Chapter 47 Personal Property and Bailment Business Law

Property • There are two kinds of property: 1. Real property which includes land property that is permanently attached to it, and • 2. Buildings, trees, soil, minerals, timber, and plants Personal property which consists of everything that is not real property. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 2 48

Personal Property • Tangible Property – All real property and physically defined personal property. – Buildings, goods, animals and minerals. • Intangible Property – Rights that cannot be reduced to physical form. – Stock certificates, certificates of deposit, bonds, and copyrights © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 3 48

Acquiring Ownership in Personal Property • Property can be acquired by: – – – – Possession or capture Purchase or production Gift Will or inheritance Accession Confusion Divorce © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 4 48

Ownership Acquired By Possession or Capture • A person can acquire ownership in unowned personal property by taking possession of it or capturing it. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 5 48

Acquiring Ownership by Purchase or Production • Purchasing the property from its rightful owner. • Producing a finished product from raw materials and supplies. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 6 48

Acquiring Ownership by Gift • A voluntary transfer of title to property without payment of consideration by the donee. • Three elements necessary to be a valid gift: 1. Donative Intent 2. Delivery 3. Acceptance © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 7 48

Gifts • Types of gifts: – Gifts inter vios are made during a donor’s lifetime that are irrevocable present transfers of ownership. – Gifts causa mortis are made in anticipation of death. – Uniform Gifts to Minors Act and the Revised Uniform Gifts to Minors Act establish procedures to make irrevocable gifts to minors. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 8 48

Ownership Acquired by Will or Inheritance • Will – gift to beneficiaries named in a will. • Inheritance – heirs stipulated in an inheritance statute. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 9 48

Ownership Acquired by Accession • Occurs when the value of personal property increases because it is added to or improved by natural or manufactured means. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 10 48

Ownership Acquired by Confusion • Occurs when fungible goods are commingled. • The owners share title to the commingled goods in proportion to the amount of goods contributed. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 11 48

Ownership Acquired by Divorce • When a marriage is dissolved by a divorce, the parties obtain certain rights in the property of the marital estate. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 12 48

Mislaid Property • Property is mislaid when its owner voluntarily places the property somewhere and then inadvertently forgets it. • The owner of the premises where the personal property is mislaid is entitled to take possession of the property against all except the rightful owner. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 13 48

Lost Property • Personal property that an owner leaves somewhere because of negligence, carelessness, or inadvertence. • The finder of lost property obtains title to the found property against everyone except the true owner. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 14 48

Estray Statutes • Many states have enacted estray statutes that give a finder of mislaid or lost property clear title to the property if certain requirements are met: – Reporting the find to an appropriate government agency. – Advertising the lost property – The owner not claiming the property within a stated time period (e. g. , one year). © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 15 48

Abandoned Property • Property is classified as 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. • Anyone who finds abandoned property acquires title to it. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 16 48

Bailments • Occurs when the owner of personal property transfers the property to another to be held, stored, delivered, or for some other purpose. • Title to the property does not transfer. • Bailor – the owner of property in bailment. • Bailee – a holder of goods who is not a seller or a buyer. – A warehouse or common carrier © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 17 48

Parties to a Bailment Bailor Goods transferred for safekeeping, storage, or transportation © 2007

Elements Necessary 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. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 19 48

Elements Necessary 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. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 20 48

Ordinary Bailments 1. 2. 3. Bailments for the sole benefit of the bailor Bailments for the sole benefit of the bailee Bailments for the mutual benefit of the bailor and bailee © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 21 48

Ordinary Bailee’s Duty of Care Type of Bailment Duty of Care Owed by Bailee Liable to Bailor for For the sole benefit of the bailor Slight Gross negligenc e For the sole benefit of the bailee Great Slight negligenc e For the mutual benefit of the bailor and bailee Ordinary negligenc e © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 22 48

Duration and Termination of Bailments • Bailment for a 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. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 23 48

Special Bailments Common Carriers Warehouse Companies Innkeepers © 2007 Prentice Hall, Business Law, sixth

Warehouse Company • Warehouser is bailee engaged in storing property for compensation. • Owes duty of reasonable care. – Liable only for loss from their own negligence. – Can limit dollar amount of loss if offer bailor opportunity to increase limit at an additional charge. • Warehouse receipt issued by warehouser indicate lien on stored items for expenses of storage. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 25 48

Common Carrier • Common carriers offer transportation services to public. – Mutual benefit of both parties • Goods delivered to them by consignor or shipper. • Held to duty of strict liability – If goods are lost or damaged, carrier is liable – Some exceptions – Can limit liability by offering bailor an opportunity to purchase higher limit. • Bill of lading is a document of title issued when goods are received. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 26 48

Innkeeper • Held to the strict liability standard • Most states have enacted Innkeepers’

Special Bailee’s Duty of Care Type of Bailee Liability Limitation on Liability Common Carrier Strictly liable except for: 1. Act of god, act of a public enemy, order of the government, act of the shipper, inherent nature of the goods May limit the dollar amount of liability by offering the bailor the right to declare a higher value for the bailed goods for an additional charge. May limit the dollar amount of liability by offering the bailor the right to declare a higher value for an additional © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman charge. Warehouse Company Ordinary negligence 19 - 28 48

Special Bailee’s Duty of Care (continued) Type of Bailee Liability Limitation on Liability Innkeeper Strictly liable State statutes may limit the liability of an innkeeper for others’ rights © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 29 48

Documents of Title • Negotiable instruments developed to represent the interests of the different parties in a transaction that uses storage or transportation between the parties. – Warehouse Receipts – Bills of Lading • Article 7 of the UCC governs documents of title. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 30 48

Warehouse Receipts • A written document issued by a person who is engaged in the business of storing goods for hire. – e. g. , warehouse company or storage company • Often a preprinted form drafted by the warehouseman. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 31 48

Bill of Lading • Document of title that is issued by a carrier when goods are received for transportation. • Issued by: – Common carriers – Contract carriers – Freight forwarders – Other persons engaged in the business of transporting goods for hire © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 32 48

Through Bill of Lading • A bill of lading that provides that connecting carriers may be used to transport the goods to their destination. • Original carrier that issued the bill of lading is liable for any damages or loss to the goods caused by the connecting carrier. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 19 - 33 48