Book Title
Business Law with UCC Applications 14th Edition

978-0077733735 Chapter 29 Lecture Notes

April 10, 2019
Chapter 29 - Personal Property and Bailments
Chapter 29
Personal Property and Bailments
I. Key Words
Abandoned property (p. 710) Implied-in-law bailment (p. 714)
Bailee (p. 714) Innkeeper (p. 717)
Bailment (p. 713) Joint tenants (p. 710)
Bailor (p. 714) Joint tenants with the right
Carrier (p. 719) of survivorship (p. 710)
Chattels (p. 709) Law of finds (p. 711)
Chose in action (p. 709) Law of salvage (p. 711)
Common carrier (p. 719) Mutuum (p. 714)
Community property (p. 710) Ordinary negligence (p. 715)
Consignee (p. 715) Passenger (p. 720)
Consignment contract (p. 715) Personal property (p. 709)
Consignor (p. 715) Racial profiling (p. 721)
Constructive bailment (p. 714) Salvage (p. 711)
Cotenancy (p. 709) Salvor (p. 711)
Donee (p, 711) Severalty (p. 709)
Donor (p. 711) Slight negligence (p. 715)
Escheat (p. 710) Tenants in common (p. 709)
Gift in causa mortis (p. 712) Transient (p. 717)
Gift inter vivos (p. 711) Warehouse (p. 722)
Gratuitous bailment (p. 714) Warehouser (p. 722)
Gross negligence (p. 714) Warehousers lien (p. 723)
Implied-in-fact bailment (p. 714)
II. Learning Objectives
1. Give examples of tangible and intangible personal property.
2. Describe the methods of owning property with others.
3. Differentiate among lost property, misplaced property, and abandoned property.
4. Identify the requirements of a completed gift.
5. Explain the law that applies to stolen property.
6. Determine when a bailment occurs.
7. Name and describe the principal types of bailments.
8. Discuss the burden of proof as it relates to bailments.
9. Make clear an innkeepers duty to accept all guests.
10. Explain innkeepers’ duties of care to their guests and their guests’ property.
III. Major Concepts
29-1 Personal Property
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Chapter 29 - Personal Property and Bailments
Personal property is everything that can be owned except real estate. Anyone who finds
lost property must make a reasonable effort to find the owner. Misplaced property must
be turned over to the manager of the place where it is found. Abandoned property is
property that has been intentionally discarded by the owner and may be kept by a finder.
The Abandoned Shipwreck Act gives states the right to shipwrecks beneath their waters.
For a gift to be completed, the donor must intend to make a gift, it must be delivered to
the donee, and the donee must accept the gift. A thief acquires no title to goods that are
stolen and therefore cannot convey a good title to others.
29-2 Bailments
Bailment occurs whenever someone transfers possession and control of personal property
to another with the intent that the same property will be returned later. The principal types
of bailments are: bailments for the sole benefit of the bailor, bailments for the sole benefit
of the bailee, and mutual-benefit bailments. Under modern law, bailees owe a duty to use
reasonable care with the goods in their possession. When goods are lost or damaged
while in the possession of a bailee, the burden is on the bailee to prove that no negligence
was involved; if this proof cannot be made, the bailee will be held responsible for the
loss, Innkeepers are required to accept all guests unless there are no vacancies. They must
respect their guests’ right of privacy. With some exceptions, innkeepers are insurers of
their guests’ property. The Transportation Security Administration (TSA), under the
Department of Homeland Security, is responsible for protecting the United States’
transportation system. Common carriers of goods are liable as insurers of the goods they
ship regardless of whether they have been negligent. Public warehousers must accept
goods for storage by any member of the public willing to pay for the service. Private
warehouses are not for general public use.
IV. Outline
I. Personal Property (29-1)
A. Introduction
1. Personal property is everything that can be owned other than real estate.
2. Personal property is divided into tangible and intangible property.
3. Tangible personal property is property that has substance and that can be touched.
4. Intangible personal property is property that is not perceptible to the senses and
cannot be touched such as stock certificates and accounts receivable.
B. Ownership of Personal Property
1. Personal property owned solely by one person is owned in severalty.
2. Personal property owned by more than one person is owned in cotenancy.
3. When people own property as tenants in common, each cotenant’s share of the
property passes to his or her heirs upon death.
