Bailment Duties

Nature of Bailor and Bailee’s Rights

The bailor continues to be the owner of the goods, despite the transfer of possession. He may sue to recover the goods against a third person for conversion.  He can also sue for damage caused to the goods by a third party.

The bailee has a so-called “special property” in the goods.  The nature of the bailee’ rights will depend on the type of bailment.  The bailee can sue to prevent third parties interfering with the goods. He can assert the rights of the owner against wrongdoers.  He may only recover as to the extent of his interest in the goods.  The bailee may have rights under the terms of his contract.

The duties of bailor and bailee will depend to some extent on the nature of the bailment. Bailments range from leasing or hiring in which the bailor as lessor. / hirer might be the supplier of goods to a consumer lessee / hiree, to repairing and servicing where the bailor is the person whose goods are repaired or serviced by the bailee.

The common law implied obligations in non-consumer contracts, may be varied by the terms of the contract. Most statutory obligations in favour of consumers may not be varied in a business to consumer contract.

Bailor’s Duties

The bailor is presumed to give certain implied warranties at common law and by statute. The common law obligations may be varied by contract. Most statutory obligations in favour of consumers may not be varied in a consumer contracts.

The common law implies a warranty by the bailor, that he has good title to the goods.  He warrants that he is either the true owner or has the true owner’s authority to bail the goods.  The bailor must not repossess the goods prematurely.  However, in the absence of a contract to the contrary, the bailor is not liable for a delay in repossessing the goods.

In certain circumstance, where the bailee incurs reasonable expense in caring for the goods, the bailor is obliged to reimburse this cost. This may arise where the bailee is obliged to incur expenditure outside the contemplation of the parties.

The implied warranty at common law by the bailor who supplies goods for use by the bailee, is that he takes reasonable care to ensure that the goods are fit for purpose. The bailor covenants that he will deliver goods which are safe and suitable for their proposed purpose and use. This applies for example, to the leasing and hiring of equipment.

Consumer Cases

The bailor must make the contract in the course of a business, while the bailee must be a consumer. The goods must be of a type ordinarily used for private use and consumption.  It is an implied term, that for a reasonable period spare parts and adequate servicing will be available. They may be made available by the seller or someone acting on his behalf.

Much of the legislation in relation to the sale of goods applies to the leasing/hiring of goods, which constitute a bailment. Terms are implied into the contract by statute.  The Consumer Credit Act has the effect of implying most of the obligations that apply to the sale of goods, to consumer hire and lease agreements. The Sale of Goods and Supply of Services implies many of the sale of goods implied warranties into hire purchase contracts with consumers.

In the case of a hire and leasing of goods to a consumer, the Consumer Credit Act implies conditions almost identical to those which apply under the Sale of Goods Act. There are implied conditions in relation to merchantability, good title, suitability and fitness for purpose.   Both the hirer and finance company are liable for breach of the conditions.

Bailor’s Common Law Obligations

Where the bailee provides services in relation to the goods or undertakes works to them, the bailor has an obligation to pay. This may arise by the terms of a contract or under principles of restitution. This may, for example, apply to dry-cleaning, car repair or the provision of other services or works to the goods.

Where the statutory consumer hire provisions do not apply (e.g. loaned goods or non-consumer supplies) the bailor’s obligations are less. Formerly, it was the common law rule that the standard implied was that the bailor must not wilfully or by gross negligence cause loss or damage to the goods.  In recent times the judicial trend has been to apply the law of negligence.  However, a lower of duty of care may apply than in the case of a bailment by contract.

The broad consumer contract principles that the goods conform with their description as to their nature and quality are likely to apply at common law, regardless of the presence or absence of a contract and the implied statutory provisions that follow.

Obligations of Bailee

Generally, a person is not obliged to protect another’s property if they have no pre-existing relationship.  However, if he has possession of goods under a bailment, a duty to take care of the goods arise.  The duty arises irrespective of whether payment or a contract is involved.  It arises irrespective of whether the bailee receives any benefit, and even arises, where the benefit is wholly in favour of the bailor.

