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■In a mutual-benefit bailment, the bailor has responsibilities as well as the bailee. The bailor is
obligated to warn the bailee of any defects in the bailed property that might result in injury to
the bailee or interfere with the use of the property. This is a form of strict liability; the bailor is
liable for failing to disclose defects even if it is unaware of their existence.
❊Proof of negligence in bailment cases.
■A bailor need only prove delivery of the bailed property to the bailee, acceptance by the bailee,
and either a failure on the part of the bailee to return the bailed property or return the property
in a damaged condition.
■If the bailee is unable to prove it acted reasonably in caring for the bailed property, the bailee
will be liable for any resulting loss or damage.
❊Items inside bailed property.
■Is a bailee liable when valuable property is located inside the bailed property and its presence is
unknown to the bailee?
•Apply the elements necessary for a bailment.
•One exception applies: Most cases hold that, although a bailee may not have known of spe-
cific property in a car, a bailment of that property will nonetheless exist if the bailee could
reasonably anticipate that the property would be in the vehicle.
❊Rules particular to bailment of cars.
■Because of the quasi-public nature of the accommodations industry, hoteliers are not allowed to
limit their liability for loss or damage to bailed property caused by their own negligence. There-
fore, disclaimers of liability on signs or receipts are not effective.
■A hotel with a parking lot or garage that takes possession of guests’ car keys must establish
effective security procedures and systems to avoid liability. The high cost of cars dictates the
importance of proper management and planning.
■A much better practice is to place all the keys in a specified location accessible only to author-
ized employees.
■We have discussed car bailments as involving transfer of the key. Customarily, if a person parks a
car in a lot and retains the key, in the eyes of the law he has not delivered possession of the vehicle
to the lot owner and therefore no bailment exists.
❊Liability for a patron’s property in a restaurant, bar, or cloakroom.
■If a bailment does exist, the hotel or restaurant will be liable if it fails to exercise the necessary
care.
■A constructive bailment, like a mutual-benefit bailment, requires the bailee to exercise reason-
able care of the bailed goods.
❊Checkrooms.
■Many hotels, restaurants, clubs, concert halls, museums, and other public businesses have check-
rooms available to safeguard guests’ valuables.
■In many states, the limiting liability laws cover attended checkrooms and baggage rooms and
limit the restaurant or hotel’s liability for losses occurring there.
■Unless all the terms of the statute are satisfied, the limitation of liability is not applicable.
❊Concessionaires.
■Several plaintiffs whose checked property was not returned from concessionaires have argued
that the concessionaire is not entitled to the benefits of the limiting statutes because those
statutes were designed to protect only innkeepers and restauranteurs. Courts have accepted this
argument and denied the concessionaire limited liability.
K. Answers to Case Example Questions
8-1-1. Did the hotel violate any law by closing the safe during the night?
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8-1-2. What was the consequence of failing to make the safe available at all hours?
8-4-1. What was the representation made by the hotel that enabled the guest to invoke the doc-
trine of estoppel?
The false representation made by the hotel was that the parking lot was a safe place to leave
the U-Haul. Mrs. Fennema asked the clerk where she could safely park the U-Haul with all of
8-4-2. What was meant by the court’s statement, “Plaintiffs also claimed that the defendant
Howard Johnson, as owner, departed from a standard of care nationally advertised by
it.” What was the significance of that statement on the outcome of the case?
Apparently Howard Johnson hotels indicated in advertisements placed nationally (perhaps in
8-5-1. What would have been the outcome of the case if the luggage had been stolen by a thief
through no fault of the hotel?
8-7-1. On what basis did the court determine that the plaintiffs were still guests at the time of
the loss?
Although they had checked out of the hotel, they were still using an accommodation the ho-
8-8-1. On what ground did the court find the hotel liable for the full value of the jewelry?
8-8-2. If the missing property had been merchandise samples, what would the outcome of the
case likely have been?
Many states’ limiting statutes provide that an innkeeper is not liable for loss or damage to mer-
8-9-1. Why was the limiting liability statute not applicable in this case?
The relationship of the guest on the part of the plaintiff, and that of the hotelkeeper on the
part of the defendant, vis-a-vis each other never arose. The occupancy by plaintiff of a private
8-9-2. Why did the court determine a bailment had not been created?
The relationship of bailor and bailee never came into existence because plaintiff did not entrust
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However, there was no evidence to indicate that users of the rack were led to believe either
8-11-1. On what basis did Collection Chevrolet rebut the presumption of evidence?
Collection presented testimony about the extensive security measures that existed at the
area from where the car was taken. No witness for Collection was able to explain how the
car and its keys were removed from Collection’s lot. Collection had established due care in
8-12-1. Why was Lindsay Acura’s rebuttal of the inference of negligence not sufficient to save
it from liability?
We do not agree with the court’s assessment. The parties had a mutual benefit bailment.
Lindsay Acura failed to return the car in an undamaged condition. Accordingly, the burden
shifted to Lindsay Acura to set forth evidence explaining its failure to redeliver the bailed
8-13-1. The court distinguishes between a hotel parking facility and a public parking lot. Why
does the court make this differentiation?
The court considers that an innkeeper is not an “ordinary” bailee. Many courts and texts
have described an innkeeper as a “professional” bailee. Unlike an “ordinary” bailee, the
8-14-1. What circumstances were missing that might have led the court to determine a bailment
did not exist?
There were no assurances or any discussion that would have led the plaintiff to reasonably
8-14-2. What additional factors would the plaintiff have had to prove to establish negligence by
the hotel?
An additional factors that the plaintiff would have had to prove to establish negligence by the
hotel would have been that the hotel did not take reasonable protective measures against
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8-17-1. Why did the limiting liability statute not apply in this case?
