1. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 1 Personal Property, Bailments, and Insurance Chapter 23 BUSINESS LAW TODAY Essentials 9 th Ed. Roger LeRoy Miller - Institute for University Studies, Arlington, Texas Gaylord A. Jentz - University of Texas at Austin, Emeritus

2. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2 Learning Objectives  What is real property? What is personal property?  What is the difference between joint tenancy and tenancy in common?  What are the three elements necessary for an effective gift?  What are the three elements of a bailment?  What is an insurable interest? When must an insurable interest exist – at the time the insurance policy is obtained, at the time the loss occurs, or both?

3. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3  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. Difference Between Real and Personal Property. Ownership rights in each. Ownership rights in each.  Acquiring Ownership of Personal Property.  Laws Governing Mislaid, Lost, or Abandoned Property. Introduction

4. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 4  Property ownership is viewed as a “bundle of rights”, including the: Right to possess. Right to possess. Right to sell. Right to sell. Right to give. Right to give. Right to lease. Right to lease. Right to destroy. Right to destroy. Property Ownership

5. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 5  Owner owns the entire “bundle of rights”.  Fee simple gives the owner the maximum possible estate or right of ownership of real property, continuing forever.  Chapter 36 will deal with realty estates. Fee Simple

6. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 6  A and B own an undivided interest in the property.  Upon B’s death interest passes to B’s heir, “C”.  The new owners of the property are A and C. AB C Tenancy in Common X

7. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 7 Joint Tenancy A and B own a Joint Tenant interest in property.A and B own a Joint Tenant interest in property. Upon B’s death, B’s interest automatically passes to A, the surviving joint tenant.Upon B’s death, B’s interest automatically passes to A, the surviving joint tenant. AB X

8. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 8 Community Property  Community Property (limited number of states) Property acquired by couple during their marriage is owned as an undivided ½ interest in property (real and personal). Property acquired by couple during their marriage is owned as an undivided ½ interest in property (real and personal).

9. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9 Real Property Ownership

10. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 10  Possession. Capture of wild animals (wild animals belong to no one). Capture of wild animals (wild animals belong to no one). Finding of abandoned property. Finding of abandoned property. Adverse Possession. Adverse Possession.  Production. Writers, inventors, manufacturers, and others who produce personal property acquire title to it. Writers, inventors, manufacturers, and others who produce personal property acquire title to it. Acquiring Ownership of Personal Property

11. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 11  Voluntary transfer of property ownership from Donor (owner) to Donee (recipient) for no consideration.  Requirements: Donative Intent. Donative Intent. Delivery—actual or “constructive” (symbolic, such as keys to car). Relinquishing Dominion and Control: Donor must give up complete control or dominion. Delivery—actual or “constructive” (symbolic, such as keys to car). Relinquishing Dominion and Control: Donor must give up complete control or dominion. CASE 23.1 In re Estate of Piper (1984). There was no evidence of actual delivery of the rings to plaintiff Kaufmann. Thus the rings remained in the estate of Piper. CASE 23.1 In re Estate of Piper (1984). There was no evidence of actual delivery of the rings to plaintiff Kaufmann. Thus the rings remained in the estate of Piper. Acceptance by donee. Acceptance by donee. Gifts

12. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 12 Types of Gifts  Three types Intervivos—while donor is living. Intervivos—while donor is living. Causa Mortis: -- made by donor in contemplation of imminent death. Causa Mortis: -- made by donor in contemplation of imminent death. Testamentary – after death, by will/inheritance. Testamentary – after death, by will/inheritance.

13. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 13 Acquiring Ownership of Personal Property  Accession. Someone adds value to a piece of personal property by use of either labor or materials. Someone adds value to a piece of personal property by use of either labor or materials.  Confusion. Commingling so that a person’s personal property cannot be distinguished from another’s. 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. Fungible goods consists of identical particles such as oil or grain.

14. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 14  Mislaid Property: Voluntary placed somewhere, then inadvertently forgotten. Finder is steward for true owner.  Lost Property: Involuntarily left. Property owner acquires title against whole world, except for true owner. Finder must return to true owner or be liable for conversion.  Abandoned Property: Discarded by true owner with no intention of recovering. Acquires title against all the world, including the original owner. Mislaid, Lost, and Abandoned Property

15. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 15  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. Bailments

16. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 16  Personal Property. (Tangible or Intangible--but not persons or realty.)  Delivery of Possession. Bailee given exclusive control or possession. Bailee given exclusive control or possession. Actual (physical) or constructive delivery. Actual (physical) or constructive delivery. Bailee must knowingly accept (Bailee must intend to exercise control over chattel). Bailee must knowingly accept (Bailee must intend to exercise control over chattel). “Involuntary” Bailments. “Involuntary” Bailments.  Bailment Agreement. Express or Implied. Express or Implied. Elements of a Bailment

17. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 17  Bailment for the sole benefit of Bailor: A gratuitous Bailment; Bailee owes Bailor a low duty of care, liable only for gross negligence. A gratuitous Bailment; Bailee owes Bailor a low duty of care, liable only for gross negligence.  Bailment for the sole benefit of Bailee: Bailee owes Bailor a high duty of care and is liable for even slight negligence. 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. Each party owes the other a reasonable duty of care. Ordinary Bailments: Duty of Care

18. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 18 Bailment for Benefit of Bailor Bailment for Benefit of Bailee Low Duty of Care High Duty of Care Reasonable Care Mutual Benefit Bailments: Bailee Duty of Care

19. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 19  Right To Possess. Bailee may acquire or use property temporarily. Title does not pass. 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. Reimbursed for costs or services as provided in the agreement.  Right to Limit Liability. Rights of the Bailee

20. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 20 Duties of Bailee  Duty to return bailed property in same condition to bailor, or bailee may liable for conversion and/or negligence.  CASE 23.2 LaPlace v. Briere. (2009). Presumption of negligence occurs when bailed property is damaged under the bailee’s control; can be rebutted by proof of bailee using reasonable and ordinary care.

21. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21  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. Mutual Benefit Bailment: free from known or hidden defects; Sole Benefit of Bailee: notify if any known defect. Rights and Duties of Bailor

22. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 22  Common Carriers are strictly liable for damages except if the damages caused by: An act of God. An act of God. An act of the public enemy. An act of the public enemy. An order of the public authority. An order of the public authority. An act of the shipper. An act of the shipper. The inherent nature of the goods. The inherent nature of the goods. Special Types of Bailments: Common Carriers

23. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 23  Warehouses: Issue documents of title (warehouse receipts) subject to contractual negotiations. Owes duty of reasonable care. Issue documents of title (warehouse receipts) subject to contractual negotiations. Owes duty of reasonable care. Can’t exculpate, can limit. Can’t exculpate, can limit.  Innkeepers: Owe duty of strict liability, modified by state statutes; if innkeeper provides safe and notifies guests. 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. If parking area provided and innkeeper accepts bailment, then may be liable. Special Bailments: Warehouses and Innkeepers

24. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 24 Insurance  Insurance is a contractual arrangement for transferring and allocating risk.  Risk. Prediction concerning potential loss based on known and unknown factors. Prediction concerning potential loss based on known and unknown factors.  Risk Management. Involves the transfer of certain risks from the individual to the insurance company by a contractual agreement. Involves the transfer of certain risks from the individual to the insurance company by a contractual agreement.  Classifications of Insurance. All risk insurance (added terrorism). All risk insurance (added terrorism).

25. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 25 Insurance Terminology  Policy (Insurance contract).  Premium is the consideration to be paid to the insurer.  Underwriter (usually an insurance company).  Broker v. Agent.

26. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 26 Insurable Interest  A person can insure anything in which he or she has an insurable interest.  Types of insurable interest: Life. Life. Property. Property.

27. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 27 The Insurance Contract  Governed by the general principles of contract law, and regulated by the state. Application is an offer, which insurance company can either reject or accept. Application is an offer, which insurance company can either reject or accept. Acceptance sometimes conditional.Acceptance sometimes conditional. Need consideration. Need consideration. Parties need capacity. Parties need capacity.

28. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 28 The Insurance Contract   Application For Insurance.   Effective Date.   Provisions and Clauses.   Interpreting Provisions of an Insurance Contract.   Cancellation.   Basic Duties and Rights.   Defenses Against Payment. 

29. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 29 Insurance Contract: Application  Filled in application attached to the policy and made a part of the contract.  Misstatements or misrepresentation can void a policy, specially if company can show it would not have issued policy if it had known the facts.

30. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 30  Broker is agent for the applicant.  Agent is agent for the insurance company. He can issue a binder, if some consideration is paid, which will immediately bind the insurance company, depending on certain conditions being met.  Parties may agree contract will not be effective until policy is issued and delivered or sent to applicant.  Parties may agree policy will be binding, not be effective, until first premium paid, or physical exam passed. Insurance Contract: Effective Date

31. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 31 Insurance Contract: Coinsurance Clauses  If owner insures her property for at least 80% of its value, owner will be able to recover up to the face value of the policy.  If owner insures for less than 80%, owner will be responsible for a proportionate share of the loss. Amount of insurance Recovery Coinsurance percentage = Percentage (80%) x Property value

32. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 32 Insurance Clauses

33. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 33  Cancellation. Insured can cancel policy at any time, and the insurer can cancel according to terms of policy. Insured can cancel policy at any time, and the insurer can cancel according to terms of policy. Insurer must give written notice of cancellation. Insurer must give written notice of cancellation.  Good Faith Obligations. CASE 23.3 Woo v. Fireman’s Fund Insurance Co. (2007). Insurance company had a contractual duty to cover the dentist, even if his work was a ‘practical joke’ on his patient. CASE 23.3 Woo v. Fireman’s Fund Insurance Co. (2007). Insurance company had a contractual duty to cover the dentist, even if his work was a ‘practical joke’ on his patient.  Bad Faith Actions. Tort action. When insurance fails to reasonably settle within policy limits. Tort action. When insurance fails to reasonably settle within policy limits. Insurance Contract: Good Faith Obligations

34. © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 34  Insurance company can raise any of the defenses that would be valid in any ordinary action or contract: Fraud, misrepresentation. Fraud, misrepresentation. Not if information given was optional.Not if information given was optional. Not incorrect statement of age.Not incorrect statement of age. Concurrent causation doctrine. Concurrent causation doctrine. Defenses Against Payment