4. When people own personal property as joint tenants, each cotenant’s share of the
property passes on death to the surviving joint tenants.
5. In states that recognize community property, property that is acquired by the personal
efforts of either spouse during marriage belongs to both spouses equally, except for
gifts and inheritance.
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Chapter 29 - Personal Property and Bailments
C. Lost, Misplaced, and Abandoned Property
1. Finders of lost property have a legal responsibility, usually fixed by statute, to make
an effort to learn the identity of the owner and return the property.
2. Misplaced property must be placed with the proprietor of the place where the
property is found to be held for the owner.
3. When property is found and turned over to state officials, without any claim
registered by the finder, the property becomes the property of the state after a period
of time set by statute.
4. Abandoned bank deposits eventually become the property of the state.
5. Abandoned property, property discarded by the owner without the intent to reclaim
ownership of it, can be kept by anyone who finds it; and the finder obtains good title
to it, even as against the original owner.
D. Gifts of Personal Property
1. There are three requirements for a gift to be completed.
a. Donor must intend to make a gift.
b. The gift must be delivered to the donee.
c. The donee must accept the gift.
2. A gift inter vivos is a gift between the living.
3. Problems may arise when gifts are made to minors.
a. Effective January 1 2008, certain unearned income of children and students will
be taxed at the parent’s income tax rate.
b. The Uniform Transfer to Minors Act establishes a procedure for gifts to be made
to minors.
4. A gift in causa mortis is a gift made in contemplation of death, and it is ineffective if
the donor does not die as expected or if death is caused by circumstances other than
those feared.
5. The Uniform Anatomical Gift Act addresses gifts of human bodies, tissues, and
organs for medical education, research, and transplantation.
E. Stolen Personal Property
1. A thief acquires no title to goods that are stolen and, therefore, cannot convey a good
2. In the case of theft, the true owner never relinquished title to the goods; and even an
innocent purchaser, who acquired the goods in good faith and for value, would be
obliged to return the goods to the owner.
II. Bailments (29-2)
A. The Elements of a Bailment
1. A bailment is a transfer of possession and control of personal property to another with
the intent that the same property will be returned later.
2. A person who transfers property in a bailment is a bailor, and the person to whom
property is transferred is the bailee.
3. A bailment may be created by expressly stated terms.
4. A bailment may be implied by circumstances and there may be an implied-in-fact
bailment, an implied-in-law bailment, and/or a constructive bailment.
B. Principles of Bailment
1. In a bailment, neither the bailor nor the bailee intends that title to the property should
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Chapter 29 - Personal Property and Bailments
2. A bailment does not occur when the person in possession of the property has no
control over it.
3. When an individual loans goods to another with the intention that the goods may ne
used and later replaced with an equal amount of different goods, a mutuum, not a
bailment, occurs.
C. Bailments for Sole Benefit of Bailor
1. A bailment for the sole benefit of the bailor occurs when possession of personal
property is transferred to another for purposes that will benefit only the bailor.
2. The bailee owes a duty to use only slight care.
3. The bailee is required to refrain from gross negligence.
4. The bailee has no implied right to use the bailors property.
D. Bailments for Sole Benefit of Bailee
1. A bailment for the sole benefit of the bailee occurs when possession of personal
property is transferred for purposes that will benefit only the bailee.
2. The bailee is required to use great care because possession of the goods is solely for
the bailee’s benefit.
3. The bailee is responsible for slight negligence.
4. The bailee has the right to use the property for the purposes for which the bailment
was created.
5. Any ordinary and expected expense incurred in the use of anothers property must be
borne by the bailee.
E. Mutual Benefit Bailments
1. When personal property is transferred to a bailee with the intent that both parties will
benefit, a mutual benefit bailment results.
2. A consignment contract is a type of mutual benefit bailment.
3. The bailee owes a duty to use reasonable care.
4. The bailee is responsible for ordinary negligence and is responsible for ordinary
5. Many courts today apply the reasonable care standard to all types of bailments.
6. In a mutual benefit bailment, the bailee must use the property only for the express
purposes permitted by the bailor in the contract, and failure to do so results in
responsibility for damages regardless of the degree of care exercised.
