HOW BAILMENT WORKS

Bailment is an agreement in common law that comes into effect when someone entrusts an asset to someone else for safekeeping.1 As previously noted, the bailor is the owner of the asset and temporarily relinquishes it to the bailee. Although the bailor gives possession to the bailee, the bailor retains legal ownership of the asset. Bailments only start once the property is in the hands of the bailee.2

The bailor is generally not entitled to use the property while the bailee holds it. Leaving your car with a valet is a common form of bailment, while parking in an unattended garage is a lease or the license of a parking space, as the garage cannot show intent to possess the car.

Bailment is distinct from leasing, where ownership remains with the lessor but the lessee is allowed to use the property.

Bailments are legal courses of action independent of contract or tort. To create a bailment, the bailee must both intend to possess, and actually physically possess, the bailable chattel.1 The bailor typically receives a written contract, a receipt, or a chit, which is what you get when you drop your coat off at a coat check. By taking possession of the property, the bailee agrees to guard it using reasonable care. Legal disputes can arise if anything happens to the asset while in the bailee’s possession.

Some common applications for bailment include:

  • Items held by a dry cleaner
  • Valet parking
  • Warehousing
  • Self-storage
  • The shipping of goods3

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