Business Law and the Regulation of Business Chapter 50: Bailments and Documents of Title By Richard A. Mann & Barry S. Roberts

Topics Covered in this Chapter A. Bailments B. Documents of Title

Bailments n Definition - the temporary transfer of personal property by one party (the bailor) to another (the bailee). n Essential Elements –Delivery of Possession –Personal Property –Possession, but Not Ownership, for a Determinable Time –Restoration of Possession to the Bailor

Classification of Bailments n For the Bailor's Sole Benefit n For the Bailee's Sole Benefit n For Mutual Benefit - includes ordinary commercial bailments.

Bailee’s Duties n Bailee's Duty to Exercise Due Care - the bailee must exercise reasonable care to protect the safety of the property and to return it to the proper person. n Bailee's Absolute Liability - occurs when (1)­the parties so agree; (2)­the custom of the industry requires the bailee to insure the property against the risk in question, but he fails to do so; or (3)­the bailee uses the bailed property in an unauthorized manner.

Bailee’s Rights n Bailee's Right to Limit Liability - certain bailees are not permitted to limit their liability for breach of their duties, except as provided by statute. n Bailee's Right to Compensation - bailee is entitled to reasonable compensation for work or services performed on the bailed goods.

Bailor's Duties n In bailment for sole benefit of bailee, the bailor warrants that she is unaware of any defects; in all other bailments, the bailor has a duty to warn of all known defects and all defects she should discover upon a reasonable inspection.

Duties in a Bailment

Special Types of Bailments n Pledge - security interest by possession. n Warehouser - storer of goods for pay; must exercise reasonable care to protect the goods and deliver them to the proper person. n Safe Deposit Boxes n Carrier of Goods - transporter of goods; a common carrier is an extraordinary bailee, while a private carrier is an ordinary bailee. n Innkeeper - hotel or motel operator; is an extraordinary bailee except as limited by statute or case law.

Documents of Title n Definition - an instrument evidencing ownership of the document and the goods it covers. n Types –Warehouse Receipt - receipt issued by person storing goods. –Bill of Lading - document issued to the shipper by the carrier (1)­as a receipt for the goods, (2)­as evidence of their carriage contract, and (3)­as a document of title.

Negotiability n A document of title is negotiable if, by its terms, the goods are to be delivered to bearer or to the order of a named person. n Due Negotiation - transfer of a negotiable document in the regular course of business to a holder, who takes in good faith, for value, and without notice of any defense or claim.

Negotiability n Rights Acquired in the Absence of Due Negotiation - transferee acquires all the rights the transferor had. n Warranties - a person who negotiates or transfers a document of title for value, other than a collecting bank or other intermediary, incurs certain warranty obligations unless otherwise agreed.

Documents n For a person to obtain title to goods by negotiation of a document, the goods must have been delivered to the issuer of the document by the owner of the goods or by one to whom actual or apparent authority is entrusted by the owner. n Lost or Missing Documents of Title - claimant may apply to a court for issuance of a substitute document.