Business Law Chapter 49 Homework How May Bailor Satisfy His Duty Provide

1208 INSTRUCTOR’S MANUAL TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION

A bailee must surrender or dispose of the property at the end of the bailment. Failing to return the property

is conversion or a breach of contract (unless the property is lost through no fault of the bailee, which the

text mentions). If property is not returned, conversion or negligence is presumed.

 ANSWER TO VIDEO QUESTION LTR. B 

care and will be liable for damages caused by even slight negligence.

 ANSWER TO VIDEO QUESTION LTR. C 

Did Vinny exercise the appropriate degree of care? Why or why not? How would a court decide this issue? The

facts state that Vinny did not bother to vacuum the rug, pick up the large objects off his floor (tennis ball, items of

clothing), or move the furniture prior to using the rug-cleaning machine. Clearly, Vinny’s careless use of the equipment

would establish that he was negligent and failed to exercise the high degree of care that he was required to use in this

situation. (In fact, it would probably even be negligent under the reasonable standard of care that would be applied if

a person had rented the equipment.) The standard a court would apply in this situation was correctly stated by Oscar

in the video—Vinny should have treated the machine as if it were Oscar’s (the supermarket’s) and not his own. The

court will hold Vinny liable for any damage that his carelessness caused to the rug-cleaning machine.

CASE SYNOPSIS—

Case 49.3: LaPlace v. Briere

Michael LaPlace boarded his horses, including a trained quarter horse named Park Me In First, at Pierre Briere’s

stable in New Jersey. Charlene Bridgwood also boarded her horse with Briere. She did not work for the stable, but one

morning she offered to help Briere’s staff to lunge the horses. During the exercise, Park Me In First suddenly reared up

Bridgwood, who was experienced in handling horses, was exercising the horse in an ordinary manner. LaPlace did not

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…………………………………………………………..……………………………………………………………………

Notes and Questions

As a bailee, was Briere liable in conversion for the death of Park Me In First? Explain. (Hint: Did Briere wrongfully

possess or use the horse without permission and without just cause?) No. A bailee commits conversion when it acts

without authority to purloin or otherwise appropriate the bailor’s property. A bailee’s intentional or negligent conduct

can give rise to conversion, even if the bailee acted in good faith. For example, a bailee could be liable for conversion

due to its negligent conduct if the bailee mistakenly destroys or disposes of the goods even absent an intent to steal

them. Here, however, the sole fact that Briere stable was unable to return the horse due to its death does not mean it

is liable for the loss. Briere stable showed the circumstances of the horse’s death, and these do not establish

conversion.

Is Bridgwood liable in conversion for the death of Park Me In First? Conversion is the unauthorized exercise of the

right of ownership over goods belonging to another, to the exclusion of the owner’s rights. Conversion is an intentional

tort, but a party need not intentionally act wrongfully for conversion to occur. The mere use of property without the

owner’s permission is not necessarily conversion. There must be some repudiation of the owner’s right, or some

exercise of dominion inconsistent with that right, that so seriously interferes with it that the actor must pay the full

What might have caused Park Me In First’s death? According to the court, “It is unknown whether the horse had

any underlying medical condition that caused its death, unrelated to Bridgwood’s conduct in exercising the horse.

There are no proofs that the lunging caused the horse’s death. The veterinarian did give a differential diagnosis that

included a fungal infection in the guttural pouch that could eat through a major artery wall and cause a massive bleed,

a tumor or abscess in the lungs that could eat through a major artery and cause a massive bleed, or a fracture in a bone

in the head from flipping over backwards.”

ANSWER TO “THE LEGAL ENVIRONMENT DIMENSION”

QUESTION IN CASE 49.3

At Briere’s stable, LaPlace had access to, and control over, Park Me In First at any time. Could Briere thus deny that

a bailment relationship existed? Explain. No. When LaPlace delivered his horse to Briere stable and left it in Briere

stable’s care for safekeeping, a bailment arrangement arose. Briere stable provided it with shelter, food, water,

training, grooming, and on occasion arranged for its medical care and shoeing. When LaPlace removed the horse from

the stable, Briere stable no longer had physical possession and control of the animal, and the bailment relationship was

suspended. At the time the horse died, however, it was residing at Briere stable solely under the care of Briere stable.

