-Hill Ryerson Limited 15 STORAGE OF GOODS Storage of goods Takes on many form but a bailment if: Possession and control of goods passes into hands of party offering storage facility Known as bailees for reward Safety deposit box, warehouses, grain elevators, parking lots (if parking attendant obtains keys)

Copyright © 2004 McGraw-Hill Ryerson Limited 16 WAREHOUSE STORAGE Standard – that of a skilled storekeeper To treat customer’s property as a “skilled storekeeper” would deal with its own property Protect goods from foreseeable risks Special storage facilities Must be in good operating conditions’ Refrigeration Not absolute liability Onus on bailee to show exercised a proper degree of control

Copyright © 2004 McGraw-Hill Ryerson Limited 17 WAREHOUSE STORAGE Warehouse receipt Evidence of the contract of bailment Entitles bearer to obtain goods from bailee Common law Bailee can retain goods until storage charges are paid Statute Liens allowed – based on possession May retain goods and seek order of sale Requirements of notice and sale be conducted in fair manner

Copyright © 2004 McGraw-Hill Ryerson Limited 18 PARKING LOTS Distinguish True bailment; and Rental of parking space Transfer of possession is necessary Done through transfer of keys Bailment - If parking lot accepts keys and parks car Rental of space – bailor keeps possession of keys and parks own car

Copyright © 2004 McGraw-Hill Ryerson Limited 19 EXCULPATORY CLAUSES Must provide adequate notice of such Bring to attention of bailor Simple printing on back of parking lot ticket is not enough Limitation must be forcefully brought to attention of bailor By direct reference Clearly market signs in conspicuous places

Copyright © 2004 McGraw-Hill Ryerson Limited 20 BAILMENT FOR REPAIR OR SERVICE Bailment When bailor delivers goods to repair shop Leaves goods with the proprietor Bailment for reward even if no charge for bailment separate from repair charge Bailee responsible for damage For sub-bailee’s negligence also Particular skills – duty of care attendant with the skill in the protection or handling of goods

Copyright © 2004 McGraw-Hill Ryerson Limited 21 HIRE OR RENTAL OF A CHATTEL Type of Bailment for reward Bailor delivers goods in return for monetary payment Car rental Usually in writing setting out terms, rights and duties of parties Bailee entitled to use of goods for entire rental period Bailee must not use goods for any other purpose than that for which they were intended No sub-bailment allowed

Copyright © 2004 McGraw-Hill Ryerson Limited 22 HIRE OR RENTAL OF A CHATTEL Liability If used for unintended purpose or sub-bailed Absolute liability If used properly Standard of care is that of reasonable care in operation or use of goods Not liable for ordinary wear and tear Bailor must provide in good working condition Goods are reasonable fit for the use intended Responsible for any defects know of or ought to know of If goods have inherent risk in use, bailor must warn of such

Copyright © 2004 McGraw-Hill Ryerson Limited 23 CARRIAGE OF GOODS Usually a carrier for reward Three types of carriers Gratuitous carriers Private carriers Common carriers Standard of care for liability varies with each

Copyright © 2004 McGraw-Hill Ryerson Limited 24 CARRIAGE OF GOODS Gratuitous Carrier If for benefit of bailor, bailee must use reasonable care in carriage of goods Private carrier May accept or reject goods as it sees fit If accepts Duty to take reasonable care of goods while they are in possession

Copyright © 2004 McGraw-Hill Ryerson Limited 25 CARRIAGE OF GOODS Common Carrier Normal part of business – offers to accept goods for shipment and has the facilities to do so Trucking company, railway company Statute limits common carriers liability Standard of care is high Totally in control of the carrier for time of bailment

Copyright © 2004 McGraw-Hill Ryerson Limited 26 CARRIAGE OF GOODS Often contract of carriage limits amount of liability Liabilities, rights and duties of parties mainly set forth in statute

Copyright © 2004 McGraw-Hill Ryerson Limited 27 PLEDGE OF PERSONAL PROPERTY AS SECURITY Pledge – the transfer of securities by a debtor to a creditor as security for the payment of a debt Personal property transferred to a creditor for security on a loan Bonds, share certificates, life-insurance policies Creditor becomes bailee and is responsible for property while in their possession Pawn – transfer of possessions (but not ownership) of chattels by a debtor to a creditor who is licensed to take and hold goods as security for payment of a debt Between debtor and pawnbroker Pawnbrokers are licensed in Canada

Copyright © 2004 McGraw-Hill Ryerson Limited 28 INNKEEPERS History – travelers goods were at the mercy of an innkeeper Common law very high standard of care on innkeepers Innkeeper responsible for any loss, even if not innkeepers fault, unless due to negligence of guest Must be an innkeeper by definition Offer both rooms and meals to the public

Copyright © 2004 McGraw-Hill Ryerson Limited 29 INNKEEPERS Statute Allows innkeepers to limit their amount of liability Applies when loss not due to negligence of or the willful or deliberate act of innkeeper To obtain protection must post relevant parts of act in each room (private and public)

Copyright © 2004 McGraw-Hill Ryerson Limited 30 SUMMARY Bailment created by: Delivery Possession Involves Transfer of possession and not title Gratuitous or for Reward Liability varies depending on type of bailment Governed by common law and statute