Copyright © 2009 by Pearson Prentice Hall. All rights reserved. PowerPoint Slides to Accompany CONTEMPORARY BUSINESS AND ONLINE COMMERCE LAW 6 th Edition by Henry R. Cheeseman Chapter 37 Personal Property, Bailment, and Insurance

37 - 2Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Insurance (1 of 2) Insurance is defined as a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event. It is a means of transferring and distributing risk of loss. The risk of loss is pooled.

37 - 3Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Insurance (2 of 2) Insured Insured – the party who pays a premium to a particular insurance company for insurance coverage. nsurer Insurer – the insurance company that underwrites the insurance coverage. Policy Policy – the insurance contract. Premium Premium – the money paid to the insurance company.

37 - 4Copyright © 2009 by Pearson Prentice Hall. All rights reserved. There are two kinds of property: 1.Real Property 1.Real Property – includes land and property that is permanently attached to it i.e., buildings, trees, soil, minerals, timber, and plants 2.Personal Property 2.Personal Property – consists of everything that is not real property.

37 - 5Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Insurable Interest (1 of 2) A person who purchases insurance must have a personal interest in the insured item or person insurable interest If the insured does not have an insurable interest in the property being insured, the contract is treated as a wager and cannot be enforced. Ownership creates an insurable interest.

37 - 6Copyright © 2009 by Pearson Prentice Hall. All rights reserved. No-Fault Automobile Insurance An automobile insurance system where the driver’s insurance company pays for any injuries or death the driver and other covered persons suffer in an accident, no matter who caused the accident Provides coverage for medical expenses and lost wages Provides coverage for pain and suffering

37 - 7Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Types of Insurance (1 of 2) Life Insurance Whole life Term Universal life Double indemnity Key person Annuity Life Insurance Whole life Term Universal life Double indemnity Key person Annuity Health and Disability Insurance Health Disability Dental Health and Disability Insurance Health Disability Dental

37 - 8Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Types of Insurance (2 of 2) Fire and Homeowners Insurance Standard fire insurance policy Homeowners policy Personal articles Renters insurance Fire and Homeowners Insurance Standard fire insurance policy Homeowners policy Personal articles Renters insurance Automobile Insurance Collision Comprehensive Liability Medical payment Uninsured motorist Automobile Insurance Collision Comprehensive Liability Medical payment Uninsured motorist

37 - 9Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Personal Property Tangible Property Tangible Property – all real property and physically defined personal property. i.e., buildings, goods, animals and minerals Intangible Property Intangible Property – rights that cannot be reduced to physical form. i.e., stock certificates, certificates of deposit, bonds, and copyrights

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Acquiring Ownership of Personal Property (1 of 5) By Possession or Capture By Possession or Capture A person can acquire ownership in unowned personal property by taking possession of it or capturing it. By Purchase or Production By Purchase or Production Purchase Purchase – purchasing the property from its rightful owner. Production Production – producing a finished product from raw materials and supplies.

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Acquiring Ownership in Personal Property (2 of 5) By Gift By Gift A voluntary transfer of title to property without payment of consideration by the donee Three elements necessary to be a valid gift: 1. Donative intent 2. Delivery 3. Acceptance

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Acquiring Ownership in Personal Property (3 of 5) Gifts Gifts (continued) Types of gifts: Gifts inter vios Gifts inter vios – gifts made during a donor’s lifetime that are irrevocable present transfers of ownership. Gifts causa mortis Gifts causa mortis – gifts that are made in anticipation of death. Uniform Gifts to Minors Act Revised Uniform Gifts to Minors Act

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Acquiring Ownership in Personal Property (4 of 5) By Will or Inheritance By Will or Inheritance Will Will – gift to beneficiaries named in a will. Inheritance Inheritance – heirs stipulated in an inheritance statute. By Accession By Accession Occurs when the value of personal property increases because it is added to or improved by natural or manufactured means

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Acquiring Ownership in Personal Property (5 of 5) By Confusion By Confusion fungible goods Occurs when fungible goods are commingled The owners share title to the commingled goods in proportion to the amount of goods contributed. By Divorce By Divorce When a marriage is dissolved by a divorce, the parties obtain certain rights in the property of the marital estate.

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Mislaid Property mislaid Property is mislaid when its owner voluntarily places the property somewhere and then inadvertently forgets it. mislaid The owner of the premises where the personal property is mislaid is entitled to take possession of the property against all except the rightful owner.

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Lost Property Personal property that an owner leaves somewhere because of negligence, carelessness, or inadvertence lost property The finder of lost property obtains title to the found property against everyone except the true owner. The lost property must be returned to its rightful owner whether he or she discovers the loser’s identity or the loser finds him or her.

