BAILMENT.

Materials prepared by Augustus Mutemi for MKUSoL

TOPIC 4 (WEEK 5): BAILMENT

By the end of the lesson, learners should be able to:

1. Explain the nature and effect of the bailment relationship, formation, and performance
2. Discuss the differences between the bailment relationship and other relationships that have
been discussed Commercial Law
3. Discuss the types of bailment, obligations of parties, and the remedies available to
aggrieved parties when the bailment relationship is breached.

Content
Bailment

It is not uncommon to find goods being placed in the custody of another person by another for
some specified or agreed purpose, whether some fee is paid or not. Bailment may therefore be
defined as the voluntary transfer of possession or delivery of goods upon trust from one person
called the bailor to another called the bailee on a contract or condition whether express or implied,
that the goods shall be returned to the bailor as soon as the time, use and purpose for which they
were bailed has elapsed, or has been performed or accomplished. In effect, the person in whose
possession the goods are placed must ultimately restore them to the bailor.

Examples of bailment are: • Delivering a car or an electronic or other item to a mechanic for repair
• Lending an item to a friend to use and return back • Banks holding property as security for a loan,
before they sell • Depositing luggage at a supermarket deposit box so as to be allowed to get in the
supermarket • Giving your luggage to the matatu owners to store as you travel. Where a person is
already in possession of goods belonging to another and he contracts to hold them as a bailee, he
henceforth assumes the role of a bailee (and the owner the bailor). This is under a bailment by
atonement i.e. where goods passed but not by bailment initially. Example: where a person ends up
with a letter or a parcel that belongs to someone else by mistake.

A bailment is a unique concept recognised under common law and is independent of a contract in
that it may or may not arise from a contractual position. As such, it is not necessary to establish
the existence of a contract in order to succeed in a bailment claim. This position was taken in
BAILMENT. Materials prepared by Augustus Mutemi for MKUSoL

Coggs v Bernard (1703) 2 Ld Raym 909. In this case, William Bernard undertook to carry several
barrels of brandy belonging to John Coggs from Brooks Market, Holborn to Water Street, just
south of the Strand (about half a mile). Bernard's undertaking was gratuitous; he was not offered
compensation for his work. As the brandy was being unloaded at the Water Street cellar, a barrel
was staved and 150 gallons were lost. Coggs brought an action on the case against Bernard,
alleging he had undertaken to carry the barrels but had spilled them through his negligence.

Holt CJ at the London Guildhall found that Mr Bernard, the defendant, was negligent in carrying
the tasks and was therefore liable as a bailee. Holt made clear that Bernard's responsibility to Coggs
was not formally contractual in nature, since he received no consideration. Instead, his
responsibility rested on the trust that Coggs placed in him to use due care in transporting the casks,
and by his tacit acceptance of that trust by taking the casks into his custody. Thus, because Bernard
acted negligently when he was under a responsibility to use care, he was held to be in breach of a
trust. In the course of his judgment, Holt gave this well-known statement of the categories of
bailment:

“And there are six sorts of bailments. The first sort of bailment is, a bare naked bailment
of goods, delivered by one man to another to keep for the use of the bailor; and this I call
a depositum, and it is that sort of bailment which I mentioned in Southcote's case (1601)
Cro Eliz 815. The second sort is, when goods or chattels that are useful, are lent to a friend
gratis, to be used by him; and this is called commodatum, because the thing is to be restored
in specie. The third sort is, when goods are left with the bailee to be used by him for hire;
this is called locatio et conductio, and the lender is called locator, and the borrower
conductor. The fourth sort is, when goods or chattels are delivered to another as a pawn, to
be a security to him for money borrowed of him by the bailor; and this is called in Latin
vadium, and in English a pawn or a pledge. The fifth sort is when goods or chattels are
delivered to be carried, or something is to be done about them for a reward to be paid by
the person who delivers them to the bailee, who is to do the thing about them. The sixth
sort is when there is a delivery of goods or chattels to somebody, who is to carry them, or
do something about them gratis, without any rewards for such his work or carriage, which
is this present case. I mention these things, not so much that they are all of them so
BAILMENT. Materials prepared by Augustus Mutemi for MKUSoL

necessary in order to maintain the proposition which is to be proved, as to clear the reason
of the obligation, which is upon persons in cases of trust.”

