16th April 2019
From the hire of company cars to the shipping of goods, the term ‘bailment’ encapsulates one of the most common forms of legal relationship for those operating a business.
‘Bailment is a term which is often unfamiliar to those who are unwittingly subject to its rules, that is, until a dispute arises.’
Tim explains this term, and what can be done to manage the risks effectively.
At its most basic, bailment is a legal relationship which arises in circumstances where one person is in possession of goods belonging to another. The goods must be something tangible, such as a car, cargo or equipment, so this does not relate to intangible assets such as debts or intellectual property rights.
In order for the relationship to arise, a person (the bailee) must voluntarily and consensually take possession of movable goods from the bailor, who retains ownership.
A typical example would be where a driver delivers their vehicle to a mechanic for repair. The mechanic receives the vehicle from the car owner so that the repairs can be carried out. It is expected that the mechanic will receive payment for the services provided, but ownership of the vehicle will remain with the owner at all times.
Another example may be where a manufacturing business allows a shipping company to collect goods from a distribution centre so that those goods can be delivered to a customer. Although ownership of the goods would never pass to the shipping company, they would be entitled to payment for the provision of their services. In return, the manufacturing business would have certain expectations as to how those goods are treated while in transit. These expectations are reflected in the law governing bailment
These two examples demonstrate the numerous circumstances in which a bailment relationship can be implied.
Once you have entered into a relationship which involves bailment, it is important to understand the obligations on both sides in order to avoid a dispute and to protect the business if a dispute should arise.
If you are the owner of the goods, the car driver or the manufacturing company in the scenarios above, you must:
For the person or company in possession of the goods (ie the mechanic or the shipping company), they must:
These terms are implied by the law but can be varied by contract or statute. If a dispute does arise, you should consult a dispute resolution solicitor to establish the position and the full range of obligations affecting your business.
Disputes usually arise if either party is considered to be in breach of its obligations arising from the bailment in question. For example:
There are a range of claims which can be brought against the offending party, including:
It is important to note that the above actions are but a few of those available to an aggrieved party under the terms of a bailment. The complex nature of this area of law and broad range of potential actions underline the importance of any dispute being referred quickly to a specialist solicitor.
In the event that your claim is successful, there are a number of remedies available which can include;
In most cases, the legal costs would be paid by the losing party and as such the risks of a claim can be significant.
There are a number of problems which can arise from a bailment dispute and your solicitor will be able to advise on the best way of solving these without escalating to litigation.
For example, if the owner of the goods fails to collect them, how can the person dispose of those goods? Can the person in possession charge for storage or sell these items?
The answer to such questions will depend entirely on the circumstances of each individual case and the potential risk for your business.
As specialists in dispute resolution, we can provide tailored advice to ensure that you take the most appropriate steps to reduce the risk to your business and to ensure that you are fully aware of your obligations and the options available to you.
For advice on any of the above, please contact Tim Newsome on 01782 525011 or email firstname.lastname@example.org.
This article is for general information purposes only and does not constitute legal or professional advice. Please note that the law may have changed since the date this article was published.