Sub-Bailment or New Bailment
If the person who holds goods bails them or gives them to a third party, then there may be a sub-bailment or a new substituted bailment. If the new bailee is intended to be a subordinate instead of a substitute, the original bailee continues as such; this is a sub-bailment. This may or may not be permitted under the terms of the bailment.
A sub-bailment may arise when a person who is himself a bailee, gives or entrusts the bailed goods to another. Under the sub-bailment, the original bailment continues, and the original bailee retains his responsibilities.
This is in contrast to a case where the original bailment ends and a new substituted bailment takes place. In this latter case, the original bailee’s liability will be limited to his duty to his care in finding the replacement. It may also be governed by the terms of a contract.
It is a question of interpretation of the agreement as to whether there is the authority to sub-bail. The circumstances may imply that sub-bailment is not possible. For example, where goods are warehoused, the obligation to take care of them is likely to be presumed personal and incapable of being delegated.
Permission for Sub-Bailment I
Where sub-bailments are permitted, the bailee will be liable for negligence in selecting the sub-bailee. He may also be responsible for the failure to perform the delegated duty. The sub-bailee’s duties are similar to that of the bailee. The sub-bailee can look for payment to the immediate sub-bailor only.
If a bailee parts with possession of the goods without authority, this will be a deviation. He will be strictly liable for harm that befalls the goods. He may be liable to the bailor for conversion. The bailor or true owner may recover the goods. For example, if a person sells goods that have been hired, the person purchasing will take them subject to the hiring.
There may be a term of the original bailment contract, which allows the sub-bailment. The contract may equally prohibit sub-bailment. This may be an express or implied term. he bailee may act as an agent of the bailor in relation to sub-bailment in some cases
If the identity of the bailee is critical, where, for example, he has particular skills relevant to the bailment, the bailment is likely to be interpreted as personal. Generally, sub-bailment and sub-contracting will be permitted unless the identity of the bailee is of importance and the bailee has been selected because of his/ its personal characteristics or unique qualities.
Permission for Sub-Bailment II
If a sub-bailment is allowed, it must be within the scope of the express or implied permission. Goods may be given for a specific purpose which necessitates the use of a subcontractor and a sub-bailment. However, it does not follow that the goods may be given to any third party without restriction. If the bailee releases the goods to a person negligently in breach of his duty of care, he will be liable to the bailor, if damage is caused as a result.
If the sub-bailment is unauthorised, the bailee becomes strictly liable for any damage that occurs during the unpermitted sub-bailment. Exemption clauses are not available in this case.
If the sub-bailment takes place without the authority of the head bailor, the head bailor is not bound. The head bailor may recover the goods or their value. Both the bailee by reason of his unauthorised bailment and the sub-bailee by receipt of the goods may be liable.
Terms of Sub-Bailment
The terms of the bailor’s consent will determine to what extent the bailee himself may sub-bail the goods. In this case, two bailments arise. If the sub-bailment is with the consent of the bailor, there is a further bailment as between the head-bailor and the sub-bailee.
Generally, the original bailee will remain liable for his contractual, common law and statutory obligations. He will be potentially liable for negligence in selecting the sub-bailee, even if the sub-bailment is permitted.
The bailor retains his superior title, subject to such rights and restrictions as affect it. Where goods are loaned or hired, the borrower and hirer’s rights are subordinate to and, remains subject to the terms of the bailor’s title.
Duties of sub-bailee
The sub-bailee has the same general duties as every bailee. The sub-bailee is normally, although not necessarily, in a contractual relationship with the bailee.
If the sub-bailee damages the goods carelessly he is almost certain to be liable in negligence to the head- bailor. There is the requisite degree of proximity so that a duty of care arises. The head bailor may decide to ratify the bailment which will provide more absolute duties on the part of the sub-bailee to him.
If there are clauses which limit or exempt the liability of the bailee in the head bailment contract, then provided that they are in sufficiently wide terms, they may be available to the sub-bailee. The availability of the clauses depends on the express or implied terms of the contract.
The sub-bailee may acquire a lien over the goods for payment, in which event he may retain them until paid. Similarly. the sub-bailee may be entitled to salvage or expenses necessarily incurred preserving the goods.
Liability and Exclusion Clauses I
The bailee will owe duties to the sub-bailee. If the bailee acts as an agent for the bailor, the general law of agency may create a relationship of bailor and bailee between the bailor and sub-bailee. The bailor may ratify the bailee’s unauthorised act. See the principle of ratification in the law of agency.
The bailee owes duties to the bailor. A sub-bailee owes duties to the immediate bailee and to the head-bailor. The duties are independent of any contract. Questions of privity of contract do not preclude the duties and obligations.
If the sub-bailee damages the goods carelessly, he will be liable under the above general principles. The position in relation to carelessly allowing goods to be damaged or stolen by third parties is more problematical. In many cases, a duty of care may extend to avoiding the deliberate act of another.
Liability and Exclusion Clauses II
At common law, the bailee is entitled to exclude or limit his liability. Questions may arise as to whether the sub-bailee may rely on exemption clauses in the principal contract. See the articles of the carriage of goods by sea, where the matter has arisen many times.
Where the bailee is a consumer, the limitations on liability must comply with the standards in the Sale of Goods and Supply of Services Act. The limitations on liability must be reasonable in accordance with the criteria set out in that Act.