978-0077733735 Chapter 29 Lecture Notes

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Solution Manual

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Business Law with UCC Applications 14th Edition

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978-0077733735

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) Warehouser’s 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 innkeeper’s 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

title.

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

pass.

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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 bailor’s 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 another’s 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

negligence.

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’

property.

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

negligent

(d) Losses arising out of characteristics of the property that cause its own

deterioration

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

(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

disease.

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Chapter 29 - Personal Property and Bailments

i. Racial profiling may not be a motivating factor in a carrier’s decision to refuse

transportation.

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

penalties.

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

warehouser.

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 warehouser’s 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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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.

1986).

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

constitutional.

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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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 passenger’s 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 Miller’s last known

address and later posted a notice of the sale of Miller’s 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

http://www.bop.gov/PublicInfo/execute/policysearch?todo=query&series=5000#.

2. In connection with obtaining funds through the use of personal property, the web site

for the National Pawnbrokers Association can be found at

http://www.nationalpawnbrokers.org/.

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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

http://www.uniformlaws.org/ActSummary.aspx?title=Anatomical%20Gift%20Act

%20(2006).

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

http://www.cntraveler.com/stories/2014-09-04/bumped-due-to-overbooking-airlines-o

we-you-money-not-vouchers.

7. Air travel tips along with information regarding what to do about lost luggage is

available from the U.S. Department of Transportation at

http://www.transportation.gov/airconsumer/air-travel-tips.

8. An article addressing protection of personal data of guests by hotels titled “Protecting

Your Guest Information” can be found at

http://www.4hoteliers.com/features/article/8909.

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

http://www.consumerreports.org/cro/magazine/2013/12/protect-yourself-when-shoppi

ng/index.htm.

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

http://www.cnn.com/2014/06/26/world/asia/freedom-project-nepals-organ-trail/.

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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 innkeeper’s 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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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 carrier’s liability is that of an insurer of goods.

Review the exceptions to this general rule.

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Business Law with UCC Applications 14th Edition