© 2007 West Legal Studies in Business, A Division of Thomson Learning Chapter 28 Personal Property and Bailments

© 2007 West Legal Studies in Business, A Division of Thomson Learning 2 What is real property? What is personal property? What does it mean to own property in fee simple? What is the difference between a joint tenancy and a tenancy in common? What are the three elements necessary for an effective gift? How else can property be acquired? What are the three elements of a bailment? What are the basic rights and duties of the bailee? What are the basic rights and duties of the bailor? Learning Objectives

© 2007 West Legal Studies in Business, A Division of Thomson Learning 3 Introduction Definition: Property consists of legally protected rights and interests a person has in anything with an ascertainable value that is subject to ownership. –Difference Between Real and Personal Property. –Ownership rights in each. Acquiring Ownership of Personal Property. Laws Governing Mislaid, Lost, or Abandoned Property.

© 2007 West Legal Studies in Business, A Division of Thomson Learning 4 Property Ownership Property ownership is viewed as a “bundle of rights”, including the: –Right to possess. –Right to sell. –Right to give. –Right to lease. –Right to destroy.

© 2007 West Legal Studies in Business, A Division of Thomson Learning 5 Fee Simple Owns the entire “bundle of rights”. Fee simple gives the owner the maximum possible estate or right of ownership of real property, continuing forever. Chapter 44 will deal with realty estates.

© 2007 West Legal Studies in Business, A Division of Thomson Learning 6 Tenancy in Common A and B own an undivided interest in the property. Upon B’s death interest passes to B’s heir, “C”. CASE 28.1 Clark v. Dady (2004). AB C

© 2007 West Legal Studies in Business, A Division of Thomson Learning 7 Joint Tenancy A and B own an undivided interest in property but, upon B’s death, B’s interest passes to A, the surviving joint tenant. AB

© 2007 West Legal Studies in Business, A Division of Thomson Learning 8 Concurrent Ownership Tenancy by the Entirety (not common) –Usually between husband and wife. Community Property (limited # of states) –Property acquired by couple during their marriage is owned as an undivided ½ interest in property (real and personal).

© 2007 West Legal Studies in Business, A Division of Thomson Learning 9 Acquiring Ownership of Personal Property Possession. –Capture of wild animals (wild animals belong to no one). –Finding of abandoned property. –Adverse Possession. Production. –Writers, inventors, manufacturers, and others who produce personal property acquire title to it.

© 2007 West Legal Studies in Business, A Division of Thomson Learning 10 Voluntary transfer of property ownership from Donor (owner) to Donee (recipient) for no consideration. Three types –Intervivos—while donor is living. –Causa Mortis: -- made by donor in contemplation of imminent death. –Testamentary – after death, by will/inheritance. Gifts

© 2007 West Legal Studies in Business, A Division of Thomson Learning 11 Gifts Three requirements for valid gift: –Delivery—actual or “constructive” (symbolic, such as keys to car). Donor must give up complete control or dominion. Delivery by a 3 rd party is OK. CASE 28.2 In re Estate of Piper (1984). –Donative intent on the part of the donor –Acceptance by the Donee.

© 2007 West Legal Studies in Business, A Division of Thomson Learning 12 Acquiring Ownership of Personal Property Will or Inheritance. Accession. –Someone adds value to a piece of personal property by use of either labor or materials. Confusion. –Commingling so that a person’s personal property cannot be distinguished from another’s. –Fungible goods consists of identical particles such as oil or grain.

© 2007 West Legal Studies in Business, A Division of Thomson Learning 13 Mislaid, Lost or Abandoned Property Mislaid Property: Voluntary placed somewhere, then inadvertently forgotten. Finder is steward for true owner. Lost Property: Involuntarily left. Property owner acquires title against whole world, except for true owner. Finder must return to true owner or be liable for conversion. Abandoned Property: Discarded by true owner with no intention of recovering. Acquires title against all the world, including the original owner.

© 2007 West Legal Studies in Business, A Division of Thomson Learning 14 A bailment is formed by the delivery of personal property, without transfer of title, by one person (Bailor) to another (Bailee), usually under an agreement for a particular purpose. The property must be returned by the Bailee to the Bailor, or a third party as directed by the Bailor, in the same or better condition. CASE 28.3 Sunbelt Cranes Construction and Hauling, Inc. v. Gulf Coast Erectors, Inc. (2002). Bailments

© 2007 West Legal Studies in Business, A Division of Thomson Learning 15 Elements of a Bailment Personal Property. (Tangible or Intangible--but not persons or realty.) Delivery of Possession. –Bailee given exclusive control or possession. –May be actual or constructive. –Bailee must knowingly accept (Bailee must intend to exercise control over chattel). Bailment Agreement. –Express or Implied.

© 2007 West Legal Studies in Business, A Division of Thomson Learning 16 Bailments: Duty of Care Bailment for the sole benefit of the Bailor: –A gratuitous Bailment; Bailee owes Bailor a low duty of care, liable only for gross negligence. Bailment for the sole benefit of the Bailee: –Bailee owes Bailor a high duty of care and is liable for even slight negligence. Mutual Benefit Bailment: most common. –Each party owes the other a reasonable duty of care.

© 2007 West Legal Studies in Business, A Division of Thomson Learning 17 Bailments: Duty of Care Benefit of Bailor Benefit of Bailee Low Duty of Care High Duty of Care Reasonable Care Mutual Benefit

© 2007 West Legal Studies in Business, A Division of Thomson Learning 18 Rights and Duties of the Bailee Right To Possess. –Bailee may acquire or use property temporarily. Title does not pass. Right to Use Bailed Property. Rights of Compensation. –Reimbursed for costs or services as provided in the agreement.

© 2007 West Legal Studies in Business, A Division of Thomson Learning 19 Rights and Duties of the Bailee Right to Limit Liability. Duty to Return bailed property in same condition to Bailor. Bailee may liable for conversion and/or negligence.

© 2007 West Legal Studies in Business, A Division of Thomson Learning 20 Rights and Duties of the Bailor Right to have property protected and used as agreed. Right to have property back at end of bailment with service or repair done properly. Right to have the Bailee not convert. Right to not be bound to limitation of liability unless Bailor knows. Duty to Provide safe goods: –Mutual Benefit Bailment: free from known or hidden defects; Sole Benefit of Bailee: notify if any known defect.

© 2007 West Legal Studies in Business, A Division of Thomson Learning 21 Publicly licenses to provide transportation services to general public. Common Carriers are strictly liable for damages except if the damages caused by: –An act of God. –An act of the public enemy. –An order of the public authority. –An act of the shipper. –The inherent nature of the goods. Shipper’s loss. Connecting Carriers. Special Bailments: Common Carriers

© 2007 West Legal Studies in Business, A Division of Thomson Learning 22 Special Bailments: Warehouses and Innkeepers Warehouses: –Owe duty of reasonable care. –Can’t exculpate, can limit. Innkeepers: –Owe duty of strict liability, modified by state statutes; if innkeeper provides safe and notifies guests. –If parking area provided and innkeeper accepts bailment, then may be liable.

© 2007 West Legal Studies in Business, A Division of Thomson Learning 23 Termination of Bailments Mutual agreement of both parties. Demand by either party. Completion of the purpose of the bailment. Act by the bailee that is inconsistent with the terms of the bailment. Operation of law.