Chapter 47
Personal Property and Bailment
Business Law
Legal, E-Commerce, Ethical, and International Environments
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 1
48
Property
•
There are two kinds of
property:
1.
Real property which includes
land and property that is
permanently attached to it,
and
•
2.
Buildings, trees, soil, minerals,
timber, and plants
Personal property which
consists of everything that is
not real property.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 2
48
Personal Property
• Tangible Property – All real
property and physically defined
personal property.
– Buildings, goods, animals and
minerals.
• Intangible Property – Rights that
cannot be reduced to physical
form.
– Stock certificates, certificates of
deposit, bonds, and copyrights
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 3
48
Acquiring Ownership in
Personal Property
• Property can be acquired by:
–
–
–
–
–
–
–
Possession or capture
Purchase or production
Gift
Will or inheritance
Accession
Confusion
Divorce
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 4
48
Ownership Acquired By Possession
or Capture
• A person can acquire
ownership in unowned
personal property by taking
possession of it or capturing
it.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 5
48
Acquiring Ownership by
Purchase or Production
• Purchasing the property from
its rightful owner.
• Producing a finished product
from raw materials and
supplies.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 6
48
Acquiring Ownership by 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
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 7
48
Gifts
• Types of gifts:
– Gifts inter vios are made during
a donor’s lifetime that are
irrevocable present transfers of
ownership.
– Gifts causa mortis are made in
anticipation of death.
– Uniform Gifts to Minors Act and
the Revised Uniform Gifts to
Minors Act establish procedures
to make irrevocable gifts to
minors.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 8
48
Ownership Acquired by Will or
Inheritance
• Will – gift to beneficiaries
named in a will.
• Inheritance – heirs stipulated
in an inheritance statute.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 9
48
Ownership Acquired by
Accession
• Occurs when the value of
personal property increases
because it is added to or
improved by natural or
manufactured means.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 10
48
Ownership Acquired by
Confusion
• Occurs when fungible goods
are commingled.
• The owners share title to the
commingled goods in
proportion to the amount of
goods contributed.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 11
48
Ownership Acquired by
Divorce
• When a marriage is dissolved
by a divorce, the parties
obtain certain rights in the
property of the marital
estate.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 12
48
Mislaid Property
• Property is mislaid when its owner
voluntarily places the property
somewhere and then
inadvertently forgets it.
• 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.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 13
48
Lost Property
• Personal property that an owner
leaves somewhere because of
negligence, carelessness, or
inadvertence.
• The finder of lost property obtains
title to the found property against
everyone except the true owner.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 14
48
Estray Statutes
• Many 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).
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 15
48
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.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 16
48
Bailments
• 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 – the owner of property in
bailment.
• Bailee – a holder of goods who is
not a seller or a buyer.
– A warehouse or common carrier
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 17
48
Parties to a Bailment
Bailor
Bailee
Goods transferred for
safekeeping, storage, or
transportation
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 18
48
Elements Necessary to Create
a Bailment
• 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.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 19
48
Elements Necessary to Create
a Bailment (continued)
• Bailment Agreement
– A bailment may be either
express or implied.
– Express bailments can be either
written or oral.
– 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.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 20
48
Ordinary Bailments
1.
2.
3.
Bailments for the sole benefit of
the bailor
Bailments for the sole benefit of
the bailee
Bailments for the mutual benefit
of the bailor and bailee
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 21
48
Ordinary Bailee’s Duty of Care
Type of Bailment
Duty of Care Owed by Bailee
Bailee
Liable to
Bailor for
For the sole benefit of the bailor
Slight
Gross
negligence
For the sole benefit of the bailee
Great
Slight
negligence
For the mutual benefit of the
bailor and bailee
Ordinary
Ordinary
negligence
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 22
48
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 at will- A bailment
without a fixer term; can be
terminated at any time by either
party.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 23
48
Special Bailments
Common Carriers
Warehouse Companies
Innkeepers
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 24
48
Warehouse Company
• Warehouser is bailee engaged in
storing property for compensation.
• Owes duty of reasonable care.
– Liable only for loss from their own
negligence.
– Can limit dollar amount of loss if offer
bailor opportunity to increase limit at
an additional charge.
• Warehouse receipt issued by
warehouser indicate lien on stored
items for expenses of storage.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 25
48
Common Carrier
• Common carriers offer
transportation services to public.
– Mutual benefit of both parties
• Goods delivered to them by
consignor or shipper.
• Held to duty of strict liability
– If goods are lost or damaged, carrier
is liable
– Some exceptions
– Can limit liability by offering bailor an
opportunity to purchase higher limit.
• Bill of lading is a document of title
issued when goods are received.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 26
48
Innkeeper
• Held to the strict liability
standard
• Most states have enacted
Innkeepers’ Statutes
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 27
48
Special Bailee’s Duty of Care
Type of Bailee Liability
Limitation on
Liability
Common
Carrier
Strictly liable except
for:
1. Act of god, act of a
public enemy, order of
the government, act of
the shipper, 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
Company
Ordinary negligence
May limit the dollar
amount of liability by
offering the bailor the
right to declare a
higher value for an
additional charge.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 28
48
Special Bailee’s Duty of Care
(continued)
Type of Bailee Liability
Limitation on
Liability
Innkeeper
State statutes may
limit the liability of an
innkeeper for others’
rights
Strictly liable
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 29
48
Documents of Title
• Negotiable instruments
developed to represent the
interests of the different parties in
a transaction that uses storage or
transportation between the
parties.
– Warehouse Receipts
– Bills of Lading
• Article 7 of the UCC governs
documents of title.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 30
48
Warehouse Receipts
• A written document issued by a
person who is engaged in the
business of storing goods for hire.
– e.g., warehouse company or
storage company
• Often a preprinted form drafted
by the warehouseman.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 31
48
Bill of Lading
• Document of title that is issued by
a carrier when goods are
received for transportation.
• Issued by:
– Common carriers
– Contract carriers
– Freight forwarders
– Other persons engaged in the
business of transporting goods
for hire
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 32
48
Through Bill of Lading
• A bill of lading that provides that
connecting carriers may be used
to transport the goods to their
destination.
• Original carrier that issued the bill
of lading is liable for any damages
or loss to the goods caused by the
connecting carrier.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
19 - 33
48