F. Burden of Proof
1. In the past, the bailor had to prove the bailee was negligent in order to recover against
the bailee which was difficult because the bailor was not in a position to know what
caused the loss.
2. Most courts today shift the burden of proof in bailment cases to the one in the best
position to know what happened, the bailee.
G. Innkeepers, Carriers, Warehousers
1. Innkeepers
a. An innkeeper is the operator of a hotel, motel, or inn that holds itself out to the
public as being ready to entertain travelers, strangers, and transient guests.
b. The Civil Rights act of 1964 prohibits discrimination in the selection of guests for
reasons of race, creed, color, sex, or ethnic background.
c. Innkeepers must use reasonable care in protecting their guests from harm.
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Chapter 29 - Personal Property and Bailments
d. Guests are guaranteed exclusive and undisturbed privacy of rooms assigned by
the hotel.
e. With certain exceptions, innkeepers are held by law to be insurers of their guests’
f. Innkeepers are not liable as insurers in the following four cases:
(a) Losses caused by a guest’s negligence
(b) Losses to a guest’s property due to an act of God or a public enemy
(c) Losses of property due to accidental fire in which the hotelkeeper is not
(d) Losses arising out of characteristics of the property that cause its own
2. In most states innkeepers are further protected by laws limiting the amount of claim
any guest may make for a single loss.
3. State laws may also give an innkeeper the right to provide a safe or vault for the
protection of valuables, and a guest who does not use the safe or vault may not
recover against the innkeeper.
4. Innkeepers have a lien on their guests’ property for the payment of amounts owed.
5. Credit card blocking is a common method used by hotels to secure payment.
6. Carriers
a. Agencies responsible for protecting the nation’s transportation system and
supervising the entry of people and goods into the U.S. include the Transportation
Security Administration and the Department of Homeland Security.
b. Carriers are businesses that undertake to transport persons, goods, or both.
c. A carrier is a common carrier if it holds itself out to the general public to provide
transportation for compensation.
d. Common carriers of goods are insurers of all goods accepted for shipment and are
liable as insurers, regardless of whether or not they have been negligent, unless
there is proof that the damage comes within one of the following exceptions:
(a) Acts of God
(b) Acts of the public enemy
(c) Acts of public authorities
(d) Acts of the shipper
(e) The inherent nature of the goods
e. With some exceptions, common carriers must accept without discrimination all
goods offered to them for shipment.
f. Carriers may limit the amount of their liability to the value stated on the bill of
lading, which is the written contract between a common carrier and a shipper.
g. Today, the FAA has established regulations that require the screening of
passengers and property before entering an aircraft, and passengers who do not
consent to the screening must be refused transportation.
h. Common carriers may not discriminate in the selection of passengers on the basis
of race, color, national origin, religion, sex, or ancestry but may refuse passengers
under the following circumstances:
(a) When all available space is occupied or reserved.
(b) If they are disorderly, intoxicated, insane, or infected with a contagious
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Chapter 29 - Personal Property and Bailments
(c) When the carrier decides a passenger “is or might be inimical to safety.”
i. Racial profiling may not be a motivating factor in a carriers decision to refuse
j. When an airline flight is overbooked, airline passengers may be bumped if there
are insufficient passengers willing to voluntarily give up their seats.
k. Passengers who are bumped may be entitled to compensation.
l. Certain items cannot be carried on board an aircraft, and those who attempt to
bring banned items through checkpoints are subject to fines and criminal
m. Federal rules place limits on the liability of airlines for lost luggage.
7. Warehousers
a. A warehouser is a person engaged in the business of storing goods for hire.
b. A warehouse receipt is a receipt issued by a person engaged in the business of
storing goods for hire.
c. A public warehouser is one that owns a warehouse in which any member of the
public who is willing to pay the regular charge may store goods.
d. A warehouser whose warehouse is not for general public use is a private
e. A warehouser must use that amount of care that a reasonably careful person
would use, and failure to use such care makes the warehouser liable for losses or
damages to the goods.
f. A warehouser has a lien on the goods that are in the warehousers possession until
charges are satisfied.
