PART 5 – SPECIAL CONTRACTUAL
RELATIONSHIPS

Chapter 21 – The Law
of Bailment
Prepared by Douglas H. Peterson, University of
Alberta
Copyright © 2004 McGraw-Hill Ryerson Limited
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THE LAW OF BAILMENT
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Nature of Bailment
Types of Bailment
Innkeepers
Copyright © 2004 McGraw-Hill Ryerson Limited
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NATURE OF BAILMENT
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Bailment – transfer of a chattel by the owner
to another for some purpose, with the
chattel to be later returned or dealt with in
accordance with the owner's instructions
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A temporary transfer of possession of personal
property
Car rental, repair of goods, storage of goods
Bailor – the owner of property in a bailment
Bailee – the person who gains possession in
a bailment
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THE LAW OF BAILMENT
THE SIMPLE BAILMENT RELATIONSHIP
Obligation to Return Chattel
BAILOR
Transfer of Possession of Chattel
Owner of Chattel
BAILEE
Possesses Chattel for
Use, Storage,
Transport, etc.
Title to Chattel
Remains in Bailor
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NATURE OF BAILMENT
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Three elements
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Delivery of goods by the bailor
Possession of the goods by the bailee for a
specific purpose
Return of the goods to the bailor at a later time,
or disposition of goods according to bailor’s
wishes
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SUB-BAILMENT
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Sub-Bailment – bailment within a bailment
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Sub-bailor and sub-bailee
Requires special agreement between bailee and
bailor or a custom or practice of the trade
Sub-bailment allowed
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Auto repairs, carriage of goods, storage of goods
Not allowed if bailor relying on special skill of
bailee
Terms of sub-bailment must be consistent with
original agreement
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BAILOR-BAILEE RELATIONSHIP
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Normal ingredients of a bailment contract
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The services to be provided by the bailee
The bailee’s price and payment requirements
The extent to which the bailee is liable for
damages or loss
The remedies of the parties for failure to
perform
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BAILOR-BAILEE RELATIONSHIP
(Requirements)
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Delivery into hands of bailee (possession by bailee
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Retention of title by bailor
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Constructive possession can be a problem
Bailee receives possession only, title never passes
Bailee can sue for interference with property or damage
to property by third parties
Return of goods to bailor
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Same goods must be returned
Fungibles – interchangeable commodities such as grain,
fuel, oil, gasoline
Must return same grade or quality, and same quantity
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LIABILITY FOR LOSS OR DAMAGE
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Different standards for different forms of
bailment
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Standard of care depends on type of bailment
Onus on bailee to show standard of care
required of particular bailment was met
Loss not a result of bailee’s culpable negligence
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LIABILITY FOR LOSS OR DAMAGE
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General principles
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Bailee must return goods
Bailee must return goods in same condition
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No damage, normal wear and tear allowed
Onus on bailee to show no negligence
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Only bailee can give evidence of such
Must provide reasonable explanation otherwise is
liable
Principle of res ipsa loquitur
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TYPES OF BAILMENT
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Gratuitous Bailment
Bailment for Reward
Storage of Goods
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Warehouse Storage
Parking Lots
Bailment for Repair or Service
Hire or Rental of a Chattel
Carriage of Goods
Pledge of Personal Property as Security
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GRATUITOUS BAILMENT
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For the benefit of the bailee or the bailor, or
both
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Without monetary reward
Liability varies with respective benefits received
by the parties to the bailment
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Unless parties have specified a standard of care
Benefit for Bailor
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Bailee’s liability is minimal
Depends on nature of goods
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GRATUITOUS BAILMENT
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Benefit for Bailee
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Higher standard of care
Liable for any damage caused by negligence of
bailee
bailors must exercise reasonable care to ensure
that they are aware of defects and must inform
their bailees of the existence of such defects
Benefit for Both
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Standard of an ordinary person, how one would
take care of their own goods
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BAILMENT FOR REWARD
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Various scenarios
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For storage
For deposit
Repair shops
Rental of a chattel
Carriage of goods
Pledge of goods for security
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STORAGE OF GOODS
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Storage of goods
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Takes on many form but a bailment if:
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Possession and control of goods passes into hands of
party offering storage facility
Known as bailees for reward
Safety deposit box, warehouses, grain elevators,
parking lots (if parking attendant obtains keys)
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WAREHOUSE STORAGE
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Standard – that of a skilled storekeeper
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To treat customer’s property as a “skilled
storekeeper” would deal with its own property
Protect goods from foreseeable risks
Special storage facilities
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Must be in good operating conditions’
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Refrigeration
Not absolute liability
Onus on bailee to show exercised a proper
degree of control
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WAREHOUSE STORAGE
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Warehouse receipt
