© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 1

PERSONAL PROPERTY AND BAILMENT

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall

CHAPTER 47 CHAPTER 47

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 2

Property

• Real property – land and property permanently attached to it.

− E.g., buildings, fixtures, trees, soil, minerals, timber, and plants.

• Personal property – property that is not real property.

− E.g., book, car, stock certificate.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 3

Personal Property

• Tangible Property – All real property and physically defined personal property.– E.g., buildings, goods, animals, and minerals.

• Intangible Property – Rights that cannot be reduced to physical form.– E.g., stock certificates, certificates of deposit,

bonds, and copyrights.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 4

Acquiring Ownership ofPersonal Property

– Possession or capture

– Purchase– Production– Gift

– Will or inheritance– Accession– Confusion– Divorce

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 5

Ownership Acquired By Possession or Capture

• Acquiring ownership of unowned property in its natural state.

• Important when country was being developed.

• Rare in today’s society.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 6

Acquiring Ownership by Purchase or Production

• Purchasing the property from its rightful owner.

• Producing a finished product from raw materials and supplies.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 7

Acquiring Ownership by Gift

• Voluntary transfer of title to property without payment of consideration by the donee.

• Three elements for valid gift:1. Donative Intent

2. Delivery (physical or constructive)

3. Acceptance

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 8

Gifts

• Gifts inter vivos are made during donor’s lifetime.−Irrevocable present transfers of ownership.

• Gifts causa mortis are made in anticipation of death.−Can be revoked up until time of death.−Takes precedence over prior will.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 9

Uniform Gifts to Minors ActUniform Transfers to Minors Act

• Establish procedures to make irrevocable gifts to minors.

• Gifts of money deposited in financial institution.• Gifts of securities registered in name of trustee

as custodian.• Donor or trustee acts as custodian of funds.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 10

Ownership Acquired by Will or Inheritance

• Property distributed to beneficiaries named in a will.

• Property distributed to heirs stipulated in an inheritance statute.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 11

Ownership Acquired by Accession

• When value of personal property increases because it is added to or improved by natural or manufactured means, accession belongs to the owner.− E.g., when horse gives birth to a colt.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 12

Ownership Acquired by Accession (continued)

• If improvement is made wrongfully, owner acquires value of improved property.− E.g., when thief steals car and puts new engine in it.

• If improvement is made mistakenly and improvement cannot be removed, owner acquires value of improved property.– E.g., when addition to house is made larger than

planned.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 13

Ownership Acquired by Confusion

• Occurs when fungible goods are commingled.– E.g., oil, grain, cattle.

• Owners share title to the commingled goods in proportion to the amount of goods contributed.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 14

Ownership Acquired by Divorce

• When a marriage is dissolved by a divorce, the parties obtain certain rights in the property of the marital estate.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 15

Mislaid Property

• Owner voluntarily places property somewhere and then inadvertently forgets it.

• Owner of the premises where the personal property is mislaid entitled to take possession of the property against all except the rightful owner.– Claim is superior to rights of finder.– Must take reasonable care of property until it

is reclaimed by owner.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 16

Lost Property

• Owner leaves property somewhere because of negligence, carelessness, or inadvertence.

• Finder obtains title to the found property against everyone except the true owner.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 17

Estray Statutes

• Finder of mislaid or lost property obtains clear title to the property if:– Finder reports find to an appropriate

government agency.– Finder or government advertises the lost

property– Owner does not claim the property within a

stated time period (e.g., one year).

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 18

Abandoned Property

• Property is 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.• Finder of abandoned property acquires title.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 19

Bailment

• Owner of personal property (bailor) transfers the property to another (bailee) to be held, stored, delivered, or for some other purpose.– E.g., warehouse or trucking company holds property.

• Title to property not transferred.• Bailee must follow bailor’s directions concerning

the property.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 20

Parties to a Bailment

BailorBailor BaileeBaileeGoods transferred for Goods transferred for

safekeeping, storage, or safekeeping, storage, or transportationtransportation

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 21

Elements 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.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 22

Elements 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.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 23

Ordinary Bailments

• Bailments for the sole benefit of the bailor.– Bailee cares for property as a favor.

• Bailments for the sole benefit of the bailee.– Bailee asks to use bailor’s property for

personal reasons.• Bailments for the mutual benefit of the bailor

and bailee.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 24

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

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 25

Duration and Termination of Bailments

• Bailment for 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.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 26

Special Bailments

Common CarriersCommon Carriers

Warehouse Warehouse CompaniesCompanies

InnkeepersInnkeepers

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 27

Warehouse Company

• Bailee engaged in storing property for compensation.

• Ordinary bailee.• Owes duty of reasonable care.

– Liable only for loss from own negligence.– Can limit liability by offering bailor opportunity to

increase limit for an additional charge.

• Warehouse receipt indicates lien on stored items for expenses of storage.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 28

Common Carrier

• Offers transportation services to public.– E.g., airlines, railroads, trucking companies.

• Mutual benefit bailment.– If goods are lost or damaged, carrier is liable.– Act of God and other exceptions.– Can limit liability by offering bailor an opportunity to

purchase higher limit.

• Bill of lading issued by carrier-bailee when goods are received.

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 29

Common Carrier (continued)

© 2010 Pearson Education, Inc., publishing as Prentice-Hall© 2010 Pearson Education, Inc., publishing as Prentice-Hall 30

Innkeeper’s Statute

• Under common law, innkeeper held to strict liability standard for loss of personal property.

• Most states have enacted Innkeepers’ Statutes to limit liability of innkeepers if safe is provided and guests are aware of safe.– May also limit dollar amount of liability.