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.

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.

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