V. Background Information
A. Cross-Cultural Notes
1. French pets and domesticated animals were voted “living beings” as opposed to
“personal property” with one result being that wealth French citizens can leave their
fortunes to their pets.
B. Historical Notes
1. Travel in the Middle Ages involved a great deal of risk, in part because of
unscrupulous innkeepers who robbed travelers. In England, to make travel safer,
government officials were assigned to inspect inns and arrest criminals. As a result,
the English inn evolved into a safe haven for the traveler. The common law guiding
innkeepers in England influenced the law in the United States.
2. The origin of the word hotel in American culture dates back to the late eighteenth
century when the owners of the famous Tontine Tavern changed its name to the City
Hotel, to invoke the more fashionable French word hotellerie.
C. State Variations
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Chapter 29 - Personal Property and Bailments
1. In California, New York, Tennessee, and Wisconsin a donor who breaks an
engagement is still allowed to recover the engagement ring. The theory being that the
ring was given solely in contemplation of marriage, and once the marriage is called
off the gift must be returned.
2. In the territory of Puerto Rico, every gift made by a person having no children or
descendents is revoked if the donor, after the gift, has or adopts children.
3. New York, Ohio, and many other states limit a hotel’s liability for theft of a guest’s
personal property if the hotel provides a safe or safe deposit box for their guests,
provides adequate notice of these safes, and states clearly the ramification of not
placing articles in them.
4. North Carolina applies a different standard. In North Carolina for any value over
$100, guests must notify the innkeeper in writing with an itemized list. The innkeeper
is then liable for the full amount reported.
5. In Iowa a person may file with the state department of transportation a complaint
against a common carrier that has violated the law and the amount of damages caused
by the violation. The cause appears, the Department of Transportation may
investigate and request a hearing.
6. Whether a school bus operator contracting to a public school system is considered a
common carrier varies among states. In Massachusetts, for example, a court ruled that
a bus operator was held to the same standard as a common carrier. Gallant by
Gallant v. Gorton, 581 F.Supp. 909 (D. Mass. 1984).
D. Quotations
1. When Samuel Clemens (Mark Twain) asked to borrow a book from a neighbor, the
neighbor agreed, but said, “I must ask you to read it here. I make it a rule never to let
any book go out of my library.” Several days later, when the neighbor asked to
borrow Clemen’s lawnmower, Clemens replied, “Why certainly. You’re more than
welcome to it. But I must ask you to use it here. You know that I make it a rule.”
VI. Terms
1. The term pledge originally came from the Late Latin verb plebere, meaning “to
pledge or to promise.” It obtained its additional current meaning of security from
Middle English.
2. The legal phrase burden of proof has two meanings. First, it describes the
responsibility of the party who must present evidence to prove or disprove a relevant
and material fact in a court case. Second, burden of proof refers to the amount of
proof that is required for a favorable decision to be rendered in a case. Depending on
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distribution without the prior written consent of McGraw-Hill Education.
Chapter 29 - Personal Property and Bailments
the type of case, there are three levels of the amount of required proof. Most civil
cases, such as negligence cases, require only enough evidence to favor one party.
Some civil cases, however, demand a higher level of proof—“clear and convincing
evidence.” Criminal cases require that the proof results in a decision that is “beyond a
reasonable doubt.”
VII. Related Cases
1. A dealer in diamonds (D1) delivered to another dealer (D2) three diamonds to display
to a prospective buyer. D2 placed the loose stones in his pocket and went to a public
auction. He lost the diamonds and D1 sued and won. The court held that in this
bailment for mutual benefit, D2 was negligent and therefore liable. Kittay v.
Cordasco, 134 A. 667 (N.J. App. 1926).
2. Willis went to the racetrack and paid a dollar to park his car. While gambling, he lost
more than his bets—a thief broke into his van and stole his golf clubs and some
jewelry. He sued under a bailment theory. The court ruled in the racetrack’s favor,
articulating the reasonable care standard of bailment, and ruled that the track used due
care to protect the vehicles. Willis v. Louisiana Downs, Inc., 499 So.2d 155 (La. App.
