Also known as: bailor bailee relationship · bailor-bailee · bailment · bailor · bailee
Written by attorneys · grounded in primary & secondary sources — see below
A legal arrangement in which one party transfers possession of personal property to another for a limited purpose while retaining ownership. The recipient owes duties of care and must return the property or follow instructions upon termination of the arrangement.
Brianna Burke sold custom equipment to Boulder Construction under an installment contract. After Boulder stopped payment and repudiated future deliveries, Brianna instructed the warehouse bailee holding the next shipment not to release the goods. The bailee complied, preventing Boulder from obtaining the equipment despite its demand.
Atlas Logistics stored its inspection drone with TransWay Freight under a short-term bailment. TransWay auctioned the drone by mistake to a third party. Atlas recovered the drone's value at auction plus lost contract profits and interest because the bailee's unauthorized disposition constituted conversion.
Bianca Baker stored sealed crates of artwork with a bailee. The bailee opened the crates, removed pieces, and sold them. Because the bailee broke bulk, possession of the removed artwork reverted to Bianca, allowing her to pursue a larceny claim against the bailee.
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Zenith Cars stored transmissions in a third-party warehouse that issued negotiable receipts. Stone Motor took a security interest in the receipts rather than filing against the goods. The perfection through the documents gave Stone priority over a later judgment creditor even though the goods remained with the bailee.
A seller may stop delivery when the buyer becomes insolvent, repudiates, or fails to make a payment due before delivery. The seller must notify the bailee in time for the bailee to prevent release with reasonable diligence.
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Yes. When a bailee opens closed containers and misappropriates the contents, possession reverts to the bailor. The bailee's taking then becomes a trespassory larceny.
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A security interest in goods held by a bailee may be perfected by perfecting an interest in a negotiable document covering the goods. No separate filing against the goods themselves is required while the bailee holds them.
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A bailee is liable for conversion if it redelivers to the bailor after an adverse claim by the true owner, unless the bailee had no knowledge or reason to know of the adverse claim. Redelivery to a third party pursuant to the bailor's instructions also creates liability if the bailee knows the bailor lacks authority.
Supporting sources
…The Court found that the Historical Society had done nothing inconsistent with the theory that the painting was a "voluntary bailment or gratuitous loan" and had "utterly failed to prove that its possession of the portrait was adversary', hostile'." Id. at 474-475. The Court found further that the Historical Society…