Key Takeaways

  • Bailment involves transferring possession—not ownership—of goods to another party for a specific purpose.
  • The relationship is between a bailor (owner) and bailee (custodian), and it may arise with or without a written contract.
  • Types of bailment include those for mutual benefit, benefit of the bailor, or benefit of the bailee.
  • Duties of bailees include care and return of goods; failure may result in liability.
  • Bailment ends when the agreed term expires, the goods are returned, or the purpose is fulfilled.
  • Special types include involuntary bailment and constructive bailment.
  • Bailments occur in many real-world settings, such as dry cleaning, valet services, and storage facilities.

Bailment of goods refers to temporarily transferring the possession, but not necessarily the ownership, of property from one entity to another on a temporary basis.

Definition of Bailment

"Bailment" is a term that refers to the act of transferring personal property from one person to another for the purpose of safekeeping or to allow the person the property is being transferred the ability to control or use the property on a temporary basis. Bailment is a specific type of contractual agreement. A contract does not need to be signed for this agreement to be in effect. There are two people involved in bailment:

  • The "bailee," or the person who is receiving the transferred property.
  • The "bailor," or the person transferring the property.

Two things are also worth noting:

  • The bailee is only in possession of the property to a specified time period.
  • The bailor still owns the property while the bailee possesses it.

Put another way, the definition of bailment is delivering property into temporary possession and control to another person for some reason. Bailment should not be confused with a sale of property contract, even if the bailment agreement includes financing from a seller or making payments on the property. The main difference is this:

  • Sale of property contracts intend to transfer ownership to the property's buyer.
  • Bailment does not intend to transfer ownership, which is not to be confused with possession.

For bailment to be in effect, the bailee needs to:

  • Intend to possess the property.
  • Have actual possession of the property.

Further, the bailor must:

  • Intend to have the property returned to him or her once the specified time period has elapsed.
  • Or, intend the property be returned after the purpose for which it was transferred has been fulfilled.

Consider this example. A man and his wife arrive at a fancy dining venue. They get out of their car and hand the keys to a valet, expecting him to park the car for them. In this scenario, it's obvious the intention is for the valet to temporarily possess the car. It should be equally as obvious that the couple expects to get their car back when they're done eating. Even though the valet possesses the car, and he is responsible for taking care of it while he does possess it, the couple still owns the car and expects to get it back once the intended purpose has been fulfilled.

Legal Elements of a Bailment

For a bailment to be legally valid, several elements must be present:

  • Delivery of Possession: The bailor must physically or constructively deliver the goods to the bailee.
  • Acceptance by Bailee: The bailee must knowingly accept the property, taking possession with intent to safeguard or use it for a specific purpose.
  • Mutual Agreement: While a written contract is not always necessary, there must be mutual understanding of the purpose and conditions of the bailment.
  • Return Obligation: The bailee must return the property (or dispose of it according to the bailor’s instructions) after the purpose is served or the time expires.

Without these elements, a court may not recognize a bailment relationship under the law.

Reasons for Using Bailment

Bailment usually happens without the existence of a written contract. This means there are a number of scenarios in which the law might recognize that bailment exists. Some of these potential scenarios can include:

  • A bailment that exists with a mutual benefit for both involved parties.
  • A bailment that exists only to benefit the bailor.
  • A bailment that exists only to benefit the bailee.

Bailment that can benefit both parties might include a scenario in which one person leaves his or her car with another person, expecting repairs to be completed on the vehicle. In this case, the person leaving the car is the bailor, and the person fixing the car is the bailee. This is mutually beneficial because the bailor expects to get his or her car fixed and the bailee expects to be paid for fixing it.

Bailment that benefits only the bailor might include a scenario in which somebody leaves a valuable item, such as an expensive piece of jewelry, with somebody else for the purpose of safekeeping. The person leaving the jewelry is the bailor, and the person keeping it is the bailee. In this scenario, if the bailee is not expecting any compensation for keeping the jewelry safe, the bailment benefits only the bailor.

Bailment that benefits only the bailee could be an instance in which one person allows another to borrow something. Say, for example, you allow your friend to borrow your car for the day, and you're not expecting anything in return. You would be the bailor, and your friend would be the bailee. Because you're not expecting any sort of compensation for allowing your friend to use your car, only the bailee benefits from the bailment in this scenario.

Real-Life Examples of Bailment

Bailments occur frequently in everyday life. Examples include:

  • Dry Cleaners: A customer (bailor) leaves clothing with a cleaner (bailee), expecting it to be cleaned and returned.
  • Valet Parking: The vehicle owner hands over keys to a valet; this is a mutual benefit bailment if the service is paid.
  • Storage Units: Renting a unit for storing belongings creates a commercial bailment, often governed by contract terms.
  • Repair Services: Handing over a watch to a jeweler for repair forms a bailment.
  • Borrowing Items: Lending a friend your bike for a day, without charge, is a gratuitous bailment.

Each scenario demonstrates temporary possession with the intent to return the goods to their rightful owner.

Special Types of Bailment

There are several variations of bailment recognized by law:

  • Involuntary Bailment: Arises when someone unintentionally comes into possession of another's property (e.g., lost wallet). The finder becomes a bailee and must use reasonable care.
  • Constructive Bailment: Occurs without a formal agreement—typically arising from circumstances where someone takes possession for another's benefit, like when someone takes a neighbor's package to prevent theft.
  • Pledged Bailment: When goods are held as security for a debt or obligation.
  • Warehousing Bailment: Storage companies holding property for a fee act as bailees under a mutual benefit bailment.

Termination of Bailment

Bailment can end under several circumstances:

  • Fulfillment of Purpose: Once the reason for the bailment is completed (e.g., repaired car returned), the bailment ends.
  • Expiration of Time: If the agreement specifies a time frame, bailment ends when time runs out.
  • Demand by Bailor: In gratuitous bailments, the bailor may demand the return of goods at any time.
  • Destruction or Loss of Goods: If the goods are lost or destroyed (without bailee negligence), the bailment terminates.
  • Mutual Agreement: The parties may agree to end the bailment early.

Duties and Liabilities of the Bailee

A bailee is legally bound to perform certain duties:

  • Duty of Care: A bailee must exercise reasonable care over the property. The level of care varies:
    • Slight care if only the bailor benefits.
    • Extraordinary care if only the bailee benefits.
    • Ordinary care if both benefit (most commercial bailments).
  • Return of Goods: The bailee must return the goods in the agreed condition. Failure to return or negligent damage may lead to liability.
  • No Unauthorized Use: The bailee may not use the property for any purpose not agreed upon.
  • Burden of Proof: If the goods are damaged or lost, the bailee may bear the burden of proving they were not negligent.

Frequently Asked Questions

  1. Does a bailment require a written contract?
    No, a bailment can be formed verbally or through conduct, as long as delivery and acceptance of the property occurs with the intent to return it.
  2. Can a bailee be held liable for lost or damaged goods?
    Yes, if the bailee is negligent or uses the property beyond the agreed purpose, they may be liable for damages.
  3. What is the difference between a bailment and a lease?
    A lease transfers the right to use property for a set period, often with compensation. A bailment does not transfer ownership or permanent use rights.
  4. Can a bailor retrieve goods early?
    In gratuitous bailments, the bailor typically has the right to demand return at any time. In commercial bailments, terms may limit early retrieval.
  5. Is leaving something in a friend’s garage a bailment?
    It can be, especially if the friend accepts responsibility for safekeeping. However, if it was left without consent or knowledge, bailment may not apply.

If you need help with bailment of goods, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies such as Google, Menlo Ventures, and Airbnb.