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Bailment describes a legal relationship where physical possession of personal property (chattels) is transferred from one person (the 'bailor') to another person (the 'bailee') who subsequently holds possession of the property. However, it is distinguished from a contract of sale or a gift of property, as it only involves the transfer of possession and not its ownership. In addition, unlike a lease or rental, where ownership remains with the leasor but the lessee is allowed to use the property, the bailor 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 in a parking garage. However, it arises in many other situations, including terminated leases of property, warehousing (including store-it-yourself). No matter how a bailment arises, the bailor is expected to take reasonable precautions to safeguard the property. Moreover, a bailee may be liable in conversion if they do not return the property on the request of the bailor, or if they use the property without permission of the bailor.
Bailment can arise in a number of situations, and is often described by the type of relationship that gave rise to the bailment. The common distinctions are:
- Voluntary v. Involuntary. In a voluntary bailment, the bailor agrees to accept responsibility for possession of the goods. In an involuntary bailment, the bailor has possession of the goods without intention to do so. A common situation that creates involuntary bailment is when landlord locks someone out of their apartment for non-payment of rent. The landlord may not do as he wishes with the personal property inside the apartment, and in most jurisdictions must hold it safe for the tenant to pick-up within a reasonable time.
- For consideration v. for no consideration. If a person agrees to accept a fee or other good consideration for holding possesion of goods, they are generally held to a higher standard of care than a person who is doing so without being paid.
- Fixed term v. indefinite term. A bailor who leaves property for a fixed term is deemed to have abandoned the property if it is not removed at the end of the term. However, if there is no clear term of bailment agreed upon, the goods cannot be considered abandoned unless the bailor is given notice that the bailee wishes to give up possession of the goods.
A constructive bailment is created when the bailee receives and accepts a symbol of the property (if you asked to borrow your neighbors truck and accepted and received the keys, you would be entering into a constructive bailment for the truck).
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