The case overturned the then leading case in the law of bailments, Southcote's Case (1601), which
held that a general bailee was strictly liable for any damage or loss to the goods in his possession
(e.g., even if the goods were stolen from him by force). Under the ruling in Coggs v Bernard, a
general bailee was only liable if he had been negligent. Despite his reappraisal of the standard of
liability for general bailees, Holt CJ refused to reconsider the long-standing common law rule that
held common carriers strictly liable for any loss or damage to bailed property in their possession.
Although admitting that the rule was "hard," Holt CJ justified it by stating:

This [rule] is a politik establishment, contrived by the policy of the law, for the safety of
all persons, the necessity of whose affairs oblige them to trust these sorts of persons [i.e.
carriers], that they may be safe in their ways of dealing: for else these carriers might have
an opportunity of undoing all persons that had any dealings with them, by combining with
thieves etc; and yet doing it in such a clandestine manner, as would not be possible to be
discovered. And this is the reason the law is founded upon that point

An example of bailment is where a friend agrees to store some items for another or someone ends
up with items belonging to another by mistake, there is no consideration in both cases hence no
contract….. In both cases they will be responsible for any loss or damage by reason of the trust
that the bailor put in them or the obligation that the bailee undertakes to discharge. It may be
contractual or not

Bailment is the delivery of goods from one person (the bailor or his agent) to another (the bailee
or his agent) on the condition express or implied in the contract that the goods shall be returned to
the bailor as soon as the purpose for which they have been bailed has been completed. If there is
no intention to return the goods, that is not a bailment. The reason for bailment may be for storage,
repairs, trade, personal use etc

In Bainbridge v Firmstone [1838] 8 AD, the plaintiff, at the defendant’s request, had consented
to allow the defendant to remove and weigh two boilers and the defendant had at the same time
promised to return them in their original sound condition. The plaintiff sued for breach of this
promise and the defendant pleaded lack of consideration, that the defendant acquired no benefits
BAILMENT. Materials prepared by Augustus Mutemi for MKUSoL

in taking possession of and weighing the boilers. The court of the Queen’s Bench rejected the plea.
Patterson J thought that whether there was a benefit to the defendant or not, there was “…at any
rate a detriment to the plaintiff from his parting with the possession for even so a short time…”

In his considered judgment, Lord Denman observed as follows:

“…the defendant had some reason for wishing to weigh the boilers; and he could do so
only by obtaining permission from the plaintiff, which he did obtain by promising to return
them in good condition. In other words, there is no requirement as to furnishing valuable
consideration beyond the fact of entrusting the goods to the custody of another on that
other’s promise to return them. Neither does the common law prescribe any formalities for
the creation of bailment…”

In Building and Civil Engineering Holidays Scheme Management Ltd v Post Office [1966] 1
QB 247, Lord Denning MR stated as follows, regarding the nature of bailment:

“…at common law, bailment is often associated with a contract but this is not always the
case…an action against a bailee can often be put, not as an action in contract, nor in tort,
but as an action on its own, Sui Generis, arising out of the possession had by the bailee of
the goods…”

A common carrier, for example, such as a railway company, owes a duty of care independently of
a contract to a person whose goods it accepts for carriage. If goods which have been delivered to
a bailee are lost or damaged whilst in his custody, the bailee is liable to the person who suffers loss
of damage (whether he be the owner or the bailor) unless the bailee proves that the loss or damage
is not due to any fault on his part.

It is immaterial that the act or neglect for which the bailee is faulted is directly attributable to him
or to his servant. The common law position is that the employer is vicariously liable for the acts
of his servant, as was the case in Morris v CW Martin and Sons Ltd [1966] 1 QB 716. In this
case, the plaintiff sent her mink store to a furrier to be cleaned. The furrier told her that he himself
did no cleaning but that he could arrange for this to be done by the defendants. The plaintiff
approved the proposal. The furrier accordingly, acting as principal and not as agent, made a
contract with the defendants, a well-known firm, to clear the plaintiff’s fur. While in their
possession, the fur was stolen by their servant. The plaintiff was sued by the defendants, who
BAILMENT. Materials prepared by Augustus Mutemi for MKUSoL

pleaded exemption clauses contained in their contract with the furrier. The court of appeal held the
defendants liable and observed that:

1. When the defendants received the fur in order to clean it, they became bailees for reward,
and
2. As bailees, they owed a common law duty to the plaintiff and
3. The clauses on which they relied were not adequate to meet the facts of the case.

Allowing the appeal, the court held that the defendants, being sub-bailees for reward, owed to the
plaintiff, the owner of the fur, the duties of a bailee for reward to take reasonable care of the fur
and not to convert it. Accordingly, as in the circumstances the defendants were not protected by
the exempting conditions, the plaintiffs could sue the defendants directly for the loss of the fur
caused by its theft by their servant who had been employed to take care of it and clean it.

Creation of bailment

There are no formal requirements for the creation of bailment at common law as long as the
particular arrangement meets the basic factors by which it is defined. While physical delivery is
made to the bailee, property in, and title to, the goods remains with the bailor to whom they must
be ultimately restored on the accomplishment of the purpose for which the bailee holds them.