3. Heart of Atlanta Hotel v. U.S., 379 U.S. 241 (1964) was the first challenge to the
1964 Civil Rights Act. The Atlanta Hotel refused to rent rooms to African Americans
who contended that the unavailability of accommodations made interstate travel
difficult for them. The motel defended itself on the grounds that it had a constitutional
right to choose customers. The Supreme Court of the United States upheld the Civil
Rights Act on the grounds that discrimination put a burden on interstate commerce
and that Congress had a right to remove such obstructions as long as its means were
4. The hotel chain Days Inn had a sign clearly posted informing guests they could
deposit their valuables in the office safe. When a guest’s money and diamonds were
stolen, he sued the hotel for liability. The court ruled that the sign was enough to
protect the hotel from suit. Bischoff v. Days Inn of America, 568 F.Supp. 1065 (D.
S.C. 1983).
5. A skier who was injured in a lift line sued the ski resort and lost. An appeals court
ruled that the ski lift is a common carrier because it indiscriminately offers its
services to carry skiers at a fixed rate from the bottom of the ski run to the top. Squaw
Valley Ski Corp. v. Superior Court, 3 Cal.Rptr.2d 897 (Cal. App. 1992).
6. TRW contracted with Federal Express to ship goods. Federal Express in turn
contracted with Great Western Airlines to deliver the goods. The Great Western plane
crashed and TRW’s insurer as subrogee sued both Great Western and Federal Express.
The court ruled that Great Western was a connecting carrier and was liable to TRW
for actual damages if it was found negligent. The court noted that Great Western
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distribution without the prior written consent of McGraw-Hill Education.
Chapter 29 - Personal Property and Bailments
could not take advantage of a limitation of liability granted to Federal Express
because no contractual provision extended the provision to Great Western.
Akwright-Boston Manufacturing Mutual Ins. Co. v. Great Western Airlines, Inc., 767
F.2d 425 (8th Cir. 1985).
7. In Cestell v. American Airways, 88 S.W.2d 976 (Ken. App. 1935), the court
recognized the principles that common carriers of passengers may refuse transport to
passengers that have contagious diseases because the health of the other passengers
would be endangered and also that a common carrier may refuse transport to a
passenger unable to travel. That is true even if the carrier initially issued a ticket and
determines that the passengers condition has deteriorated.
8. Political activist Ralph Nader sued Allegheny Airlines for fraudulent
misrepresentation because it failed to inform him of its overbooking practices and
failed to give him the boarding priority it had promised. Although he had been told
that he had a “confirmed reservation,” when Nader arrived at the check-in area, he
was told that his flight had been overbooked. Nader was awarded $10 in
compensatory damages and $25,000 in punitive damages. Nader v. Allegheny
Airlines, Inc., 426 U.S. 290 (1976).
9. A warehouser is liable for items not accounted for even if no warehouse receipt is
issued. The duty remains and burden shifts to the warehouser to explain the loss or
disappearance of the goods. Kearns v. McNeill Bros. Moving & Storage Co. Inc., 509
A.2d 1132 (D.C. App. 1986).
10. When Miller was evicted from her apartment, she put her property in storage. At the
end of the storage period, the storage company sent notice to Millers last known
address and later posted a notice of the sale of Millers goods. The court ruled that
summary judgment in favor of the plaintiff on the issue of actual damages was
appropriate because the defendant did not comply with the notification provisions of
the warehouseman’s lien statute in regard to the sale. Miller v. Henshaw, 808 P.2d.715
(Okla. App. 1991).
VIII. Teaching Tips and Additional Resources
1. Interesting information regarding the type of personal property inmates in federal
prison may have, DNA sample procedures, and other policies can be found on the
web site of the Federal Bureau of Prisons at
2. In connection with obtaining funds through the use of personal property, the web site
for the National Pawnbrokers Association can be found at
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distribution without the prior written consent of McGraw-Hill Education.
Chapter 29 - Personal Property and Bailments
3. The National Association of Unclaimed Property Administrators, NAUPA, at
http://www.unclaimed.org/, assists with searching for unclaimed funds along with
information on fraud.
