1. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-1 CANADIAN BUSINESS AND THE LAW Second Edition by Dorothy Duplessis Steven Enman Shannon O’Byrne Sally Gunz Presentation prepared by Allan Elliott, Southern Alberta Institute of Technology

2. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-2 CHAPTER SEVENTEEN PERSONAL PROPERTY OBJECTIVES:  The different forms of property  How ownership and possession of property are acquired  The obligations and rights associated with property  The nature of the bailment relationship  Various types of bailment for reward

3. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-3 PERSONAL PROPERTY OVERVIEW OF PERSONAL PROPERTY  personal property – all property other than land  tangible property – personal property, the value of which comes from its physical form  intangible property – personal property, the value of which comes from legal rights

4. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-4 ACQUISITION OF OWNERSHIP OWNERSHIP OF PROPERTY IS ACQUIRED BY: ▪ purchasing or leasing land  purchasing or manufacturing goods  insurance coverage gives the customer the right to recover losses in specified circumstances  accounts receivables are created by delivering goods for payment at a later date  certain intellectual property is owned as a result of being created

5. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-5 ACQUISITION WITHOUT OWNERSHIP POSSESSION WITHOUT OWNERSHIP  one party gains possession of property of another with the intent that possession ultimately be returned to the owner  relationship of bailment has been established

6. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-6 OBLIGATIONS ARISING FROM OWNERSHIP AND POSSESSION LAW OF BAILMENT PROVIDES:  owner bears ultimate responsibility for protection  someone other than the owner who has possession must take reasonable care  who bears risk of loss should insure

7. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-7 RIGHTS ARISING FROM OWNERSHIP AND POSSESSION OWNER IN POSSESSION MAY:  sell the property and transfer ownership and possession to the buyer  lease the property with the intent of regaining possession or selling it when the lease expires  use the property as security for a loan, giving the lender the right to seize or sell if the borrower defaults  transfer possession to another for storage or repair with the right to regain possession

8. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-8 PRINCIPLES OF BAILMENT BAILMENT  a temporary transfer of possession of personal property from bailor to bailee  bailor – the owner of property who transfers possession in a bailment  bailee – the person who receives possession in a bailment  bailment for value – bailment involving payment for use of a service  gratuitous bailment – bailment that involves no payment

9. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-9 THE CONTRACT OF BAILMENT NORMAL INGREDIENTS OF BAILMENT CONTRACT  the services to be provided by the bailee  the price to be paid by the bailor and the payment terms  the extent to which the bailee is liable for damages or loss  the remedies of the parties for failure to perform  warehouseman – a bailee who stores personal property

10. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-10 LIABILITY OF BAILEES EXTENT OF BAILEE’S LIABILITY  reasonable care in all the circumstances  spectrum of a bailee’s liability Lowest Standard * Gratuitous bailment benefiting bailor Standard: bailee required to exercise slight care Middle Standard * both bailor and bailee have benefit Standard: bailee required to exercise ordinary diligence Highest Standard * Gratuitous bailment benefiting the bailee *Common carriers *Innkeepers standard Standard: bailee to exercise great care

11. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-11 LIABILITY OF BAILORS CONTRACTUAL BAILMENTS  bailors warrant that the goods used by their bailees are fit for the purpose for which they were bailed GRATUITOUS BAILMENTS  bailors must exercise reasonable care to ensure that they are aware of defects and must inform their bailees of the existence of such defects

12. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-12 REMEDIES REMEDIES FOR FAILURE TO PERFORM OBLIGATIONS ARISE :  when a bailee is attempting to recover a fee for services performed in relation to the property  when a bailor is trying to recover for damage done to the property while in the bailee’s possession

13. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-13 TYPES OF BAILMENT FOR REWARD LEASE  chattel lease – a contract where the lessee pays for the use of a lessor’s personal property  operating lease – a lease where the property is returned to the lessor when the term is up  financing lease – a lease that enables the lessee to finance the acquisition of personal property

14. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-14 LEASES FORMS OF A CHATTEL LEASE A. Two-party leasing arrangement DEALER(LESSOR)LEASELESSEE RESULT: ONE CONTRACT – LESSEE HAS REMEDIES AGAINST THE DEALER FOR PROBLEMS WITH THE PROPERTY Figure 17.1 (A)

15. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-15 LEASES FORMS OF A CHATTEL LEASE B. Three-party leasing arrangement FINANCIER (lessor) DEALER (vendor) LEASE SALE LESSEE FINANCIER (purchaser) RESULT: TWO CONTRACTS – DEALER SELLS TO WHO LEASES TO LESSEE. LESSEE HAS NO CONTRACT WITH DEALER Figure 17.1 (B)

16. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-16 STORAGE GENERAL RESPONSIBLITLY  to treat customer’s property as a “skilled storekeeper” would deal with its own property  warehouseman – a bailee who stores personal property  has a lien, by legislation, over the property until the owner pays the storage fee

17. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-17 REPAIRS GENERAL RESPONSIBILITY  bailee must provide reasonable safekeeping for the property and complete repairs in workmanlike manner  bailee has a lien against the property for the value of the repairs as long as bailee has possession of the property

18. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-18 TRANSPORTATION GENERAL RESPONSIBILITY  common carriers held to a very high standard of care  they are described as being “insurers” - if property is lost or damaged while in their possession, it is presumed the carrier is liable  carrier – a bailee who transports personal property

19. Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 17-19 LODGING INNKEEPER’S GENERAL RESPONSIBILITY  at common law similar to that of a common carrier  legislation (Innkeeper’s Act) permits limitation of liability to a certain amount  this protection is lost if loss of property is due to negligent or deliberate act of the innkeeper or the inn’s employees or if the property is deposited with the inn for safekeeping