Bailment must meet the following conditions:

Possession lies at the heart of a bailment: It has been said before that delivery of the goods by
the bailor is necessary so that the bailee may re deliver them back to the bailor after the bailment.
The bailor delivers the possession of the goods and not the ownership/ title so it’s important that
the bailee is in possession. Possession is determined by the amount of control that the bailee has
over the item….it may be real possession or constructive possesion --Is a loan transaction between
bank and customer a bailment? No it is not. You don’t usually return the same cash! It seems like
the cash you get becomes yours too! You get ownership.

In Ashby v Tolhurst [1937] 2KB 242, the owner of a car left it in a private car park. He paid the
parking attendant and received a ticket from him. While the car owner went around his business
the parking attendant allowed a thief to drive off in the car. The thief misled the attendant into
believing that he was taking the car with the owner’s permission. The owners of the car park
BAILMENT. Materials prepared by Augustus Mutemi for MKUSoL

admitted that the park attendant had been negligent, but relying on an exclusion clause printed on
the ticket denied liability. The question then turned on whether the car owners had become bailees
of the car. It was held that the relationship between the parties was of licensor and licensee and not
of a bailor and bailee. The car owner had merely been given permission to park in the car park.
The owners of the car park had not received possession of the car.

The bailor retains a superior interest in the chattel to that of the bailee: Bailee acquires a
limited possessory interest in the chattel. The interest is subordinate to that of the bailor. This is
evidenced by the requirement to re deliver the chattel back to the bailor and requirement for the
bailee to deal with the chattel according to the bailors instructions). NB: Where possession and
ownership has passed to the bailee, that ceases to be a bailment (e.g. hire purchase)

The bailee must consent to take possession of the chattel for there to be a bailment: This is a
point of contention especially because of ‘involuntary bailments’. (Whereby a person ends up in
control of a chattel belonging from another without consenting as a bailee.) e.g. A letter may be
sent to someone by mistake. Traditionally bailment was considered to arise out of mutual consent.
It is still unsettled whether the consent needed is the consent of the bailor or of the bailee. The
general rule is that any person who voluntary assumes possession of goods belonging to another
will be held to owe the duties of the bailee at common law.

Types of bailment

Indefinite Term vs Fixed Term Bailment

How long are the goods supposed to be held? Where there is an agreement that chattels should be
picked after some time and the bailor fails to collect them, the bailor may be taken to have given
up his rights to the property and considered to have abandoned the chattels. If there was no
agreement on how long the chattel was to stay there will be no abandonment unless the bailee
gives a notice to the bailor.

See : The Disposal of Uncollected Goods Act Cap 38

S 5: Notice to take delivery needs to be given of at least 30 days.

S 6: Notice of intention to sell should be given before the goods are sold. The notice should be for
a period of at least 90 days.
BAILMENT. Materials prepared by Augustus Mutemi for MKUSoL

S7: If the notices are not honoured the bailee may sell at the best price possible, offset his expenses
and pay the balance back to the bailor (If any) or claim the balance

Gratuitous Bailment vs Bailment for Consideration

Will the person holding the chattel be paid for their actions or are they doing it for free? If they are
being paid then it is a bailment for consideration and he will generally be held to a higher degree
than a person who is doing it for free i.e. gratuitously. Example of gratuity-lending an item to a
friend

Voluntary vs Involuntary Bailments

Voluntary bailments: the bailee accepts responsibility of the items. Involuntary bailments: the
bailee ends up with goods without ever intending to do so. E.g. goods sent to someone by mistake.
In the latter case the bailee is responsible for taking care of the items for a reasonable period. An
involuntary bailee is only liable for gross negligence or deliberate damage to goods. A voluntary
bailee is under a higher duty to take care of the goods.

Bailment and third parties

The bailee’s possession gives him sufficient legal interest in the goods to be able to insure them
against loss or damage or other risk either for the full value or to cover his interest. E.g. when you
take a car to a reputable garage, the garage owner may have taken out insurance in case your car
gets lost or gets damaged while it is in his garage, so that should this arise, his insurer would
compensate you for the loss. The bailee cannot pass a good title to a third party even if the third
party obtains the item in good faith without knowledge of the bailees defect in title. In case this
happens the bailor may recover the goods from the third party. The bailee will be liable in
conversion.

The bailee’s possession is also sufficient to bring an action against a 3rd party wrongdoer in
negligence. The bailee is entitled to recover full market value of the chattel against the wrongdoer
and also damages for consequential loss. Having recovered in full from the wrongdoer the bailee
may subtract the value of his interest and pay the surplus to the bailor. When the bailee recovers
in full from the wrongdoer, no action may later be maintained by the bailor even if he would
otherwise have a right of action to sue. Likewise a bailee is prevented from recovering from the
BAILMENT. Materials prepared by Augustus Mutemi for MKUSoL

wrongdoer if the bailor has done so already. In O’Sullivan v Williams [1992] 3All ER 385, the
owner of a vehicle lent it to his girlfriend while he was on holiday. The car was damaged while in
her possession. His successful claim for damages based on his right to recover the car from her at
his will was held to preclude a second action by the girlfriend even though she had possession of
the car at the time it was damaged. Principally the bailor and bailee recover according to their
actual interests so as to avoid double liability of the wrongdoer. All the parties may be enjoined in
a suit. If the wrongdoer suffers double liability the later claimant must reimburse the wrongdoer
to the extent of his unjust enrichment (which depends on him having also received payment from
the first claimant).