4. Information on the Uniform Anatomical Gift Act provided by the National
Conference of Commissioners on Uniform State Laws can be found at
5. An article titled “Deep-sea booty! $500 million in coins found” regarding the
recovery of a shipwreck treasure can be found at
http://www.msnbc.msn.com/id/18736741. Further information on Odyssey who
found the treasure is available at http://www.odysseymarine.com/.
6. In connection with issues involving bumped airline passengers, an article titled
“Bumped Due to Overbooking? Airlines Owe You Money, not Vouchers” is available
from Conde Nast Traveler at
7. Air travel tips along with information regarding what to do about lost luggage is
available from the U.S. Department of Transportation at
8. An article addressing protection of personal data of guests by hotels titled “Protecting
Your Guest Information” can be found at
9. A history of lodging can be found at the web site of the American Hotel and Lodging
Association at http://www.ahla.com/content.aspx?id=4072.
10. An article from ConsumerReports.org titled Reduce Your Chances of Becoming a
Victim When Shopping - Parking Lot Safety Tips to Reduce Your Chances of
Becoming a Victim” is available from
11. An article from the World Health Association involving trafficking in human organs
is available at http://www.who.int/bulletin/volumes/82/9/feature0904/en/index.html.
Additional information is available at
http://www.time.com/time/health/article/0,8599,1912880,00.html. An article titled
“Nepal's Organ Trail: How Traffickers Steal Kidneys” and videos are available from
CNN at
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distribution without the prior written consent of McGraw-Hill Education.
Chapter 29 - Personal Property and Bailments
12. The distinction between tangible and intangible personal property is not always clear
—why is a stock certificate not tangible, for example? To help students understand
the distinction, have them make lists of their own tangible personal property. Discuss
into which category certain property should fall. Ask students to share interesting
examples of items in both categories.
13. Have a group of students research the state’s statute on unclaimed property.
California’s unclaimed property site is at http://sco.ca.gov/upd.html.
14. Poll students to find out if any of them have ever found lost property. What did they
do with it? Was it handled according to the state’s lost property statute? What
penalties are there for a finder who does not follow the state statute?
15. Break the class into small groups. Have them discuss what problems a court would
face in a case in which there was an alleged gift in causa mortis. Would there be
problems of proof if there was no written proof? How could this problem be rectified?
16. Have students keep lists of the temporary transactions of personal property in which
they are involved over a course of a week. Next, have them determine which of their
transactions are bailments and which are mutuums. For each bailment, students
should identify the bailor and the bailee and determine if the bailment is involuntary,
gratuitous, for the sole benefit of the bailor, for the sole benefit of the bailee, or for
mutual benefit. For each mutual benefit bailment, students should identify if the
bailment is a pledge, contract for the use of goods, contract for the custody of goods,
or contract for work or service on goods.
17. Ask students to think of examples of types of property that might commonly be
involved in the tort of conversion in a bailment for the sole benefit of a bailor. Invite
students to share experiences they may have had in which someone used their
property without permission while temporarily storing it or caring for it.
18. Have students go to various businesses that would be considered bailments, such as a
dry cleaners or parking garage and inquire as to agreements involved. If possible,
have them bring to class copies of the bailment agreements. What restrictions are
listed? Are these enforceable in most states?
19. Point out to students that because a mutual-benefit bailment is a contract, minors have
the right to disaffirm the contract in most situations.
20. Invite a hotel or motel manager to talk to the class. Ask the manager to bring copies
of the notice from the hotel that sets the terms for the safekeeping of valuable items.
Ask students to discuss how this notice addresses the innkeepers duty of care.
Encourage a discussion on this topic and about the legal cases in which the manager
has been involved.
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distribution without the prior written consent of McGraw-Hill Education.
Chapter 29 - Personal Property and Bailments
21. Have students go on the Internet or to the school’s online library and research articles
from newspapers across the country concerning fires or robberies that took place in
hotels. Ask the students to analyze each article and determine if they think the
innkeeper was liable to the guests.
22. Ask students to collect lists of carrier names that they spot on trucks during the course
of a week. In class, discuss whether each carrier is a common or private carrier. You
might want to use the Yellow Pages as a reference.
23. Discuss reasons why a common carriers liability is that of an insurer of goods.
Review the exceptions to this general rule.
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distribution without the prior written consent of McGraw-Hill Education.