LAW OF BAILMENT

INTRODUCTION A bailment is the relationship established when someone entrusts his property temporarily to someone else without intending to give up title. It is the rightful possession of goods by one who is not the owner. Bailment is a duty under Common Law In Malaysia, the law of bailment is governed by Part IX of the Contracts Act 1950 and Common Law.

Definition (Section 101 Contracts Act 1950) A “bailment” is the delivery of goods by one person to another for some purpose. When the purpose is accomplished, the goods shall be returned or disposed of according to the directions of the person delivering them. Bailor - The person delivering the goods. Bailee – The person to whom the goods are delivered. Examples:E.g. dry cleaners, repair shops, parking garages, storage facilities.

A bailment is the transfer of possession but not title or use; e.g. parking a car in a commercial garage often creates a bailment with the garage owner.

The one who is a bailee takes on the burden of being responsible to return the goods to their owner. Bailments only apply to personal property; a bailment requires that the bailor deliver physical control of the goods to the bailee. Examples: deliver a car to a parking lot attendant, checked a coat in a restaurant, deposited property in a safe-deposit box, taken items, clothes or appliance in to a shop for repair.

For a bailment to exist, the bailee must know or have reason to know that the property exists. When property is hidden within the main object entrusted to the bailee, lack of notice can defeat the bailment in the hidden property. For instance, a parking lot is not responsible for the disappearance of laptops stored in the trunk of a car, nor is a dance hall cloak room responsible for the disappearance of a fur wrap inside a coat, if they did not know of their existence.

Duty of Care It depends on the type of bailment: If the bailment is for the sole benefit of the bailor (the owner), the bailee is answerable only for gross neglect or fraud: the duty of care is slight. E.g. parking your car at your neighbour’s garage. If the bailment is for the sole benefit of the bailee, he owes an extraordinary care. e.g. Borrowing a friend’s car to go to TESCO If the bailment is for the mutual benefit of bailee and bailor, then the ordinary negligence standard of care will govern. e.g car sent to a workshop for repair

ONUS (BURDEN OF PROOF): The bailee owes a duty to take care of the goods bailed (section 104 Contracts Act 1950) The BOP is on the bailee. He has to prove: that he has exercised reasonable care AND Any loss or damage was not due to his negligence. Bailee is not liable if he has exercised duty of care as ordinary prudent man. (Section 105 Contracts Act 1950)

LAW OF BAILMENT IN CARRIAGE OF GOODS

A bailment arises when one person (a bailee) rightfully holds property belonging to another (a bailor). In commercial transactions, bailment law mostly governs the responsibilities of : the carriers (transporting the goods) ans warehousers (storage of goods) and The law of bailments addresses the critical links in the movement of goods from the consignor to consignee.

CARRIER Carrier is responsible for carrying goods under a contract of carriage. In addition to this contractual obligation, by accepting possession of the goods, carriers will become subject to common law duties in bailment and tort.

As a bailee, a carrier is obliged to take reasonable care of the goods entrusted to them and to redeliver those goods in the same condition as he received it. UNLESS: it is proven that the loss or damage occurred even though he has exercised reasonable care to safeguards the goods. The degree of care: the degree of care which a reasonable man would exercise with his own goods. A carrier may pass legal possession of the goods (with the authority from the bailor) to some sub-bailee acting as sub-contractor or agent on behalf of the bailor.

FORWARDER/NVOCC SHIPPING LINE SHIPPER BAILOR BAILEE SUB BAILEE

Example of himalaya clause: Any claims against a bailee or sub-bailee may be subject to the terms of the Himalaya Clause in the BL. (e.g. right to sue, limitation etc) Example of himalaya clause: The merchant undertakes that no claim or allegation whether arising in contract, bailment, tort or otherwise shall be made against any servant, agent or subcontractor of the carrier which imposes or attempts to impose upon any of them or any vessel owned or chartered by any of them any liability whatsoever in connection with the goods or the carriage of the goods whether or not arising out of negligence on the part of such person, and, if any such claims or allegation should nevertheless be made, to indemnify the carrier against all consequences therof.'

'The merchant further undertakes that no claim or allegation in respect of the goods shall be made against the carrier by any person other than in accordance with the terms and conditions of this bill of lading which imposes or attempts to impose upon the carrier any liability whatsoever in connection with the goods, whether or not arising out of negligence on the part of the carrier, and if any such claim or allegation should nevertheless be made, to indemnify the carrier against all consequences thereof. = no claim could be made by shipper outside the BL terms

Warehousekeeper The warehousekeeper generally does not provide a written agreement to the other party. In the absence of an agreement, the bailee is required to act in good faith and to provide a reasonable standard of care with the property The bailment is for the mutual benefit of bailor and bailee. = standard duty of care. As a bailee, a warehousekeeper is liable to take reasonable care of the goods and to avoid their loss, such as by theft and misdeivery.

The warehousekeeper is responsible for goods listed in a warehouse receipt even though that were not in fact delivered to the warehouse (or were misdescribed). To avoid this liability, the issuer must note on the document that he does not know whether the goods were delivered or are correctly described. One simple way is to mark on the receipt that “contents, condition, and quality are unknown.”

The warehousekeeper is obligated to deliver the goods to any person with documents that entitle him to possession. The warehousekeeper can avoid liability for no delivery by showing that he delivered the goods to someone who is entitled to the posession of the goods.

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