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BU231 OC - Chapter 15,17,18,31 Reading Notes.doc

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Wilfrid Laurier University
Keith Masterman

1 READING NOTES CHAPTER 15: Leasing and Bailment Bailment Definition o Bailment is a transfer of possession of personal property without a transfer of ownership o Transferor / owner of property is the bailor o Party that receives custody is the bailee Non-Contractual Bailments o Essential elements of bailment are: Change in possession without change in ownership Intention that the property shall be returned to the bailor The intention that the object shall be returned need not be stated expressly between parties but may be presumed from circumstances Bailment can occur involuntarily such as when someone forgets an object at your restaurant, you become a bailee Benefit of Bailment o Bailments may be for the benefit of the bailor, bailee or both parties o A gratuitous bailment may benefit both parties such as when a car is left with a friend for safekeeping, but the friend has permission to use it occasionally o A bailment for value can go both ways as well such as when a car dealership gives you a car to play with for a weekend (and hopefully buy) so you can enjoy it Rights and Duties of a Bailee Liability Under Contract and Tort o In contract often the terms (express or implied) outline the duties and liabilities of the bailee Exemption clauses written into contracts for liability of bailees are construed very strictly by the court If goods are damaged for any reason not related to performance related to the contract, bailee is not protected by the exemption clause o The standard of care required by the law of torts applies in circumstances not covered expressly or impliedly by the bailment contract Also applies to gratuitous bailments o Law of bailment places the burden on bailee of showing they were not negligent, must offer a reasonable alternative explanation (reverse onus) Eg. You send your car in for repairs and it gets blown up there, you need only establish the condition of the car when you dropped it off, and the condition it was in when you received it As a result of this, it may be easier for a bailor to sue under the rules of bailment than tort 2 Standard of Care o Gratuitous bailment for benefit of Bailor Least strict Bailee should not be under a particularly high duty towards bailor because the bailee is doing a favour for bailor Still liable for gross negligence Eg. Can I put my car in your garage for the winter? o Gratuitous bailment for benefit of Bailee Most strict Bailor receives no consideration, thus the bailee should compensate the bailor when damage occurs to goods as result of any slight carelessness Eg. Can I borrow your lawnmower? o Bailment for Value Falls between the two above A bailee for value is expected to take the same care of goods as a prudent and diligent person should take care of goods My car will be at your shop while you service it o Note: The type of goods affects the standard of care, as very valuable and easily damaged goods require more care than otherwise Remedies of a Bailee for Value of Services Rendered o Main concern of a bailee is to receive compensation for services rendered, cant undo a repair job o Usual remedy is an action for the contract price o If a carrier is transporting goods in several installments and only partly delivers the total cargo the carrier can sue quantum meruit Lien (Repair and Storage Liens Act) o Liens give the bailee a right to retain possession of goods until the bailor pays what is due for the services o Arises only when the service has already been performed and payment is past- due o A right of lien is available to bailees who perform services in nature of repairs or improvements to goods, innkeepers, common carriers and to lawyers and bankers Right of Sale (Repair and Storage Liens Act) o If a bailee is unable to pay off charges (such as when they become insolvent) the bailee is left with goods they cant use o Bailees now have a statutory right to sell the goods Certain time needs to elapse after payment is due Advance notice must be given to bailor of the intention to sell Sale must be advertised Sale must be held by public auction 3 o Note: The proceeds of the sale first go to reimburse bailee for costs of sale, then the overdue charges, any in excess goes back to original bailor o Thus if you sell the good too cheap, you become liable to the bailor Special Types of Bailment Storage and Safekeeping o Express and implied authority of bailment contract affects their liability Terms of contract may reduce liability if customer (bailor) overrides a warehouse keepers usual discretion in handling goods, become liable only for complying with those instructions o Not customarily obliged to insure goods against fire, but when expressly contracted to do so and they fail, they owe the bailor the insured value of the goods If goods are fungible (identical substitutes may be bought) then the bailees liability is discharged when they replace the goods o Warehouse owners in Canada have a lien on goods, and may sell by public auction Repair o In accepting work, a repairer undertakes to do it in a competent manner employing the skills it professes and completing it in time, not doing this is a breach of contract o Standard of care is same for warehouse o Ordinarily, a bailor gives repairers implied authority to order replacement parts unless stipulated in contract o Lien on goods, some provinces allow sale Transportation o Gratuitous Carrier Help Andrew move down the street o Private Carrier Move a specific kind of thing, choose their clients o Common Carrier Move anything anywhere Liability: Shipper (Bailor) need only prove that the carrier received the goods in condition, and delivered them in bad condition Thus, the burden is on the carrier to establish cause of loss within a recognized defence Unless otherwise agreed, common carriers are liable for the full value of the good Defences against liability: Act of God Fire is not an act of god, unless lightning started Inherent Vice Latent defects make susceptible to damage Default by Shipper o Contract contains implied promise that the goods are safe to carry, thus make the movers pack everything themselves!!! o Common law gives common carriers a lien 4 Innkeepers o Innkeepers are any people who maintain a establishment offering lodging to any member of the public o Liability: Innkeepers are typically only liable where the goods have been stolen, lost or injured through the willful act, default, or neglect of the innkeeper or an employee, or where goods have been deposited expressly for safekeeping If a hotel refuses to accept a guests goods for safe custody then it loses the benefit of reduced liability Because hotel guest shares responsibility a hotel can avoid liability if it can show the disappearance or damage was due to carelessness of the guest Burden is on hotel guest (bailor) to demonstrate carelessness of employees Often less responsible for damages, therefore it is better to have something stolen than damaged o Only have a lien, some provinces can sell goods Pawn o Pawn is a bailment of personal property as repayment for a loan o Borrower is pledgor; creditor is pledgee (eg. Bank, pawnbroker) Pledgee is similar to bailee for value in their exercise of a standard of care o Pledgees obtain liens, and the pledgor gives authority to the pledgee to sell the pledged goods upon default Pawnbroker may obtain absolute ownership of pledged goods after similar actions in right of sale
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