Business Law and the Business Law and the Regulation of BusinessRegulation of Business

Chapter 50: Bailments and Documents of TitleChapter 50: Bailments and Documents of Title

Business Law and the Business Law and the Regulation of BusinessRegulation of Business

Chapter 50: Bailments and Documents of TitleChapter 50: Bailments and Documents of Title

ByBy

Richard A. MannRichard A. Mann

&&

Barry S. RobertsBarry S. Roberts

Topics Covered in this ChapterTopics Covered in this Chapter

A. BailmentsA. Bailments

B. Documents of TitleB. Documents of Title

Bailments Bailments

DefinitionDefinition - the temporary transfer of - the temporary transfer of personal property by one party (the personal property by one party (the bailor) to another (the bailee)bailor) to another (the bailee)..

Essential ElementsEssential Elements – Delivery of PossessionDelivery of Possession– Personal PropertyPersonal Property– Possession, but Not Ownership, for a Possession, but Not Ownership, for a

Determinable TimeDeterminable Time– Restoration of Possession to the BailorRestoration of Possession to the Bailor

Classification of BailmentsClassification of Bailments

For the Bailor's Sole BenefitFor the Bailor's Sole Benefit For the Bailee's Sole BenefitFor the Bailee's Sole Benefit For Mutual BenefitFor Mutual Benefit - - includes ordinary includes ordinary

commercial bailments.commercial bailments.

Bailee’s DutiesBailee’s Duties

Bailee's Duty to Exercise Due CareBailee's Duty to Exercise Due Care - - the the bailee must exercise reasonable care to bailee must exercise reasonable care to protect the safety of the property and to protect the safety of the property and to return it to the proper person.return it to the proper person.

Bailee's Absolute LiabilityBailee's Absolute Liability - - occurs when (1) occurs when (1) the parties so agree; (2) the custom of the the parties so agree; (2) the custom of the industry requires the bailee to insure the industry requires the bailee to insure the property against the risk in question, but he property against the risk in question, but he fails to do so; or (3) the bailee uses the bailed fails to do so; or (3) the bailee uses the bailed property in an unauthorized manner.property in an unauthorized manner.

Bailee’s RightsBailee’s Rights

Bailee's Right to Limit LiabilityBailee's Right to Limit Liability - - certain bailees are not permitted to limit certain bailees are not permitted to limit their liability for breach of their duties, their liability for breach of their duties, except as provided by statute.except as provided by statute.

Bailee's Right to CompensationBailee's Right to Compensation - - bailee is entitled to reasonable bailee is entitled to reasonable compensation for work or services compensation for work or services performed on the bailed goods.performed on the bailed goods.

Bailor's DutiesBailor's Duties

IIn bailment for sole benefit of bailee, the n bailment for sole benefit of bailee, the bailor warrants that she is unaware of bailor warrants that she is unaware of any defects; in all other bailments, the any defects; in all other bailments, the bailor has a duty to warn of all known bailor has a duty to warn of all known defects and all defects she should defects and all defects she should discover upon a reasonable inspection.discover upon a reasonable inspection.

Duties in a BailmentDuties in a Bailment

Type of BailmentBailee’s Duty ofCare Bailor’s Duty

For sole benefit ofbailor

Slight care To warn of defects ofwhich she knew or shouldhave known

For sole benefit ofbailee

Utmost care To warn of known defects

For mutual benefit Ordinary care To warn of defects ofwhich she knew or shouldhave known

Special Types of BailmentsSpecial Types of Bailments

PledgePledge - - security interest by possession.security interest by possession. WarehouserWarehouser - - storer of goods for pay; must storer of goods for pay; must

exercise reasonable care to protect the exercise reasonable care to protect the goods and deliver them to the proper person.goods and deliver them to the proper person.

SafeSafe DepositDeposit BoxesBoxes CarrierCarrier ofof GoodsGoods - - transporter of goods; a transporter of goods; a

common carrier is an extraordinary bailee, common carrier is an extraordinary bailee, while a private carrier is an ordinary bailee.while a private carrier is an ordinary bailee.

InnkeeperInnkeeper - - hotel or motel operator; is an hotel or motel operator; is an extraordinary bailee except as limited by extraordinary bailee except as limited by statute or case law.statute or case law.

Documents of Title Documents of Title

DefinitionDefinition - an instrument evidencing - an instrument evidencing ownership of the document and the ownership of the document and the goods it covers.goods it covers.

TypesTypes– Warehouse ReceiptWarehouse Receipt - - receipt issued by receipt issued by

person storing goods.person storing goods.– Bill of LadingBill of Lading - - document issued to the document issued to the

shipper by the carrier (1) as a receipt for shipper by the carrier (1) as a receipt for the goods, (2) as evidence of their carriage the goods, (2) as evidence of their carriage contract, and (3) as a document of title.contract, and (3) as a document of title.

NegotiabilityNegotiability

A document of title is negotiable if, by its A document of title is negotiable if, by its terms, the goods are to be delivered to terms, the goods are to be delivered to bearer or to the order of a named bearer or to the order of a named person.person.

Due NegotiationDue Negotiation - - transfer of a transfer of a negotiable document in the regular negotiable document in the regular course of business to a holder, who course of business to a holder, who takes in good faith, for value, and takes in good faith, for value, and without notice of any defense or claim.without notice of any defense or claim.

Negotiability Negotiability

Rights Acquired in the Absence of Rights Acquired in the Absence of Due NegotiationDue Negotiation - transferee acquires - transferee acquires all the rights the transferor had.all the rights the transferor had.

WarrantiesWarranties - a person who negotiates - a person who negotiates or transfers a document of title for or transfers a document of title for value, other than a collecting bank or value, other than a collecting bank or other intermediary, incurs certain other intermediary, incurs certain warranty obligations unless otherwise warranty obligations unless otherwise agreed.agreed.

DocumentsDocuments

For a person to obtain title to goods by For a person to obtain title to goods by negotiation of a document, the goods negotiation of a document, the goods must have been delivered to the issuer must have been delivered to the issuer of the document by the owner of the of the document by the owner of the goods or by one to whom actual or goods or by one to whom actual or apparent authority is entrusted by the apparent authority is entrusted by the owner.owner.

Lost or Missing Documents of TitleLost or Missing Documents of Title - - claimant may apply to a court for claimant may apply to a court for issuance of a substitute document.issuance of a substitute document.