LaPlace was not present at the time to exercise any control over the horse.”

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ANSWER TO “WHAT IF THE FACTS WERE DIFFERENT” IN CASE 49.3

ADDITIONAL CASES ADDRESSING THIS ISSUE —

Recent cases considering the imposition of liability in a bailment relation include the following.

• International Turbine Services, Inc. v. VASP Brazilian Airlines, 278 F.3d 494 (5th Cir. 2002) (an aircraft engine lease

unambiguously placed the cost of repairing engine damage caused by the failure of an “on–condition” part on the

lessee according to a term that obligated the lessee to repair and maintain the engine and bear the risk of loss and

damage “from any and every cause whatsoever,” with the only exception being the lessor’s responsibility for scheduled

maintenance of time-controlled and on-condition parts).

C. DUTIES OF THE BAILOR

1. Bailor’s Duty to Reveal Defects

A bailor’s principal duty is to provide the bailee with goods free from hidden defects that could injure the

bailee. Failing to notify the bailee of defects is negligence

• In a mutual-benefit bailment, the bailor must notify the bailee of defects that the bailor could have

discovered with reasonable diligence.

• In a bailment for the sole benefit of the bailee, however, a bailor must notify a bailee only of known

defects.

2. Warranty Liability for Defective Goods

Courts have applied warranties of fitness to bailments for hire, and UCC Article 2A extends implied

warranties of merchantability and fitness for a particular purpose to bailments whenever those bailments

include rights to use the bailed goods.

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tract. Exceptions include—

• An act of God.

• An act of a public enemy.

• An order of a public authority.

• An act of the shipper.

• The nature of the goods.

B. WAREHOUSE COMPANIES

Like ordinary bailees, warehouse companies are liable for loss or damage to property resulting from negligence.

ADDITIONAL BACKGROUND—

Documents of Title and Article 7

Due negotiation under the Uniform Commercial Code (UCC) requires that the purchaser of a document of title take

it in the regular course of business or financing [UCC 7–501]. Although UCC 7–501 was consolidated from a variety of

Purposes of Changes:

1. * * *

There are two aspects to the usual and normal course of mercantile dealings, namely, the person making the

transfer and the nature of the transaction itself. The first question which arises is: Is the transferor a person with

whom it is reasonable to deal as having full powers? In regard to documents of title the only holder whose possession

appears, commercially, to be in order is almost invariably a person in the trade. No commercial purpose is served by

allowing a tramp or a professor to “duly negotiate” an order bill of lading for hides or cotton not his own, and since

such a transfer is obviously not in the regular course of business, it is excluded from the scope of the protection of

subsection (4).

The second question posed by the “regular course” qualification is: Is the transaction one which is normally proper

to pass full rights without inquiry, even though the transferor himself may not have such rights to pass, and even

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staleness of a bill of lading may appropriately be recognized as negating a negotiation in “regular” course.

C. INNKEEPERS

Innkeepers, and so on, are held to a strict liability standard with respect to property brought into the rooms by

guests. In most states, innkeepers can avoid strict liability by providing a safe in which guests may keep their

valuables. Statutes generally cover the liability of innkeepers for items not kept in safes. This liability ranges from

limits on dollar amounts to no liability in the absence of negligence. The text also discusses the extent of an

innkeeper’s responsibility for guests’ automobiles.

TEACHING SUGGESTIONS

1. Ask students whether they have ever found valuable lost or abandoned property. Did they attempt to locate the

owner or notify the police? Did they keep the property for themselves?

4. Starting with the often stated notions “possession in nine–tenths of the law” and “finders keepers, losers

weepers,” ask students to consider the accuracy of these statements in light of the principles set out in this chapter.

Cyberlaw Link

How might the principles of personal property and bailments apply to software? How might these principles apply

in the context of cyberspace (to software downloaded over the Internet, for example)?