Where a bailment is for reward, there is usually a contract, and the bailee’s obligations are determined by the contract and / or the ordinary law of negligence.  Much the same standard applies to the contractual obligation. The bailee may have a choice of remedy where there is a contract.

The Sale of Goods and Supply of Services Act, 1980 provides that a person who provides a service in the course of a business, impliedly warrants that he has the necessary skill to render the service, and will do so with due care and skill. This obligation will apply to bailments by which work is done on goods which are entrusted to another for that purpose.

Negligence and Duty of Care

The ordinary law of negligence requires persons in a relationship of proximity, including where one has possession of another’s goods for reward, to take reasonable care to avoid loss or damage being caused to the other. Failure to do so may give rise to liability to the owner of the goods or the bailor, (if different) for negligence.

The burden of disproving negligence lies with the bailee.  He must prove that he took good care of the goods.  This approach is justified, as the bailee is in a better position to prove or disprove what has happened to the goods. The principle applies to the proof of negligence. Breach and causation must be proved in the normal way.

The consumer hiree must, by statute, l take all reasonable care of goods which are let to him under a consumer-hire agreement and shall be liable to the owner if he fails to take such care.  The hiree shall, within 10 days of receipt of a request in writing from the owner of the goods let to the hirer under a consumer-hire agreement, inform the owner where the goods are at the time when the information is given or, if it is sent by post, at the time of posting.

Contractual Duties

If the bailment is contractual (e.g. leasing or hiring) the terms of the bailee’s duties will be expressed or implied in the contract.  Breach of the terms will be a breach of contract, subject to the rights and remedies that flow from it.

In very many cases, there will be an express or implied contract which governs the bailment.  However, even if there is no contract, (e.g. goods are lent) then the common law duty to take care of the goods arises.  The obligations are similar to those that apply to the civil wrong of negligence.

A bailee’s duty is independent of his capacity to contract. However, persons under age or of unsound mind may be subject to reduced obligations.

Extent of Bailee’s Duties

The extent of the bailee’s duty to take care of the goods depends on the nature of the relationship. Traditionally, where a bailment was for reward or consideration, the duty that applied was that applicable under the general law of negligence.  When a bailee derives no benefit from taking the goods or is performing a free service for the bailor, a lesser standard of care may suffice.

The modern approach taken by the courts is to apply the principles of negligence in all cases. However, under this approach, the circumstances of the particular case determine what constitutes negligence. Therefore, there is still an effective difference in duty, determined by the nature of the bailment.

The general principle is that the bailee should take such care of the goods that a prudent man would take of his own goods.  If the bailment is a gratuitous loan for the benefit of the bailee, more care is expected of him than of a bailee for reward.  In this case, he may be liable for slight negligence.

In the case of a bailment where the bailee receives no benefit, a lesser standard applies. He must take the same care of the goods which he would take of his own goods. A higher standard of care will be required where the bailment is for the benefit of the bailee.

Deviations and Redelivery

Where the bailee deviates from the intended method of carriage or storage, he may be held strictly liable for loss or damage that arises.  Effectively, he is deemed to take the greater risk by reason of the deviation.

The deviation principle may apply more widely than first appears. Where goods are retained beyond a permitted period or stored in a different place, the enhanced level of liability may arise because the principle of deviation applies. The bailee who deviates is likely to be held automatically responsible for loss and damage unless the loss or damage would have happened in any event.

The deviation of itself may constitute a breach of the underlying contract, which entitles the bailor to terminate it and reclaim the goods.  This act may deny the bailee of the benefit of an exemption or limitation clauses in the contract, which might otherwise protect him from liability.

Re Delivery

The failure to re-deliver the goods may in itself be a deviation so that the bailee incurs an enhanced level of liability.  If the inability to deliver is due to the bailor’s fault, the principle of deviation will not apply, and the bailee may become an involuntary bailee, with a lesser level of responsibility.

The bailee may be liable for conversion or detinue of the goods, where he fails to redeliver them when due. See the articles in relation to the civil wrongs of detinue and conversion.

The consumer hirer shall, within 10 days of receipt of a request in writing from the owner of the goods let to the hirer under a consumer-hire agreement, inform the owner where the goods are at the time when the information is given or, if it is sent by post, at the time of posting.

