19 - 148 - 1 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Chapter 47 Personal Property and Bailment Business Law Legal, E-Commerce,

© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 148 - 1

Chapter 47Personal Property and Bailment

Business LawLegal, E-Commerce, Ethical, and International

Environments


Property

• There are two kinds of property:

1. Real property which includes land and property that is permanently attached to it, and

• Buildings, trees, soil, minerals, timber, and plants

2. Personal property which consists of everything that is not real property.


Personal Property• Tangible Property – All real

property and physically defined personal property.– Buildings, goods, animals and

minerals.• Intangible Property – Rights that

cannot be reduced to physical form.– Stock certificates, certificates

of deposit, bonds, and copyrights


Acquiring Ownership in Personal Property

• Property can be acquired by:– Possession or capture– Purchase or production– Gift– Will or inheritance– Accession– Confusion– Divorce


Ownership Acquired By Possession or Capture

• A person can acquire ownership in unowned personal property by taking possession of it or capturing it.


Acquiring Ownership by Purchase or Production

• Purchasing the property from its rightful owner.

• Producing a finished product from raw materials and supplies.


Acquiring Ownership by Gift

• A voluntary transfer of title to property without payment of consideration by the donee.

• Three elements necessary to be a valid gift:

1. Donative Intent2. Delivery3. Acceptance


Gifts• Types of gifts:

– Gifts inter vios are made during a donor’s lifetime that are irrevocable present transfers of ownership.

– Gifts causa mortis are made in anticipation of death.

– Uniform Gifts to Minors Act and the Revised Uniform Gifts to Minors Act establish procedures to make irrevocable gifts to minors.


Ownership Acquired by Will or Inheritance

• Will – gift to beneficiaries named in a will.

• Inheritance – heirs stipulated in an inheritance statute.


Ownership Acquired by Accession

• Occurs when the value of personal property increases because it is added to or improved by natural or manufactured means.


Ownership Acquired by Confusion

• Occurs when fungible goods are commingled.

• The owners share title to the commingled goods in proportion to the amount of goods contributed.


Ownership Acquired by Divorce

• When a marriage is dissolved by a divorce, the parties obtain certain rights in the property of the marital estate.


Mislaid Property• Property is mislaid when its

owner voluntarily places the property somewhere and then inadvertently forgets it.

• The owner of the premises where the personal property is mislaid is entitled to take possession of the property against all except the rightful owner.


Lost Property• Personal property that an owner

leaves somewhere because of negligence, carelessness, or inadvertence.

• The finder of lost property obtains title to the found property against everyone except the true owner.


Estray Statutes• Many states have enacted estray

statutes that give a finder of mislaid or lost property clear title to the property if certain requirements are met:– Reporting the find to an

appropriate government agency.

– Advertising the lost property– The owner not claiming the

property within a stated time period (e.g., one year).


Abandoned Property• Property is classified as

abandoned if:– An owner discards the

property with the intent to relinquish his or her rights in it, or

– An owner of mislaid property gives up any further attempts to locate it.

• Anyone who finds abandoned property acquires title to it.


Bailments• Occurs when the owner of

personal property transfers the property to another to be held, stored, delivered, or for some other purpose.

• Title to the property does not transfer.

• Bailor – the owner of property in bailment.

• Bailee – a holder of goods who is not a seller or a buyer.– A warehouse or common carrier


Parties to a Bailment

BailorBailor BaileeBaileeGoods transferred for Goods transferred for

safekeeping, storage, or safekeeping, storage, or transportationtransportation


Elements Necessary to Create a Bailment

• Personal Property– Only personal property can be

bailed.

• Delivery of Possession– The bailee has exclusive

control over the personal property.

– The bailee must knowingly accept the personal property.


Elements Necessary to Create a Bailment (continued)

• Bailment Agreement– A bailment may be either

express or implied.– Express bailments can be

either written or oral.– Under the Statute of Frauds, a

bailment must be in writing if it is for more than one year.

– A bailment may be implied from the circumstances.


Ordinary Bailments1. Bailments for the sole benefit

of the bailor2. Bailments for the sole benefit

of the bailee3. Bailments for the mutual

benefit of the bailor and bailee


Ordinary Bailee’s Duty of Care

Type of Bailment Duty of Care Owed by Bailee Bailee Liable to Bailor for

For the sole benefit of the bailor Slight Gross negligence

For the sole benefit of the bailee Great Slight negligence

For the mutual benefit of the bailor and bailee

Ordinary Ordinary negligence


Duration and Termination of Bailments

• Bailment for a fixed term- A bailment that terminates at the end of the term or sooner by mutual consent of the parties.

• Bailment at will- A bailment without a fixer term; can be terminated at any time by either party.


Special Bailments

Common CarriersCommon Carriers

Warehouse Warehouse CompaniesCompanies

InnkeepersInnkeepers


Warehouse Company• Warehouser is bailee engaged in

storing property for compensation.

• Owes duty of reasonable care.– Liable only for loss from their own

negligence.– Can limit dollar amount of loss if

offer bailor opportunity to increase limit at an additional charge.

• Warehouse receipt issued by warehouser indicate lien on stored items for expenses of storage.


Common Carrier• Common carriers offer

transportation services to public.– Mutual benefit of both parties

• Goods delivered to them by consignor or shipper.

• Held to duty of strict liability– If goods are lost or damaged, carrier

is liable– Some exceptions– Can limit liability by offering bailor an

opportunity to purchase higher limit.

• Bill of lading is a document of title issued when goods are received.


Innkeeper• Held to the strict liability

standard• Most states have enacted

Innkeepers’ Statutes


Special Bailee’s Duty of CareType of Bailee Liability Limitation on

Liability

Common Carrier

Strictly liable except for:1. Act of god, act of a public enemy, order of the government, act of the shipper, inherent nature of the goods

May limit the dollar amount of liability by offering the bailor the right to declare a higher value for the bailed goods for an additional charge.

Warehouse Company

Ordinary negligence May limit the dollar amount of liability by offering the bailor the right to declare a higher value for an additional charge.


Special Bailee’s Duty of Care (continued)

Type of Bailee Liability Limitation on Liability

Innkeeper Strictly liable State statutes may limit the liability of an innkeeper for others’ rights


Documents of Title• Negotiable instruments

developed to represent the interests of the different parties in a transaction that uses storage or transportation between the parties.– Warehouse Receipts– Bills of Lading

• Article 7 of the UCC governs documents of title.


Warehouse Receipts• A written document issued by a

person who is engaged in the business of storing goods for hire.– e.g., warehouse company or

storage company• Often a preprinted form drafted

by the warehouseman.


Bill of Lading• Document of title that is issued

by a carrier when goods are received for transportation.

• Issued by:– Common carriers– Contract carriers– Freight forwarders– Other persons engaged in the

business of transporting goods for hire


Through Bill of Lading• A bill of lading that provides that

connecting carriers may be used to transport the goods to their destination.

• Original carrier that issued the bill of lading is liable for any damages or loss to the goods caused by the connecting carrier.