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Evidence of the contract of bailment
Entitles bearer to obtain goods from bailee
Common law
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Bailee can retain goods until storage charges are paid
Statute
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Liens allowed – based on possession
May retain goods and seek order of sale
Requirements of notice and sale be conducted in fair
manner
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PARKING LOTS
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Distinguish
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True bailment; and
Rental of parking space
Transfer of possession is necessary
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Done through transfer of keys
Bailment - If parking lot accepts keys and parks
car
Rental of space – bailor keeps possession of
keys and parks own car
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EXCULPATORY CLAUSES
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Must provide adequate notice of such
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Bring to attention of bailor
Simple printing on back of parking lot ticket is
not enough
Limitation must be forcefully brought to
attention of bailor
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By direct reference
Clearly market signs in conspicuous places
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BAILMENT FOR REPAIR OR SERVICE
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Bailment
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When bailor delivers goods to repair shop
Leaves goods with the proprietor
Bailment for reward even if no charge for
bailment separate from repair charge
Bailee responsible for damage
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For sub-bailee’s negligence also
Particular skills – duty of care attendant with the
skill in the protection or handling of goods
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HIRE OR RENTAL OF A CHATTEL
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Type of Bailment for reward
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Bailor delivers goods in return for monetary
payment
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Usually in writing setting out terms, rights and
duties of parties
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Car rental
Bailee entitled to use of goods for entire rental period
Bailee must not use goods for any other purpose
than that for which they were intended
No sub-bailment allowed
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HIRE OR RENTAL OF A CHATTEL
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Liability
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If used for unintended purpose or sub-bailed
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Absolute liability
If used properly
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Standard of care is that of reasonable care in operation or use of
goods
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Not liable for ordinary wear and tear
Bailor must provide in good working condition
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Goods are reasonable fit for the use intended
Responsible for any defects know of or ought to know of
If goods have inherent risk in use, bailor must warn of
such
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CARRIAGE OF GOODS
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Usually a carrier for reward
Three types of carriers
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Gratuitous carriers
Private carriers
Common carriers
Standard of care for liability varies with each
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CARRIAGE OF GOODS
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Gratuitous Carrier
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If for benefit of bailor, bailee must use
reasonable care in carriage of goods
Private carrier
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May accept or reject goods as it sees fit
If accepts
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Duty to take reasonable care of goods while they are
in possession
Copyright © 2004 McGraw-Hill Ryerson Limited
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CARRIAGE OF GOODS
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Common Carrier
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Normal part of business – offers to accept goods
for shipment and has the facilities to do so
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Trucking company, railway company
Statute limits common carriers liability
Standard of care is high
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Totally in control of the carrier for time of bailment
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CARRIAGE OF GOODS
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Often contract of carriage limits amount of
liability
Liabilities, rights and duties of parties mainly
set forth in statute
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PLEDGE OF PERSONAL PROPERTY AS
SECURITY
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Pledge – the transfer of securities by a debtor to a
creditor as security for the payment of a debt
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Personal property transferred to a creditor for security on
a loan
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Bonds, share certificates, life-insurance policies
Creditor becomes bailee and is responsible for property
while in their possession
Pawn – transfer of possessions (but not ownership)
of chattels by a debtor to a creditor who is licensed
to take and hold goods as security for payment of
a debt
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Between debtor and pawnbroker
Pawnbrokers are licensed in Canada
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INNKEEPERS
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History – travelers goods were at the mercy
of an innkeeper
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Common law very high standard of care on
innkeepers
Innkeeper responsible for any loss, even if not
innkeepers fault, unless due to negligence of
guest
Must be an innkeeper by definition
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Offer both rooms and meals to the public
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INNKEEPERS
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Statute
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Allows innkeepers to limit their amount of
liability
Applies when loss not due to negligence of or
the willful or deliberate act of innkeeper
To obtain protection must post relevant parts of
act in each room (private and public)
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SUMMARY
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Bailment created by:
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Involves
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Transfer of possession and not title
Gratuitous or for Reward
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Delivery
Possession
Liability varies depending on type of bailment
Governed by common law and statute
Copyright © 2004 McGraw-Hill Ryerson Limited
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