978-0077733711 Chapter 23 Lecture Note

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Chapter 23 – Personal Property and Bailments

CHAPTER 23

PERSONAL PROPERTY AND BAILMENTS

I. OBJECTIVES

This chapter’s objectives are to acquaint students with the concept of property, to examine the

various classifications of property, and to explore the ways that ownership of personal property

can be obtained. The chapter also surveys the law of bailments. After reading the chapter and

attending class, a student should be able to:

1. Understand the concept of property as a bundle of rights that the law recognizes.

2. Differentiate personal property from real property.

3. List the primary ways to acquire ownership of personal property.

4. Explain how the rights of finders of abandoned, lost and mislaid property differ.

5. List and discuss the elements that are necessary for making a valid gift of property.

6. List the three essential elements of a bailment.

7. Explain the basic duties of the bailee and the bailor of personal property.

8. Discuss the special rules applicable for bailments to common carriers and hotelkeepers.

9. Discuss the special rules applicable to bailments covered by negotiable documents of title,

including warehouse receipts and bills of lading.

II. ANSWER TO INTRODUCTORY PROBLEM

A. The first question following the introductory hypothetical inquiries as to the ownership of an

item created by an artisan. In this instance the artisan Claudio, would be the owner of the

ring he created. Although he is employed as a jeweler and his work product in the course of

his employment would be the property of his employer, in this instance he created the ring

outside of his working hours using materials he had paid for himself.

B. The second question asks whether an engagement ring given in anticipation of marriage

would be considered a completed gift—or whether it would be a conditional gift that might

be revoked. Gifts given in contemplation of marriage commonly are considered to be

conditional gifts made on an implied condition that marriage between the donor and the

donee will take place. Thus it could be revoked if the donee decided to call off the marriage.

C. The third question raises the issue of the responsibility of someone who finds an item that has

apparently been lost or mislaid. In this instance, Sandra, the custodian who found the ring in

the bathroom, should have given it to her employer to hold for the true owner. Because the

ring is considered mislaid property, the restaurant has the better right to the ring than the

finder—Sandra.

D. The fourth question deals with the rights of someone who acquires an item from someone

who does not have good title to it. In this instance, by paying $200 to Sandra for the ring,

Gloria would obtain only whatever right to the ring that Sandra has. Because Sandra would

be obligated to return the ring to the true owner, Cheryl, if Cheryl discovered that Sandra has

the ring, Gloria too would be obligated to give the ring back to Cheryl as Gloria has only the

same rights to it that Sandra has.

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Chapter 23 – Personal Property and Bailments

E. The fifth question raises the issue of whether it is ethical to use someone else’s property for

your personal benefit without their implicit or explicit permission. Most would say that its

desirable ethically to have at least some basis for concluding that you have the other person’s

implicit approval—and that if you do not—you should seek to get their explicit approval.

III. SUGGESTIONS FOR LECTURE PREPARATION

A. Introduction

1. Discuss the nature of property and give examples of the importance of private property in

history and in a free enterprise system.

2. Indicate that property is a bundle of rights. This can be emphasized by asking students

what they may do with a car they own. (Possess it, sell it, rent it, give it away, devise it,

or destroy it.) You might compare the rights that the tenants and landlord have in the

same building. This exercise will show students that the bundle of rights can be

distributed to different people. Emphasize that there is no property unless a society’s law

recognizes its existence. Note that extending property status is tantamount to granting a

monopoly to the owner. Ask the students about the reasons a society would grant such a

monopoly. The students should discern that greater productivity from members of society

and greater wealth for society are the reasons our legal system recognizes property rights

for individuals.

3. Distinguish real from personal property.

4. Distinguish tangible from intangible property. Give examples of some important forms of

intangible property, such as copyrights, trade secrets, trademarks, and patents.

B. Acquiring Ownership of Personal Property

1. List on an overhead or the chalkboard the ways in which one may obtain ownership of

personal property.

2. Discuss acquisition of property by production and sale. Give examples of how a person

may obtain ownership by producing property. E.g., building a table from lumber or

writing a musical composition. Note that purchase is the most common manner in which

a person obtains ownership of personal property. Nearly all property ownership is

transferred by purchase.

a. This is a good time to review or incorporate the materials in the Formation and Terms

of a Sales Contract chapter concerning title and third parties.

3. Discuss how one can obtain ownership of wild animals by catching or killing them, with

the exception of endangered species.