Bailment under Service Contracts

In a contract for the provision of services, the Sale of Goods and Supply of Services Act provides that the service provider must provide the services with reasonable care and skill.  It is a further implied term of the contract, that the supplier has the necessary skill to render the service and that he will supply the service with due skill, care and diligence.  These implied terms will cover many and diverse arrangements, such, for example, the carriage of goods and warehousing.

The service provider’s / bailee’s expertise and skills are relevant to its duties.  For example, a business which holds itself out as a warehouse keeper would have higher duties to take care of the goods than another type of business which simply receives goods in the course of its business. A warehouse keeper which holds itself out as having special security systems etc. would have higher duties than an ordinary warehouse keeper.

Where a bailment involves the carriage of goods, there is a duty not to deviate from the stipulated route or the other key terms and conditions. The bailee may, by his breach of contract, expose the goods to risks different from those which are ordinarily agreed to be accepted.  In these circumstances, the bailee is more “strictly” liable for harm that befalls the goods in the course of the deviation, without the need to prove further fault.

Liability Issues

A bailee is responsible for the acts and omissions of his employees, in accordance with the principle of vicarious liability.  Vicarious liability may apply even if the employee is acting outside the course of his duties. An employer may be liable for the dishonest acts of his employees in relation to bailed goods.  The principle may be limited to goods to which his circumstances of employment gives access.

Apart from vicarious liability, a bailee usually remains responsible for the actions of his employees, independent contractors or service providers.  He cannot avoid his duties by delegating them to another.

The bailee is obliged to return the goods when required.  If he does not do so, legal action for detinue may be taken, in order to require him to do so. If the bailee is unable to return the goods, by reason of having lost, destroyed or parted with them, he is liable to compensate the owner. If there is a contract, its express and implied, terms will cover the position.  The usual rights and remedies arising from breach of contract will be available to the owner.

Expenses may be incurred by the bailee in order to preserve the goods or deliver them to a safe place.  Where this arises outside the terms of the contract, a right of reimbursement or salvage may apply.

Limitation of Liability

A contract between the bailor and bailee may reduce, exclude or limit the liability of the bailor or bailee in respect of the loss of or damage to the goods.  The limitation must be in fair and reasonable terms under the Sale of Goods and Supply of Services Act in the case of certain types of contract and certain types of exclusions and limitations. The obligation to provide services with due skill and care may be limited and excepted in a consumer contract, only if and so far, as it is fair and reasonable.

Many cases have arisen over the years in relation to clauses which purport to limit the legal liability of the bailor.  The courts do not favour exemption clauses and interpret them against the interests of the person who puts them forward. An exemption clause is available, only in so far as the bailment is being undertaken in accordance with the terms of the contract.

If this obligation is breached, the exemptions are not available. This on the basis that they are interpreted as exempting liability, on the assumption that the contract is being performed in the required way.  Because the courts interpret exemption clauses against the interests of the person putting them forward, any use of the goods outside the terms of the bailment contract may be enough to disapply the exemption clause.

References and Sources

Irish Texts

Modern law of personal property in England and Ireland 1989  Bell

Consumer Law Rights & Regulation 014       Donnelly & White

Commercial Law White           2012 2nd ed

Commercial & Economic Law in Ireland        2011 White

Commercial Law 2015 Forde 3rd ed

Irish Commercial Precedents (Looseleaf)

Commercial & Consumer Law: Annotated Statutes 2000  O’Reilly

UK Texts

Personal Property Law: Text and Materials  2000  Sarah Worthington

Personal Property Law (Clarendon Law Series) 2015 Michael Bridge

The Law of Personal Property 2017   Professor Michael Bridge and Prof. Louise Gullifer

The Principles of Personal Property Law 2017  Duncan Sheehan

Crossley Vaines on Personal Property 1967 by J C Vaines

The Law of Bills of Sale 2017 James Weir

Palmer on Bailment 2009  Norman Palmer

The Reform of UK Personal Property Security Law: Comparative Perspectives  2012 John de Lacy

The Law of Personal Property Security 2007  Hugh Beale and Michael BridgeCases