DISCUSSION QUESTIONS

1. What is the difference between tangible and intangible personal property? Tangible personal property—such as a

2. What are the three requirements for an effective gift? In order to create a valid gift, the donor must first intend to

3. How may a gift be delivered to a donee when physical delivery is impossible due to the nature of the gift itself?

4. What is the difference between mislaid, lost and abandoned property? Mislaid property is property that has been

5. What is the difference between actual delivery and constructive delivery in creating a bailment? Actual delivery

6. Is it possible to deliver a gift of personal property over the Internet? Explain. Of course, it is possible, although not in all

7. Do bailees have the right to limit their bailment liability? Yes. Bailees can limit their bailment liability by type of risk, by

8. Discuss the two basic duties of a bailee. The bailee must take proper care of the property and surrender or dispose of

9. How may a bailor satisfy his duty to provide the bailee with goods that are free from hidden defects that could injure

the bailee? In a mutual-benefit bailment, the bailor must notify the bailee of all known defects and any hidden defects that the

10. Are innkeepers and hotel owners strictly liable when their guests lose personal property on the premises? Under the

common law, innkeepers and hotel owners were held to a strict liability standard with respect to property brought into the

ACTIVITY AND RESEARCH ASSIGNMENTS

1. Many states have estray statutes that encourage finders of lost property to report their findings by providing that the

2. Obtain several types of bailment agreements and ask students to examine their exculpatory clauses to see whether

they attempt to protect the bailee from negligence and other wrongful acts or simply make reference to the standard common

law exceptions to strict liability.

EXPLANATIONS OF SELECTED FOOTNOTES IN THE TEXT

Footnote 5: On Maine’s border with Canada, in February 2005, U.S. Border Patrol agents spotted a snowmobile

driving up some nearby railroad tracks. The snowmobile’s tracks indicated an illegal drive into Canada. Shortly afterwards, two

employees of the railroad gave the agents a large duffel bag containing U.S. currency, which the employees averred to have

found. A test indicated the scent of drugs on the bag. The United States filed a complaint in a federal district court against the

$165,580 under federal statutes that provide for the forfeiture of money involved in illegal drug deals and the transporting of

There was a third party involved in this case, Shortly after the USBP agents confiscated the bag of cash, a snowmobiler

who identified himself as Allen Gagnon approached and made conversation, though without mentioning the unconcealed bag in

the agents’ possession. Later, the snowmobiler claimed the bag, describing its contents accurately. Unable to satisfactorily

account for the source of the money, however, or to logically explain its presence in the bag and in the woods, this individual

did not respond to the government’s complaint and was held in default).

As for the bag, in the court’s opinion, “there are two possible ‘true’ owners: Allen Gagnon and the United States. It is a

logical inference from the Complaint that the owner of the $165,580.00 is Allen Gagnon. It would be passing strange for

someone with no connection to the money in the duffel bag not only to know the exact amount of money in the bag, but also

how it was wrapped and where it was lost. Mr. Gagnon’s decision not to file a claim in the unusual circumstances of this case

1216 INSTRUCTOR’S MANUAL TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION

does not mean that he is not the owner; it only means that—likely for good and sufficient reason—he has decided not to claim

the cash.”

If Madore and LaPointe had placed the duffel bag in their car, and the law enforcement officials had found it there and

impounded the car with the cash, could Madore and LaPointe have successfully claimed ownership of the car? Yes. At least,

their interest would have been founded on more than mere possession, and they would have had standing to challenge a

government claim to the vehicle, because title to it would have been in their names.”

Could the claimants have successfully argued that because they briefly possessed the currency, they had an ownership

interest in it? Explain. No. “[U]nexplained naked possession of cash,” as the court described it, is not enough to establish

standing to challenge the government’s forfeiture claim. “[T]he Claimants merely came upon the money as the result of a

fortuitous incident. While they might have briefly possessed the currency, mere naked possession does not rise to the level of

an ownership interest.” The court cited as similar a case in which a cabdriver was held not to have an interest in a suitcase full of

cash found by the police’s drug-sniffing dogs in the trunk of his taxi.