4. Explain the rights of finders of lost, mislaid, and abandoned property. Distinguish and

give examples of these three different categories of property.

5. Students should learn to answer the following questions: (1) When is property lost,

mislaid, or abandoned? (2) Who has the right to possession of property that is found? and

(3) Who has title to property that is found? The answer to the first question determines

the answer to the last two. Indicate that whether property is lost, mislaid, or abandoned

must often be proved circumstantially. Emphasize the criteria that enable a person to

determine whether found property is misplaced, lost, or abandoned. Check to see

whether state or local laws provide for advertising found property or taking it to the

police, and what the statute of limitations is for recovering personal property.

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Chapter 23 – Personal Property and Bailments

Corliss v. Wenner and Anderson (page 646). In this case, the Idaho Court of Appeals held

that gold coins discovered by a contractor and his employee while excavating soil for a

driveway were not abandoned property or treasure trove that belonged to the finder, but

rather should be considered to be the property of the owner of the premises.

Points for Discussion: Ask your students whether they agree with the court’s decision?

Note the policy reasons the court cited for declining to hold that the gold coins should be

viewed as “treasure trove” with the finder acquiring ownership of them.

Additional Examples: Problem Cases #1 and #2.

Ethics in Action (page 649). Ask the students how they would respond to the question

posed by the author at the end of the article.

6. Briefly discuss acquisition by leasing. Stress that the lessee acquires only possession and

use rights, as opposed to ownership, of the leased property.

7. Discuss acquisition of property by gift. Note that to make a gift, the donor must intend to

make a gift (donative intent) and must voluntarily deliver the property to the donee

(deliver). It should be emphasized that delivery is required, because otherwise promises

to make gifts could be fabricated by donees. Relate this to the consideration requirement

in contract law and the general principle that promises to give gifts are unenforceable.

Give examples of situations in which there has been delivery and situations in which

there has not. Discuss and give examples of symbolic delivery.

Example: Problem Case #3.

a. Emphasize that a gift causa mortis is a conditional gift. It is ineffective if any of

three events (set forth in the text) occurs. Explain why gifts causa mortis are

revocable, whereas gifts inter vivos are not. Also note that a gift causa mortis takes

precedence over a will that states how the property will be distributed.

b. Discuss other types of conditional gifts such as engagement rings.

Lindh v. Surman (page 649): An engagement ring is an inherently conditional gift,

with marriage an implied condition of the transfer of title. Accordingly, the gift does

not become absolute until the marriage occurs. The court rejects the traditional fault-

based approach, under which Rodger would have lost the case because he broke the

engagement. Instead, the court adopts and applies a “no-fault” approach. Under this

approach, the giver of the engagement ring is entitled to recover it (or its value) when

the engagement is broken, regardless of which party is responsible for having ended

the relationship.

Points for Discussion: Ask the students whether they agree with the majority of the

court or with the view expressed by the dissenting judge. As a matter of public policy,

which approach–the no-fault rule or the fault-based rule–is preferable in engagement

ring cases?

Example: Problem Case #4.

c. Briefly discuss the Uniform Transfers to Minors Act.

8. Discuss confusion as a means of gaining ownership of property. Explain that confusion

exists only with fungible goods, such as grain or oil, that cannot be separated once they

are mixed. Another critical question is whether one of the owners deliberately or

negligently commingled the property. The wrongdoer must bear the loss of his intentional

or negligent act.

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Chapter 23 – Personal Property and Bailments

9. Discuss accession and distinguish it from confusion. Note that the law of accession

applies when someone adds to or changes the character of another’s property. Note the

role of wrongful or negligent conduct in determining each party’s ultimate rights in the

improved property.

Example: Problem Case #5.

C. Bailments

1. Introduce the concept of bailment by giving students some familiar example of situations

that would constitute bailments.

2. List and discuss the elements of a bailment. Give special emphasis to the element of

control, which is the most important element in determining whether a bailment exists.

Use examples of bailments and non-bailments to illustrate the elements of a bailment.

Stress the role that contracts–express and implied–play in the creation of bailments.

Example: Problem Case # #6.

3. Discuss and define the three traditional categories of bailments (bailments for the benefit

of the bailor, bailments for the benefit of the bailee, and mutual benefit bailments), and

explain the significance of a bailment’s classification. Also mention the special types of

bailments created when professional bailees, such as innkeepers and common carriers,

take possession of property. Note that these professional bailees are held to a higher

standard of care, usually that of an insurer.

