TYPES OF PROPERTY Property: Legally protected rights and interests in anything with an ascertainable value that is subject to ownership. Real Property: Land and everything of value attached to it, such as foliage and permanent structures, or found under it, such as minerals and water. Personal Property: Property that is movable -sometimes referred to as chattel or personalty. There are two types of personal property: Tangible Personalty: Personal property, such as a television set or car, that has physical substance; and Intangible Personalty: Personal property, such as stocks, bonds, patents, and copyrights, the value of which does not depend on physical existence. Ch. 36: Personal Property and Bailments - No. 1 © West Legal Studies in Business (2000) PROPERTY OWNERSHIP Fee Simple: Absolute ownership entitling the property owner to possess, use, or dispose of the property as he or she chooses. Upon death, the property descends to heirs. Concurrent Ownership Tenancy in Common: Co-ownership of property in which each party owns an undivided interest in the whole property that passes to heirs at death. Joint Tenancy: Joint ownership of property in which each co-owner owns an undivided interest in a portion of the whole property that passes to the surviving joint tenants upon death. Tenancy by the Entirety: Joint ownership of property by husband and wife, where neither party can transfer his or her interest in the property without the other’s consent. Community Property: Joint ownership of property by husband and wife in which each spouse owns an undivided one-half interest in property acquired during marriage. Ch. 36: Personal Property and Bailments - No. 2 © West Legal Studies in Business (2000) ACQUIRING OWNERSHIP: NON-GIFTS Ownership of personal property may be obtained in the following ways: Purchase: Property rights may be acquired in exchange for money or other valuable consideration. Possession: Property rights may be acquired by taking possession of unclaimed, lost, or abandoned property. Production: Property rights may be acquired by creating the property. Accession: Property rights may be acquired by adding value to existing property by either personal labor or materials. Confusion: Property rights may be acquired by mixing together goods belonging to two or more persons in such a way so that the separately owned goods can no longer be identified. Confusion frequently happens with fungible goods. Ch. 36: Personal Property and Bailments - No. 3 © West Legal Studies in Business (2000) ACQUIRING OWNERSHIP: GIFTS Gift: Any voluntary transfer of property made without consideration, past or present. In order for a transfer of property to be considered a gift, the following conditions must be satisfied: (1) Donative Intent: The donor (the person giving the gift) must intend for the transfer to be a gift; (2) Delivery: The gift must be delivered to the donee (the person for whom the gift is intended), who, as a result of the gift, must be free to exercise dominion (ownership rights) over the property in question; and (3) Acceptance: The donee must accept the gift. Inter Vivos Gift: A gift made during the donor’s lifetime and not in contemplation of imminent death. Causa Mortis Gift: A gift made in contemplation of the donor’s death. The donee must survive the donor in order to accept the gift. If the donor does not die as expected, the gift is revoked. Ch. 36: Personal Property and Bailments - No. 4 © West Legal Studies in Business (2000) MISLAID, LOST, OR ABANDONED PROPERTY Mislaid Property: Property with which the owner has voluntarily parted and then cannot find or recover. When mislaid property is found, the finder does not obtain title to the mislaid property, but rather holds it in trust for the true owner. Lost Property: Property with which the owner has involuntarily parted and then cannot find or recover. When lost property is found, the finder can claim title to the property superior to that of any other person except the true owner. Estray statutes provide that after notices are published and after a period of time, the finder acquires legal title to found property. Abandoned Property: Property with which the owner has voluntarily parted with no intention of recovering it. When abandoned property is found, the finder can claim title to the property superior to that of any other person including the true owner. Ch. 36: Personal Property and Bailments - No. 5 © West Legal Studies in Business (2000) BAILMENTS Bailment: A situation in which the personal property of one person (the bailor) is entrusted to another person (the bailee), who is obligated to return the bailed property to the bailor or dispose of it as directed by the bailor. Bailments involve only personal property -- real property cannot be the subject of a bailment. Possession of the bailed property must be transferred (physical or constructive delivery) to the bailee in such a way that: (i) the bailee is given exclusive possession and control over the property (subject to the bailor’s superior rights), and (ii) the bailee knowingly accepts the personal property delivered by the bailor. A bailment agreement may be either express (i.e., in writing) or implied (i.e., not in writing) and presumes that the bailed property will be returned to the bailor or a third party designated by the bailor or will be disposed of by the bailee in the manner agreed to by the bailee and the bailor. Ch. 36: Personal Property and Bailments - No. 6 © West Legal Studies in Business (2000) ORDINARY BAILMENTS Three types of ordinary bailments are legally recognized: (1) Bailment for the Sole Benefit of the Bailor: A gratuitous bailment made for the convenience and benefit of the bailor; (2) Bailment for the Sole Benefit of the Bailee: A gratuitous bailment made for the convenience and benefit of the bailee; and (3) Bailment for the Mutual Benefit of the Bailor and Bailee: This most common kind of bailment involves some compensation by the bailor for services rendered by the bailee such as storing items or holding property while it is being repaired or serviced. Ch. 36: Personal Property and Bailments - No. 7 © West Legal Studies in Business (2000) RIGHTS AND DUTIES Rights of Bailees: Certain rights are implicit in any bailment agreement (absent explicit terms to the contrary), namely: (1) The right to control and possess the bailed property during the term of the bailment agreement; (2) In some cases, the right to use the bailed property; (3) Except in cases of gratuitous bailments, the right to be compensated; and (4) The right to limit their liability for damage to the bailed property so long as the limitations are called to the attention of the bailor and are not against public policy. Duties of the Bailee: A bailee must: (1) Take proper care of the bailed property; and (2) Surrender to the bailor or dispose of the property in accordance with the bailor’s instructions. Duties of the Bailor: A bailor must provide the bailee with goods or chattels that are free from known (obvious or hidden) defects that could cause injury. Ch. 36: Personal Property and Bailments - No. 8 © West Legal Studies in Business (2000) SPECIAL TYPES OF BAILMENTS COMMON CARRIERS AND WAREHOUSERS Common Carrier: An owner and provider of publicly available transportation services who renders those services in return for compensation. The delivery of goods to a common carrier creates a bailment relationship between the person whose property is being shipped (the bailor) and the common carrier (bailee), who is held strictly liable for the bailed personal property except for damages caused by a common law exception. Common carriers can not contract away their liabilities but can contract to limit the dollar amount of a claim. Warehouser: A provider of storage for compensation. Unlike the strictly liable common carrier, a warehouser is liable for loss or damage to bailed property resulting from the warehouser’s negligence. However, the warehouser is expected to exercise a higher degree of care, commensurate with the warehouser’s status as a professional bailee, rather than an ordinary bailee. Ch. 36: Personal Property and Bailments - No. 9 © West Legal Studies in Business (2000) SPECIAL TYPES OF BAILMENTSINNKEEPERS Innkeepers: Innkeepers, hotel owners, and others who provide lodging to the public for compensation as a regular business are strictly liable for any loss of or damage to their guests’ property. However, in many states, innkeepers may avoid strict liability by providing a safe for guests to keep their valuables in. Ch. 36: Personal Property and Bailments - No. 10 © West Legal Studies in Business (2000)