What is a Bailment?

What is bailment?

Bailment is a legal situation that arises in relation to the physical transfer of goods by the owner to someone else for a specific purpose until they are returned. The person physically transferring the goods is the ‘bailor’ and the person receiving them is the ‘bailee’. The principle is little known but, in reality, it often arises in practice.

For example, bailment arises where goods are supplied subject to a retention of title clause in the contract, and where an item is given to a delivery company to transfer the property to the customer.

It is crucial to understand that legal ownership of the property itself is not being transferred, only the physical possession of it. The bailor remains the legal owner of the property. The bailee possesses the property for a specific purpose and must return it to the bailee in accordance with the bailment agreement. Usually, the bailee is not permitted to use the goods for their own purposes.

Although the law does not precisely define possession, the basic characteristics are control and an intention to exclude others. Note that bailment only arises in relation to personal, tangible property – and not to land and buildings.

Is transferring possession of the goods always a bailment?

No, giving goods to someone else to be delivered onto a third party does not amount to a bailment. So where an employer gives items to an employee to be delivered to a third party, the employee only has custody of the goods and is not a bailee.

Bailment is a type of contractual relationship, but is distinguishable from similar types of contractual relationships, such as leasing, or depositing an item with a pawn broker.

What are the legal implications?

A bailee has a duty of care in respect of the bailed property. This is an objective test. The duty of care is higher where the bailment is for reward, or where the bailed property is very valuable or fragile. The bailee is under a duty to take reasonable care to ensure that the items are not lost, damaged or destroyed whilst in their possession.

If a bailee’s profession implies that they have a certain expertise, they will be liable if they fail to exercise their expertise accordingly. A rider, for instance, who took a horse out to show a prospective buyer was liable to the owner when he rode the horse onto wet turf and the horse subsequently fell and was injured.

However, negligence on the part of the bailor may negate the bailee’s liability. Where, for example, a tyre manufacture used a customer’s moulds to make tyres, but after termination of the, contract they were not told how to dispose of the moulds, the customer could not, five years later, demand the return of the moulds, which by then had been lost. The court implied a term in the contract that the customer would collect the moulds within six months of the contract terminating. Failure to do so had relieved the manufacturer of its obligations as bailees of the tyre moulds.

At the end of the bailment, the bailee must transfer the goods back to the bailor (unless there is good cause not to).

Can a bailment be delegated?

Yes, but delegation of bailed property by the bailee will depend on the nature of the bailment and the contract of bailment – it may not actually be permitted. However, if it can be delegeted, the delegate then becomes a bailee and owes a duty of care directly to the bailor.

When is it a bailment and not a licence?

Problems have arisen in distinguishing between a bailment and a licence, for instance, in the context of car parks. Whilst each case will depend on its own facts, generally speaking, a vehicle parked on land, with or without a charge, gives rise to a mere licence and not a bailment. Therefore, there would be no duty of care and liability for loss or damage. But leaving your car in the car park with a valet is considered bailment.

What is an involuntary recipient?

Sometimes, a person can become an involuntary recipient of goods in circumstances that give rise to a bailment. However, a person who receives goods against their will is unlikely to be under any duty to the goods or their owner – but they must not convert the goods either intentionally or negligently.

Receiving goods that have been unsolicited is covered by the Unsolicited Goods and Services Acts 1971 and 1975, and subsequent regulations (these do not apply to businesses). Where unsolicited goods have been sent out, fines can be imposed on anyone who demands payment for goods which they know to be unsolicited. But if the recipient gives notice to the sender to collect the goods, the recipient may keep the goods longer than 30 days.

Under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, you have a right to keep unsolicited goods delivered to you. In addition, you do not have to contact the business to tell it you have received such items.

However, goods sent out by mistake is not the same as being sent unsolicited goods. So if goods are sent to you instead of someone else, these are not unsolicited goods and you are an involuntary bailee. Or if you have ordered a grocery shop from Tesco and you are given an extra bag of items by mistake, these are not unsolicited. You must then make the goods available for collection at the cost of the business.