D. Rights and Duties of Bailee and Bailor

1. Discuss the bailee’s duty of care under the traditional test. Discuss the modern trend of

holding bailees to a duty of reasonable care that takes into account a number of factors,

including the type of the bailment.

Example: Problem case #7.

2. Discuss the bailee’s duty to return the property. Note that there is a rebuttable

presumption of negligence on the part of the bailee if the goods have been damaged,

destroyed, or lost. The bailee must come forward with evidence showing that it acted

reasonably.

a. You may want to clarify the duty to return with regard to fungible property. Also,

some care should be taken in explaining the bailee’s dilemma when a third party

claims an interest in the bailed property. Using an example may clarify the ambiguity

here. Such a dilemma arises, for instance, when a person buys a camera on credit and

the seller takes a security interest in the camera. If the buyer takes the camera to a

repair shop, and the seller tries to repossess the camera when it is at the repair shop,

the repair shop needs to know what to do. This is a good problem for the students to

address in class.

3. Discuss the enforceability of limitations on the bailee’s liability. You might begin by

asking students whether they have seen signs posted in parking garages, cloakrooms, and

restaurants that the proprietor is not responsible for loss of items left with it. Next pose

the question whether such disclaimers are enforceable. Special emphasis should be placed

on the public policy against a person escaping liability for injuries he has caused. Also

point out that for many bailors–especially consumers–contracts with such clauses are

presented by the bailee on a take-it-or-leave-it basis, leaving no room for negotiation.

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Chapter 23 – Personal Property and Bailments

Weissman v. City of New York (page 654). Where the bailor took possession of the bailed

property, and had the only key to the area where it was stored, a bailment was created.

Subsequently, the bailor was negligent and breached its duty of care. The court refused to

enforce an exculpatory clause in an earlier contract between the parties, finding that the

nature of the relationship had changed and that the bailor could not disclaim liability for

its own negligence.

Example: Problem Case #8.

4. Discuss the bailee’s right to compensation. Indicate that a bailee may either be gratuitous

or compensated.

5. Discuss the bailor’s liability for defects in bailed property. Concentrate on the factors that

determine what duty the bailor owes to the bailee to discover and disclose defects in the

bailed property. Include some reference to the possible relevance of product liability

theories.

E. Special Bailment Situations

1. Acquaint students with the special liability of common carriers and hotelkeepers and

discuss with students the reasons why they are held to a higher level of liability: (1) To

ensure care by these types of bailees and (2) To protect the unsuspecting public from

careless bailees. It should be emphasized that liability may be limited, although not

eliminated.

Example: Problem Case #9.

3. Briefly discuss the usual rule that rental of a safe-deposit box creates a bailment.

4. Discuss involuntary bailments. Point out the apparent inconsistency in imposing bailee

status on persons who have not agreed to assume control of the property. Ask the students

why the law creates involuntary bailments (i.e., to ensure the protection of another’s

property). Also ask the students what type of bailment most involuntary bailments are

(solely benefiting the bailor) and what duty of care the bailee owes the bailor. Relate this

to the rules applicable to finders of lost and mislaid property.

F. The Global Business Environment: Liability of Carriers of Goods (page 658). Discuss the

various statutes and conventions that address the duties and liabilities of those who carry

the goods of others in international commerce.

G. Documents of Title

Define and give examples of documents of title. When explaining negotiable documents

of title, draw parallel comparisons with negotiable instruments, as many of the rules are

identical or similar.

Also review the law of bailments as it affects the duty of the warehouseman or carrier.

Note especially the attempts to limit liability.

Gyamfoah v. EG&G Dynatrend (now EG&G Technical Services) (page 659): Where a

bailor to a warehouseman was able to establish delivery to the bailee and the bailee’s

failure to redeliver all of the goods bailed when demand for their return was made, there

was a rebuttable presumption of conversion on the part of the warehouseman/bailee.

When the bailee was unable to provide any evidence or explanation for the disappearance

of the goods, the bailee was liable for damages as measured by the value of the lost

goods.

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Chapter 23 – Personal Property and Bailments

Points for Discussion: What is the public policy rationale for creating the rebuttable

presumption in favor of the bailee to a warehouseman?

Example: Problem Case #10.

IV. RECOMMENDED REFERENCES

A. Restatement of Property, American Law Institute.

B. Barlow Burke, Personal Property in a Nutshell, West, 2003.

C. Linda Rusch, ABCs of the UCC: Documents of Title, Philadelphia, 2004.

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