The limiting liability statute did not apply because the defendant’s establishment (a dis-
cotheque) did not come within the meaning of the statute. The limiting liability statute
8-17-2. Why did the disclaimer sign hung by Studio 54 not relieve the discotheque from liability?
8-17-3. If Conboy’s coat was three years old rather than one month old, do you think the court
would have awarded him its full value of $1,350? Why or why not?
A court in a case such as this must determine whether to grant the plaintiff the replacement
value of the coat (the cost to buy it new) or the lesser market value, which reflects its depre-
ciation at the time of the loss. The judge, while noting that “[n]o judge buys his clothing
90 ■Chapter 8
Key Terms
Act of God A happening not controlled by the
Bailment for the sole benefit of the bailor When
Concessionaire An independent contractor within
Equitable estoppel A legal principle that precludes
otherwise have existed because that person made a
Prima facie evidence Such evidence as will suffice
Public enemy A criminal who has committed
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L. Answers to End-of-Chapter Questions
❊Review Questions
1. According to common law, what is the innkeeper’s liability for a guest’s lost or stolen
property?
Under common law, the innkeeper had unlimited liability for the property of a guest that was
2. What is a limiting liability statute?
3. What two key facts must be included in a notice posted pursuant to most limiting lia-
bility statutes?
The following two facts should be included: (1) the availability of a safe in which to keep jew-
4. Which of the following types of property are covered by limiting liability statutes that
require hotels to maintain a safe?
A. Jewelry.
B. Cash.
C. A laptop (portable) computer.
D. Diamond cufflinks.
E. Expensive sporting equipment.
F. Clothes.
5. What is the consequence of a guest failing to put valuables in a safe?
6. What is estoppel? What is its relevance to a hotel’s liability for lost property?
Estoppel is a legal principle that precludes a party from claiming a right or benefit that might
7. At what point in the check-in process does a limiting liability statute become effective?
The statute becomes effective when the relationship of innkeeper and guest is created. Al-
8. What is a bailment?
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9. What is the difference between a bailment for the sole benefit of the bailor and a bail-
ment for the sole benefit of the bailee?
A bailment for the sole benefit of the bailor is one in which the bailee receives no benefit from
10. What is a mutual-benefit bailment?
11. If you leave a watch with the jeweler to be repaired, who is the bailor and who is the
bailee?
12. Does a bailment exist between a hotel and a guest when the guest goes out for the
evening and leaves property in the Guest room?
❊Discussion Questions
1. Describe two possible circumstances in which a hotel that provides a safe to its guests
fails to satisfy the statutory requirements for a safe.
2. The Mandan Hotel posts the notice required by the limiting statute in the bathroom of
Guest rooms on the inside door of the medicine cabinet. Has the hotel posted the notice
conspicuously? Why or why not? Suppose the notice is placed an informational booklet
about the hotel that is placed on the desk in each Guest room. Is this conspicuous post-
ing? Why or why not?
Neither of these examples qualifies as conspicuous. To be conspicuous, the notice must
3. Jan ate dinner at the Demrich Restaurant. After dinner she paid the cashier and went
home without realizing she had left her purse at the restaurant. What liability does the
restaurant have if the cashier does not notice the purse and it is stolen? What liability
does the restaurant have if the cashier takes possession of the purse intending to notify
Jan that it is at the restaurant?
If the cashier does not see the purse, the restaurant has no liability for it. Under these
4. Compare the liability of a hotel and a concessionaire for coats checked in a cloakroom.
Most states’ limiting statutes restrict the liability of a hotel for coats missing from a cloakroom.
5. Demitri left his coat with an attendant in the coat-check area of a restaurant. In his coat
pocket was a cell phone. Does a bailment exist for the phone? Why or why not?
No, the bailment does not exist for the lotto ticket as it did not satisfy one of the three
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❊Application Questions
1. A limiting statute requires that a hotel post the necessary notice in the registration area,
in the hotel lobby, and in the Guest rooms. If a hotel posts the notice in the registra-
tion area and in Guest rooms but fails to post in the lobby, will the hotel be entitled to
limited liability? Why or why not?
In many states, for a hotel to qualify for the benefits of the limiting liability statute, it must
2. A guest arrives at a hotel and informs the desk clerk that she has with her a large amount
of cash. She expresses concern for its safety, and the clerk recommends she place it in a
hotel safe deposit box. When she hesitates, he assures her that the money will be pro-
tected and further, even if it does become lost the hotel will be fully liable. Relying on
this assurance, she deposits the money in the safe deposit box. When she sought to re-
trieve the money it had disappeared and has not been recovered. Is the hotel entitled to
limited liability under these circumstances? Why or why not?
No, the hotel will not be entitled to limited liability because of equitable estoppel, a legal
principle that negates a right that might otherwise have existed where a party made a false
3. Terry is a computer salesperson. She is staffing a booth at a computer expo. She brought
with her approximately $30,000 worth of laptops. What must she do vis-a-vis the hotel
to obtain maximum protection for the equipment? What if she fails to do so?
The books constitute merchandise samples. In most states a hotel is not liable for merchandise
4. Sandra is talking to the front-desk clerk and is in the process of checking out. While she
is reviewing the bill, someone steals her briefcase, which was on the ground near her
feet. The briefcase had in it various documents she needed for work, a spare pair of
glasses, and a necklace with diamonds in it. Will the hotel be liable for the loss of any
of these items? Why or why not?
The answer to the question will vary depending on the state in which the hotel is located.
A 1991 California case cited in the text held that a guest, whose jewelry was stolen as she
was waiting in the check-out line after she had removed her jewelry from the safe, was still
A 1972 New York case involving similar facts, also cited in the text, held that the limiting
liability statute was not designed to apply to a loss occurring in a check-out situation. The
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