Bailment is a little known but often used legal relationship which frequently arises in a myriad of everyday circumstances.
Bailment arises when possession of property (specifically tangible movable chattels) is transferred to (or acquired by) someone who is not the owner (“the bailee”) who becomes subject to certain obligations in relation to the property, which are owed to their owner (“the bailor”). There is a primarily obligation to return the goods at the end of the period of the bailment, unless there is good cause not to do so. The bailee may also owe a duty of care to the bailor and must take reasonable care to ensure that the property is not lost, damaged or destroyed.
The bailor may owe duties to the bailee, including the duty to pay for any agreed service undertaken by the bailee or the duty to collect the goods within a reasonable time
There is a close relationship between bailment and contract. Bailment will often arise out of a contract between the bailor and the bailee. However, a contract is not essential for bailment.
The essence of bailment is the transfer of possession, not ownership. The following key concepts are indicative of bailment:-
- The bailee must be in possession of the goods
- There must have been a “voluntary assumption” of possession (i.e. the consent of the bailee)
- The bailee must be aware of the existence of the bailor
However, the creation of a bailment does not require the bailor to consent to possession.
There are, generally speaking, two classes of bailment:-
- Gratuitous bailment
- Bailments for valuable consideration
A gratuitous bailment arises where only one party is bound to the promises that were made on the transfer of possession, even where those promises are unsupported by contractual consideration. This form of bailment can include deposits, mandates and gratuitous loans for use.
A bailment for valuable consideration arises where there is reciprocal advantage to both bailee and bailor, which may include custody for reward, hire and leasing.
There is no difference between the two classes as far as the standard of care required of the bailee is concerned.