1. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved Slides developed by Les Wiletzky PowerPoint Slides to Accompany ESSENTIALS OF BUSINESS AND ONLINE COMMERCE LAW 1 st Edition by Henry R. Cheeseman Chapter 24 Personal Property, Bailments, and Insurance Chapter 24 Personal Property, Bailments, and Insurance

2. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 2 There are two kinds of property: 1.Real Property 1.Real Property – includes land and property that is permanently attached to it e.g., buildings, trees, soil, minerals, timber, and plants 2.Personal Property 2.Personal Property – consists of everything that is not real property

3. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 3 Personal Property  Tangible Property  Tangible Property – All real property and physically defined personal property e.g., buildings, goods, animals and minerals.  Intangible Property  Intangible Property – Rights that cannot be reduced to physical form e.g., stock certificates, certificates of deposit, bonds, and copyrights

4. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 4 Acquiring Ownership of Personal Property (1 of 4)  Possession or Capture A person can acquire ownership in unowned personal property by taking possession of it or capturing it  Purchase or Production Purchase Purchase – purchasing the property from its rightful owner Production Production – producing a finished product from raw materials and supplies

5. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 5 Acquiring Ownership in Personal Property (2 of 4)  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

6. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 6 Acquiring Ownership in Personal Property (3 of 4)  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

7. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 7 Acquiring Ownership in Personal Property (4 of 4)  Will or Inheritance Will Will – gift to beneficiaries named in a will Inheritance Inheritance – heirs stipulated in an inheritance statute  Divorce When a marriage is dissolved by a divorce, the parties obtain certain rights in the property of the marital estate

8. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 8 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

9. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 9 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

10. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 10 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 (e.g., one year)

11. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 11 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

12. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 12 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 e.g., a warehouse or common carrier

13. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 13 Parties to a Bailment BailorBailee Goods transferred for safekeeping, storage, or transportation

14. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 14 Elements Necessary to Create a Bailment (1 of 2)  Personal Property Only personal property can be bailed  Delivery of Possession The bailee has exclusive control over the personal property The bailee must knowingly accept the personal property

15. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 15 Elements Necessary to Create a Bailment (2 of 2)  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

16. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 16 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

17. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 17 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

18. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 18 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

19. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 19 Common Carriers bailee  Offer transportation services to the general public (i.e., the bailee)  Consignor bailor  Consignor – the person shipping the goods (i.e., the bailor)  Consignee  Consignee – the person to whom the bailed goods are to be delivered duty of strict liability  Common carriers are held to a duty of strict liability

20. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 20 Warehouse Companies  Bailees  Bailees engaged in the business of storing property for compensation duty of reasonable care  They owe a duty of reasonable care to protect the bailed property  Warehousers are liable only for loss or damage to the bailed property caused by their own negligence

21. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 21 Innkeepers  Innkeeper  Innkeeper – the owner of a facility that provides lodging to the public for compensation (e.g., a hotel or motel)  Strict liability standard  Strict liability standard – common law duty that says innkeepers are liable for lost, damaged, or stolen goods of guests even if they were not at fault for the loss  Innkeepers’ statutes  Innkeepers’ statutes – state statutes that limit an innkeeper’s common law liability  Innkeeper  Innkeeper – the owner of a facility that provides lodging to the public for compensation (e.g., a hotel or motel)  Strict liability standard  Strict liability standard – common law duty that says innkeepers are liable for lost, damaged, or stolen goods of guests even if they were not at fault for the loss  Innkeepers’ statutes  Innkeepers’ statutes – state statutes that limit an innkeeper’s common law liability

22. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 22 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)

23. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 23 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)

24. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 24 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

25. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 25 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

26. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 26 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

27. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 27 Insurable Interest (2 of 2)  Beneficiary  Beneficiary – a person or organization who will receive money from the insurer at the time of the insured’s death  The beneficiary does not have to have an insurable interest in the insured’s life

28. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 28 Types of Insurance (1 of 3) 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

29. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 29 Types of Insurance (2 of 3) 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

30. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 30 Types of Insurance (3 of 3) Other Types of Insurance  Credit  Title  Marine  Umbrella Other Types of Insurance  Credit  Title  Marine  Umbrella Business Insurance  Business Interruption Insurance  Workers’ Compensation Insurance  Fidelity Insurance  Key-Person Life Insurance  Liability Insurance Business Insurance  Business Interruption Insurance  Workers’ Compensation Insurance  Fidelity Insurance  Key-Person Life Insurance  Liability Insurance

31. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 31 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

32. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 32 The Insurance Contract  Deductible clause  Coinsurance clause  Exclusions from coverage clause  Suicide clause  Endorsements  Rider  Grace Period

33. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 33 Duty to Defend  An insurance company owes a duty to defend an insured against a lawsuit  This includes: Expenses for a lawyer Court costs Deposition fees

34. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 34 Subrogation  If an insurance company pays a claim to an insured for liability or property damage caused by a third party, the insurer succeeds to the right of the insured to recover from the third party  Subrogation does not apply to life insurance policies  An insurer has no right of subrogation against his or her own insured

35. Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 24 - 35 Incontestability Clause  Prevents insurers from contesting statements made by insureds in applications for insurance after the passage of a stipulated number of years  The typical length of time is two to five years