1. © 2004 West Legal Studies in Business A Division of Thomson Learning 1 Chapter 47 Personal Property and Bailments Chapter 47 Personal Property and Bailments

2. © 2004 West Legal Studies in Business A Division of Thomson Learning 2 Introduction Definition: Property consists of legally protected rights and interests a person has in anything with an ascertainable value that is subject to ownership.  Difference Between Real and Personal Property.  Ownership rights in each. Definition: Property consists of legally protected rights and interests a person has in anything with an ascertainable value that is subject to ownership.  Difference Between Real and Personal Property.  Ownership rights in each.

3. © 2004 West Legal Studies in Business A Division of Thomson Learning 3 §1: Property Classification Property is divided into real and personal property. Real property (see Chapter 48) includes land everything permanently attached to it. Personal property is both tangible and intangible (stocks, copyrights). Real Tangible Intangible Personal Property

4. © 2004 West Legal Studies in Business A Division of Thomson Learning 4 § 2: Fixtures A fixture is personal property that becomes permanently affixed to real property.  Intent that it become a fixture is necessary.  Intent is determined by: The fact that the property cannot be removed without causing damage to the realty. The fact that the property is so adapted to the realty that it has become part of the realty.  Case 47.1: In Re Sand & Sage Farm & Ranch (2001). A fixture is personal property that becomes permanently affixed to real property.  Intent that it become a fixture is necessary.  Intent is determined by: The fact that the property cannot be removed without causing damage to the realty. The fact that the property is so adapted to the realty that it has become part of the realty.  Case 47.1: In Re Sand & Sage Farm & Ranch (2001).

5. © 2004 West Legal Studies in Business A Division of Thomson Learning 5 Trade Fixtures Trade fixtures: installed for commercial purposes by a tenant. They remain the property of the tenant and can be removed when tenant leaves, repairing any damage caused by removal. Trade fixtures: installed for commercial purposes by a tenant. They remain the property of the tenant and can be removed when tenant leaves, repairing any damage caused by removal.

6. © 2004 West Legal Studies in Business A Division of Thomson Learning 6 § 3: Property Ownership Property ownership is viewed as a “bundle of rights”, including the:  Right to possess.  Right to sell.  Right to give.  Right to lease.  Right to destroy. Property ownership is viewed as a “bundle of rights”, including the:  Right to possess.  Right to sell.  Right to give.  Right to lease.  Right to destroy.

7. © 2004 West Legal Studies in Business A Division of Thomson Learning 7 Fee Simple Person who owns the entire “bundle of rights” is said to be the owner in fee simple. Fee simple gives the owner the maximum possible estate or right of ownership of real property, continuing forever. Chapter 48 will deal with realty estates. Person who owns the entire “bundle of rights” is said to be the owner in fee simple. Fee simple gives the owner the maximum possible estate or right of ownership of real property, continuing forever. Chapter 48 will deal with realty estates.

8. © 2004 West Legal Studies in Business A Division of Thomson Learning 8 Concurrent Ownership Tenancy in common (Fig.1). A and B own an undivided interest in the property. Upon B’s death interest passes to B’s heir, “C”. A A B B C C Fig.1 A A B B Fig. 2 Joint Tenancy (Fig. 2). A and B own an undivided interest in property but, upon B’s death, B’s interest passes to A, the surviving joint tenant.

9. © 2004 West Legal Studies in Business A Division of Thomson Learning 9 Concurrent Ownership [2] Tenancy by the Entirety (not common)  Usually between husband and wife. Community Property (limited # of states)  Property acquired by couple during their marriage is owned as an undivided ½ interest in property (real and personal). Tenancy by the Entirety (not common)  Usually between husband and wife. Community Property (limited # of states)  Property acquired by couple during their marriage is owned as an undivided ½ interest in property (real and personal).

10. © 2004 West Legal Studies in Business A Division of Thomson Learning 10 § 4: Acquiring Ownership of Personal Property Personal property can be acquired through:  Possession.  Production.  Gift.  Will or Inheritance.  Accession.  Confusion. Personal property can be acquired through:  Possession.  Production.  Gift.  Will or Inheritance.  Accession.  Confusion.

11. © 2004 West Legal Studies in Business A Division of Thomson Learning 11 Possession Capture of wild animals (wild animals belong to no one). Finding of abandoned property. Adverse Possession. Capture of wild animals (wild animals belong to no one). Finding of abandoned property. Adverse Possession.

12. © 2004 West Legal Studies in Business A Division of Thomson Learning 12 Production Writers, inventors, manufacturers, and others who produce personal property acquire title to it.