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Estray Statutes Most states have enacted estray statutes that give a finder of mislaid or lost property clear title to the property if certain requirements are met: Reporting the find to an appropriate government agency Advertising the lost property The owner not claiming the property within a stated time period (i.e., one year)

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Abandoned Property Property is classified as abandoned if: An owner discards the property with the intent to relinquish his or her rights in it; or An owner of mislaid property gives up any further attempts to locate it Anyone who finds abandoned property acquires title to it.

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Bailment Occurs when the owner of personal property transfers the property to another to be held, stored, delivered, or for some other purpose Title to the property does not transfer. Bailor Bailor – the owner of property in bailment. Bailee Bailee – a holder of goods who is not a seller or a buyer. i.e., a warehouse or common carrier

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Parties to a Bailment BailorBailee Goods transferred for safekeeping, storage, or transportation

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Elements Necessary to Create a Bailment (1 of 2) Personal Property Personal Property Only personal property can be bailed. Delivery of Possession Delivery of Possession The bailee has exclusive control over the personal property. The bailee must knowingly accept the personal property.

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Elements Necessary to Create a Bailment (2 of 2) Bailment Agreement Bailment Agreement expressimplied. A bailment may be either express or implied. Express bailments Express bailments can be either written or oral. Statute of Frauds Under the Statute of Frauds, a bailment must be in writing if it is for more than one year. A bailment may be implied from the circumstances.

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Ordinary Bailments 1.Bailments for the sole benefit of the bailor 2.Bailments for the sole benefit of the bailee 3.Bailments for the mutual benefit of the bailor and bailee

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Ordinary Bailee’s Duty of Care Type of BailmentDuty of Care Owed by Bailee Bailee Liable to Bailor for For the sole benefit of the bailor SlightGross negligence For the sole benefit of the bailee GreatSlight negligence For the mutual benefit of the bailor and bailee OrdinaryOrdinary negligence

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Duration and Termination of Bailments Bailment for a Fixed Term A bailment that terminates at the end of the term or, Sooner by mutual consent of the parties Bailment for a Fixed Term A bailment that terminates at the end of the term or, Sooner by mutual consent of the parties Bailment at Will A bailment without a fixed term Can be terminated at any time by either party Bailment at Will A bailment without a fixed term Can be terminated at any time by either party

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Bailee’s Rights Depending on the type of bailment, bailees may have the right to: Exclusive possession of the bailed property Use of the bailed property Compensation for work done or services provided

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Bailor’s Duties The bailor owes the duty to: Pay the agreed-upon compensation to the bailee Not interfere with the bailee’s possessory interest during the term of the bailment Notify the bailee of any defects in the bailed property that could cause injury to the bailee or others

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Special Bailments Specialextraordinarybailees Special (or extraordinary) bailees include: Common carriers Inn keepers Warehouse companies Special bailees must follow the rules applicable to ordinary bailees. Article 7 of the Uniform Commercial Code (UCC.) They are also subject to special liability rules contained in Article 7 of the Uniform Commercial Code (UCC.)

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Type of BaileeLiabilityLimitation on Liability Common CarrierStrictly liable except for: 1. Act of god 2. Act of a public enemy 3. Order of the government 4. Act of the shipper 5. Inherent nature of the goods May limit the dollar amount of liability by offering the bailor the right to declare a higher value for the bailed goods for an additional charge. Warehouse CompanyOrdinary negligenceMay limit the dollar amount of liability by offering the bailor the right to declare a higher value for the bailed goods for an additional charge. Special Bailees’ Duty of Care (1 of 2)

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Type of BaileeLiabilityLimitation on Liability InnkeeperStrictly liableState statutes may limit the liability of an innkeeper for others’ rights. Special Bailees’ Duty of Care (2 of 2)

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Documents of Title Negotiable instruments developed to represent the interests of the different parties in a transaction that uses storage or transportation between the parties Warehouse Receipts Warehouse Receipts Bills of Lading Bills of Lading Article 7 of the UCC governs documents of title.

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Warehouse Receipts A written document issued by a person who is engaged in the business of storing goods for hire i.e., warehouse company or storage company Often a preprinted form drafted by the warehouseman

Copyright © 2009 by Pearson Prentice Hall. All rights reserved. Bill of Lading Document of title that is issued by a carrier when goods are received for transportation Issued by: Common carriers Contract carriers Freight forwarders Other persons engaged in the business of transporting goods for hire