RIGHTS OF BAILMENT

Bailments come with certain rights for both parties. Bailors can expect that bailees will take care of their assets to the best of their ability, using the most reasonable amount of caution. After the relationship ends, bailors can expect to get their property back in its original state. If this isn’t possible, bailees must account for any actions that led to damage or loss.

Bailors have the right to end the agreement and to legal recourse, including compensatory damages, if the bailee can’t produce the asset when the agreement ends. Bailees, on the other hand, can expect to be compensated for their services, take action against any other parties that damage the asset, or can exercise liens if the bailor doesn’t live up to their end of the deal. All of these rights, of course, depend on the nature of the bailment.

The liabilities depend on the type of agreement as well. In service agreement bailments (where both parties benefit), bailees are required to take reasonable steps to ensure that the asset is well cared for or they may be responsible for damages that result from their negligence.2

The burden of responsibility lessens slightly when the bailor is the only one who benefits. In gratuitous bailments, the bailee has a responsible duty of care but is only liable if they are deemed to be grossly negligent in their duties. Constructive bailments, on the other hand, carry the highest standard of care and, therefore, the greatest liability to the bailee. That’s because they are the only ones who benefit from this relationship.2

When Does a Bailment End?

The most common expiration for a bailment takes place after the asset is transferred back to the bailor by the bailee.5 For instance, the bailment ends when you pick up your clothes from the dry cleaner’s shop. Bailments may end prematurely if the property is damaged or destroyed, or when one party in the relationship terminates the agreement in writing.5

What is an extraordinary bailment?

An extraordinary bailment occurs when bailees are charged with a piece of property under strict liability. Under this type of agreement, a bailee takes complete responsibility for the asset (and the return of it in its original state) regardless of the type of care they agreed to at the onset of the relationship.

What is a service agreement bailment?

Service agreement bailments benefit both parties in the relationship. The bailor gets the benefit of their asset being safeguarded by the bailee in exchange for payment. Parking your car in a secure lot, renting a safe deposit box, using a paid valet service, or dropping your clothes off at the cleaners are common examples of service agreement bailments.

Why are bailments important?

Bailments allow individuals to transfer possession of their property to someone else for safekeeping. Bailees may have more secure means when it comes to holding assets. This is especially true in the case of banks, which are trusted by their customers to hold and safeguard their money.

The Bottom Line

Bailment refers to a legal relationship established when one party (the bailor) temporarily transfers possession of property to another party (the bailee) for a specific purpose, without transferring actual ownership. In business, bailment can occur in a variety of situations, such as when goods are stored, transported, leased, or repaired by a third party. The bailee has a duty to take reasonable care of the bailed property and return it to the bailor once the purpose is fulfilled.

Understanding the concept of bailment and the associated rights and responsibilities is essential for businesses to protect their interests and mitigate potential liabilities.

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