13. © 2004 West Legal Studies in Business A Division of Thomson Learning 13 Gifts Voluntary transfer of property ownership from Donor (owner) to Donee (recipient) for no consideration. Three types  Intervivos—while donor is living.  Causa Mortis: -- made by donor in contemplation of imminent death.  Testamentary – after death, by will/inheritance. Voluntary transfer of property ownership from Donor (owner) to Donee (recipient) for no consideration. Three types  Intervivos—while donor is living.  Causa Mortis: -- made by donor in contemplation of imminent death.  Testamentary – after death, by will/inheritance.

14. © 2004 West Legal Studies in Business A Division of Thomson Learning 14 Gifts [2] Three requirements for valid gift:  Delivery—actual or “constructive” (symbolic, such as keys to car). Donor must give up complete control or dominion. Delivery by a 3 rd party is OK.  Donative intent on the part of the donor Case 47.2: In Re Estate of Piper (1984).  Acceptance by the Donee. Three requirements for valid gift:  Delivery—actual or “constructive” (symbolic, such as keys to car). Donor must give up complete control or dominion. Delivery by a 3 rd party is OK.  Donative intent on the part of the donor Case 47.2: In Re Estate of Piper (1984).  Acceptance by the Donee.

15. © 2004 West Legal Studies in Business A Division of Thomson Learning 15 Accession “Something added.” Someone adds value to a piece of personal property by use of either labor or materials. With owner’s consent. Without owner’s consent. “Something added.” Someone adds value to a piece of personal property by use of either labor or materials. With owner’s consent. Without owner’s consent.

16. © 2004 West Legal Studies in Business A Division of Thomson Learning 16 Confusion Commingling so that a person’s personal property cannot be distinguished from another’s. Fungible goods consists of identical particles such as oil or grain. Commingled in bad faith. Commingled in good faith. Commingling so that a person’s personal property cannot be distinguished from another’s. Fungible goods consists of identical particles such as oil or grain. Commingled in bad faith. Commingled in good faith.

17. © 2004 West Legal Studies in Business A Division of Thomson Learning 17 § 5: Mislaid, Lost or Abandoned Property Mislaid Property: Voluntarily placed somewhere, then inadvertently forgotten. Finder is caretaker for true owner. Lost Property: Involuntarily left. Property owner acquires title against whole world, except for true owner. Finder may be liable for:  Conversion.  Involuntary Bailment. Mislaid Property: Voluntarily placed somewhere, then inadvertently forgotten. Finder is caretaker for true owner. Lost Property: Involuntarily left. Property owner acquires title against whole world, except for true owner. Finder may be liable for:  Conversion.  Involuntary Bailment.

18. © 2004 West Legal Studies in Business A Division of Thomson Learning 18 Mislaid, Lost or Abandoned Property [2] Abandoned Property: Discarded by true owner with no intention of recovering. Acquires title against all the world, including the original owner.  Trespassers: no title.  Treasure Trove: Title against all world except true owner. Abandoned Property: Discarded by true owner with no intention of recovering. Acquires title against all the world, including the original owner.  Trespassers: no title.  Treasure Trove: Title against all world except true owner.

19. © 2004 West Legal Studies in Business A Division of Thomson Learning 19 §6: Bailments A bailment is formed by the delivery of personal property, without transfer of title, by one person (Bailor) to another (Bailee), usually under an agreement for a particular purpose. The property must be returned by the Bailee to the Bailor, or a third party as directed by the Bailor, in the same or better condition. A bailment is formed by the delivery of personal property, without transfer of title, by one person (Bailor) to another (Bailee), usually under an agreement for a particular purpose. The property must be returned by the Bailee to the Bailor, or a third party as directed by the Bailor, in the same or better condition.

20. © 2004 West Legal Studies in Business A Division of Thomson Learning 20 Elements of a Bailment Personal Property. (Tangible or Intangible-- but not persons or realty.) Delivery of Possession.  Bailee given exclusive control or possession.  May be actual or constructive.  Bailee must knowingly accept (Bailee must intend to exercise control over chattel). Bailment Agreement.  Express or Implied. Personal Property. (Tangible or Intangible-- but not persons or realty.) Delivery of Possession.  Bailee given exclusive control or possession.  May be actual or constructive.  Bailee must knowingly accept (Bailee must intend to exercise control over chattel). Bailment Agreement.  Express or Implied.

21. © 2004 West Legal Studies in Business A Division of Thomson Learning 21 §7: Ordinary Bailments Bailment for the sole benefit of the Bailor:  A gratuitous Bailment; Bailee owes Bailor a low duty of care, liable only for gross negligence. Bailment for the sole benefit of the Bailee:  Bailee owes Bailor a high duty of care and is liable for even slight negligence. Mutual Benefit Bailment: most common.  Each party owes the other a reasonable duty of care. Bailment for the sole benefit of the Bailor:  A gratuitous Bailment; Bailee owes Bailor a low duty of care, liable only for gross negligence. Bailment for the sole benefit of the Bailee:  Bailee owes Bailor a high duty of care and is liable for even slight negligence. Mutual Benefit Bailment: most common.  Each party owes the other a reasonable duty of care.

