Bailment: What is it? How Does it Work? Who is Responsible?
Bailment describes a legal relationship in common law where the physical possession of personal property, also known as chattel, is transferred from one person – generally the owner – to another person. The person who transfers the chattel is called the bailor, and the person who receives the chattel is called the bailee.
It’s important to note here that receiving a chattel does not mean that the bailee now owns the object; they simply possess it, perhaps holding on to it temporarily for safekeeping. Ownership still stays with the bailor.
Bailment is implied by law and can arise in a number of situations. Its two main types are voluntary and involuntary.
- Voluntary is where the parties have agreed to the transfer, and the the bailee agrees to accept responsibility for possession of the goods. It’s a good idea to have a written agreement that describes this transaction, but it is not required in order to establish bailment.
- Involuntary is where there is no agreement between the parties, and the bailee ends up with possession of the goods without any intent to do so. For example, a person leaves goods with a business or individual for service and does not return for them in a timely manner. Think about clothes left at a dry cleaner, a car left at a repair shop, or even vehicle impoundment after a Highway Traffic Act violation. The bailee must hold the goods safe for the bailor to reclaim within a reasonable time. They have become, by legal definition, an involuntary bailee.
Both forms of bailment carry a legal duty of care which refers to an expectation that the bailee will take reasonable precautions to safeguard the property in their possession. Ontario has a tiered system of liability that depends on the exact relationship between bailee and bailor, specifically whether it is voluntary or involuntary and who benefits. Either party can be held responsible if they are deemed negligent.
- If the bailment is for the mutual benefit of the bailor and bailee, it carries a moderate level of duty of care. This happens when there is an exchange of performances between the parties, for example, a service that requires payment. This may involve repair, storage, or alteration of an item, for a fee. It is considered mutual benefit as both parties receive a benefit (the bailor’s chattel is improved/repaired, and the bailee gets paid).
- If the bailment is for the sole benefit of the bailor, it carries the lowest level of duty of care. This occurs when the owner is the only one benefitting from the bailment and the bailee is acting gratuitously. For example, an owner leaves a valuable item such as a car, a piece of jewelry, some art, an appliance, etc. in the safekeeping of a trusted friend while the owner is traveling or moving. There is no agreement or expectation to compensate the friend.
- If the bailment is for the sole benefit of the bailee, it carries the highest duty of care. For example, a person loans their car to their neighbour, or loans a piece of equipment to a friend. The bailee (receiver) must exercise the highest level of care since the loan is being done solely for their benefit and no payment is being made to the owner. The bailee is liable for any damages arising from their own negligence or the negligence of others who gain access to the item, for example, the item is stolen by an unknown third party while in the borrower’s possession, or someone else uses the borrowed car while in the borrower’s possession. The borrower is deemed liable for the replacement cost.
The bailor will be able to sue for damages based on the level of duty of care.
As just described, if a person agrees to accept a fee or other consideration for holding possession of goods, they are generally held to a higher standard of care than a person who is doing so for no payment or benefit. Sometimes, though, a business might seek to remove the liability that comes from this elevated duty of care.
Consider a paid coat-check counter at a theatre, or a parking lot where you have to pay to park your car. You will often see a sign that says something like “management is not responsible for damage or loss caused,” but local laws may contradict this and prevent its enforcement, especially an attended car park.
Fixed term vs. indefinite term
A bailor who leaves their property for a fixed term may be deemed to have abandoned the property if it is not removed at the end of the term, or within a reasonable length of time following. At that point, it may also convert to an involuntary bailment, for example abandoned property in a bank safe or a storage locker. This property might then go into trust holding, with the bailee holding it for some period, awaiting the owner.
If there is no clear term of bailment agreed upon, and the goods are deemed to be abandoned – the bailee is still obligated to give formal notice pursuant to the Repair and Storage Liens Act or the Commercial Tenancy Act that they intend to dispose of or sell the abandoned property.
In the case of commercial storage of goods, the storer/bailee also has a statutory right to dispose or liquidate the goods to satisfy overdue rent, and this is considered a lawful conversion of bailed goods, although notice may still be required.
If you find yourself with unwanted goods, vehicles, etc. left behind by someone, contact us. We may be able to help recover your costs.
Napier Bailiffs Ltd. is a private corporate Civil Enforcement Agency appointed by the Ontario Government to act on behalf of business, individuals, or municipalities to seize or repossess property and Commercial Landlords to evict Tenants. Pursuant to regulations within the Personal Property Security Act, Repair Storage Lien Act, Commercial Tenancies Act and Municipal Tax Act.
DISCLAIMER: We are not a law firm, the information provided is not intended to substitute for legal advice. Always seek appropriate legal counsel for your unique circumstances.