Who should sue? Bailors right of action in trespass or conversion against a wrongdoer depends
on the bailor having a right to immediate possession of the bailed chattel at the time of the
wrongdoing or where the bailment is at the will of the bailor. Where bailment is for a fixed term
the bailor has no rights to immediate possession.

Duties and liabilities of the bailor

• The bailee owes the bailor a duty to take reasonable care of the bailed chattel. This care is central
to their relationship.

• Traditionally (although sometimes contentious) the duty of the bailee may vary depending on the
circumstances and type of bailment. Thus a higher standard of care may be expected in a bailment
for consideration which is voluntary as opposed to an involuntary bailment or a gratuitous
bailment. (Although even this requires reasonable care).

• Onus is on the bailee to prove that he took appropriate degree of care under the circumstances).

• Exclusion clauses may be applied by a bailee to deny liability. Even then, it has been held that
where there is an exclusion clause excluding the bailees liability, the bailee may only escape
liability if he can prove that the loss was not occasioned by the bailees negligent or that in fact it
was the bailors negligence that caused the loss, unless the exclusion clause forms an integral part
of the contract.

• The bailee owes a duty not be negligent as he will be liable for negligence.

• He is under duty not to use the goods otherwise than according to the terms of the bailment
BAILMENT. Materials prepared by Augustus Mutemi for MKUSoL

• He has a duty to return the goods after the bailment period.

• In some circumstances the bailee’s liability for loss or damage is strict liability( i.e. no need to
prove negligence so long as the act was committed) This may arise e.g. where the bailee is a
common carrier (one who transports people or goods for a reward) unless the loss is caused by an
act of God, or where the bailee deviates in the conduct of the bailment (storing goods elsewhere,
passing the chattels to a 3rd party without consent, negligently refusing to return the goods as per
the contract etc). Strict liability can however be avoided by an exclusion clause.

Liability of common carriers was stated in BAT Kenya Limited vs Express Transport Company
Ltd & Another 1968 EA 171 as follows:

“A common carrier would be responsible for the safety of goods in all events except if the
loss or injury arose solely from the Act of God or hostilities involving the state, or from
fault of the consignor or inherent vice in the goods themselves”.

Coggs v Benard ; The law charges the common carrier against all events but acts of God and of
enemies of the King. This is due to the policy of law for safety of all persons since it is possible
for common carriers to collude with thieves or other clandestine manner and it may not be possible
to discover them.

• Deviation in the conduct of the bailment also results to a breach and gives the bailor an immediate
right to repossess the chattel.

• Where the deviation is so serious and results to a detriment of the bailors interests it may
constitute conversion by the bailee.

• If the chattel is lost or destroyed due to the negligence of the bailee he will be liable for breach
of duty (to redeliver) and conversion.

• Where the bailee delivers the chattel to the wrong person he will be liable to the bailor.

• An involuntary bailee will only be liable for misdelivery if he acts negligently in making the
delivery.

Remedies of the bailor

• Recovery of the bailed item

• Full value of goods lost or destroyed

• Damages

Duties of the bailor

• To disclose defects in the goods as known to him

• To indemnify the bailee for any cost or loss

• To allow the bailee retain a lien over goods not paid for, where the bailee has done work on them

• To collect the goods once the bailment period is over

Summary
In this lesson, learners have been taken through one more commercial transaction: the bailment
relationship. Learners had an opportunity to understand what bailment entails, how it is created,
and the various types of bailment. The bailment relationship is a special one in that it need not be
based on contract for someone to sue the other. It is based on trust. A person who undertakes to
keep in their custody goods belonging to another person, whether with consideration or without,
has assured that other person that the goods will be safe. The law of bailment comes in to protect
the goods from damage or disappearance even where there was no payment for keeping the goods
in such custody. Consider a person who borrows a wheelbarrow from his neighbour, and then the
neighbour either damages the wheelbarrow or sells it. the neighbour had not provided any
consideration to the owner. The law has to protect such owner from the neighbour.

Activities
Drafting the bailment agreement

Discussion questions
Test your understanding of the topic by answering the following questions

1. Who is a Bailee? What are the responsibilities and liabilities of Bailee in regard to the
goods which have been bailed to him? Does he have any rights?
2. Explain kinds of bailment and discuss the various rights and duties of bailer and bailee?
3. How does the bailment relationship differ from other commercial transactions?