22. © 2004 West Legal Studies in Business A Division of Thomson Learning 22 Degree of Care Bailor’s Sole Benefit Mutual Benefit Bailee’s Sole Benefit Slight Reasonable Great

23. © 2004 West Legal Studies in Business A Division of Thomson Learning 23 Rights and Duties of the Bailee Right To Possess.  Bailee may acquire or use property temporarily. Title does not pass. Right to Use Bailed Property. Rights of Compensation.  Reimbursed for costs or services as provided in the agreement. Right to Limit Liability. Right To Possess.  Bailee may acquire or use property temporarily. Title does not pass. Right to Use Bailed Property. Rights of Compensation.  Reimbursed for costs or services as provided in the agreement. Right to Limit Liability.

24. © 2004 West Legal Studies in Business A Division of Thomson Learning 24 Rights and Duties of Bailee [2] Duty to Return bailed property in same condition to Bailor. Bailee may liable for conversion and/or negligence. Case 47.3: Sunbelt Cranes Construction and Hauling, Inc. v. Gulf Coast Erectors, Inc. (2002). Case 47.4: Lembaga v. Cace Trucking (1999). Duty to Return bailed property in same condition to Bailor. Bailee may liable for conversion and/or negligence. Case 47.3: Sunbelt Cranes Construction and Hauling, Inc. v. Gulf Coast Erectors, Inc. (2002). Case 47.4: Lembaga v. Cace Trucking (1999).

25. © 2004 West Legal Studies in Business A Division of Thomson Learning 25 Rights and Duties of the Bailor Right to have property protected and used as agreed. Right to have property back at end of bailment with service or repair done properly. Right to have the Bailee not convert. Right to not be bound to limitation of liability unless Bailor knows. Duty to Provide safe goods:  Mutual Benefit Bailment: free from known or hidden defects; Sole Benefit of Bailee: notify if any known defect. Right to have property protected and used as agreed. Right to have property back at end of bailment with service or repair done properly. Right to have the Bailee not convert. Right to not be bound to limitation of liability unless Bailor knows. Duty to Provide safe goods:  Mutual Benefit Bailment: free from known or hidden defects; Sole Benefit of Bailee: notify if any known defect.

26. © 2004 West Legal Studies in Business A Division of Thomson Learning 26 Termination of Bailments Mutual agreement of both parties. Demand by either party. Completion of the purpose of the bailment. Act by the bailee that is inconsistent with the terms of the bailment. Operation of law. Mutual agreement of both parties. Demand by either party. Completion of the purpose of the bailment. Act by the bailee that is inconsistent with the terms of the bailment. Operation of law.

27. © 2004 West Legal Studies in Business A Division of Thomson Learning 27 § 8: Special Types of Bailments Documents of Title and Article 7. Negotiability of Documents of Title.  Possessor of document is entitled to receive, hold, and dispose of the document and the goods it covers.  A good faith purchaser of the document may acquire a greater right to the document and goods it covers than the transferor had. Documents of Title and Article 7. Negotiability of Documents of Title.  Possessor of document is entitled to receive, hold, and dispose of the document and the goods it covers.  A good faith purchaser of the document may acquire a greater right to the document and goods it covers than the transferor had.

28. © 2004 West Legal Studies in Business A Division of Thomson Learning 28 Common Carriers Publicly licenses to provide transportation services to general public. Common Carriers are strictly liable for damages except if the damages caused by:  An act of God.  An act of the public enemy.  An order of the public authority.  An act of the shipper.  The inherent nature of the goods. Shipper’s loss. Connecting Carriers. Publicly licenses to provide transportation services to general public. Common Carriers are strictly liable for damages except if the damages caused by:  An act of God.  An act of the public enemy.  An order of the public authority.  An act of the shipper.  The inherent nature of the goods. Shipper’s loss. Connecting Carriers.

29. © 2004 West Legal Studies in Business A Division of Thomson Learning 29 Warehouses and Innkeepers Warehouses:  Owe duty of reasonable care.  Can’t exculpate, can limit. Innkeepers:  Owe duty of strict liability, modified by state statutes; if innkeeper provides safe and notifies guests.  If parking area provided and innkeeper accepts bailment, then may be liable. Warehouses:  Owe duty of reasonable care.  Can’t exculpate, can limit. Innkeepers:  Owe duty of strict liability, modified by state statutes; if innkeeper provides safe and notifies guests.  If parking area provided and innkeeper accepts bailment, then may be liable.

30. © 2004 West Legal Studies in Business A Division of Thomson Learning 30 Law on the Web Bailments at ‘LectLaw.com Legal Research Exercises on the Web. Bailments at ‘LectLaw.com Legal Research Exercises on the Web.