If the claimants had refuted the government’s assertion that the cash was “illicit,” would the result in this case have

been different? Why or why not? Yes. The claimants conceded that they had no evidence to refute the contention that the cash

was illicit. The court acknowledged that if they had, “this would be a different case. Under the standard analysis [however] the

Government established probable cause that the property was used to facilitate a violation of federal criminal law. Once this

burden [was] met, the burden shift[ed] to the claimant[s] to establish a defense to the forfeiture,” which they could not do.

Footnote 12: Michael Straub of Treiber & Straub, Inc., in Wisconsin chose to return a diamond ring to Norman

Silverman Co. in California via United Parcel Service, Inc. (UPS), and, through www.ups.com, arranged the shipment. On the

Web site, a customer has to click on two on–screen boxes to agree to “My UPS Terms and Conditions.” Among these terms, UPS

and its insurer, UPS Capital Insurance Agency, Inc., limit their liability and the amount of insurance coverage on packages to

$50,000. UPS refuses to ship items of “unusual value”—those worth more than $50,000—for which the carrier and its insurer

disclaim liability entirely. The ring was worth $105.000. Straub opted for the maximum coverage and indicated on the air bill

If Straub had arranged for the shipment of the ring in a face-to-face transaction and UPS had not provided a copy of its

shipping terms and conditions, would the court have ruled differently? Probably. The court indicated that this might have

produced a different outcome. “While Treiber may not be a regular user of the UPS website, the company is a business

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customer that knew about the high value of its package-indeed, it is reasonable to assume that most packages it shipped were

relatively high in value. Straub should have taken the time to examine the provisions of the Tariff and/or the Terms and

Conditions of Service before he sent an item worth more than $100,000 via UPS.

Are UPS’s terms different from the terms of Federal Express Corp.? No, at least not according to the court in the Treiber

case, which noted that “FedEx permits shippers to send packages worth up to $50,000, but it limits liability for items of

extraordinary value to $500.”

ANSWERS TO ESSAY QUESTIONS IN

STUDY GUIDE TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION

BY HOLLOWELL & MILLER

1. What is the duty of a bailor to inform a bailee of defects with respect to bailed goods? If liability arises, to whom might

that liability extend? A bailor has a general duty to provide a bailee with goods free from defects that could injure the bailee. In

2. What are the three elements involved in creating a valid gift? A gift is a fairly common means of acquiring or

transferring ownership of property. A gift is essentially a voluntary transfer of property ownership. It is not supported by legally

sufficient consideration, because the very essence of a gift is giving without consideration. Gifts can be made during a person’s

lifetime, or they can be made in a last will and testament. A gift made by will is referred to as a testamentary gift. Regardless

of the means by which it is transferred, however, there are three requirements for an effective gift—delivery, donative intent,

and acceptance by the donee (the one receiving the gift). Until these three requirements are met, no effective gift has been

made. Delivery. Delivery of the gift is obvious in most cases, but some objects cannot be relinquished physically. Then the

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REVIEWING—

 PERSONAL PROPERTY AND BAILMENTS 

Vanessa Denai purchased forty acres of land in rural Louisiana with a 1,600-square-foot house on it and a metal

barn near the house. Seven months later, Denai met Lance Finney, who had been seeking a small plot of rural property

to rent. After several meetings, Denai invited Finney to live on a corner of her property in exchange for Finney’s

assistance in cutting wood and tending her property. Denai agreed to store Finney’s sailboat in her barn. With Denai’s

consent, Finney constructed a concrete and oak foundation on Denai’s property. Finney then purchased a 190-square-

foot dome from Dome Baja for $3,395. The dome was shipped by Doty Express, a transportation company licensed to

serve the public. When he received it, Finney installed the dome frame and fabric exterior so that the dome was

detachable from the foundation. A year after Finney installed the dome, Denai wrote Finney a note stating, “I’ve

decided to give you four acres of land surrounding your dome as drawn on this map.” This gift violated no local land–

use restrictions. Ask your students to answer the following questions, using the information presented in the chapter.

1. Is the dome real property or personal property? Explain. The dome is personal property. A key distinction between

2. Is Denai’s gift of land to Finney a testamentary gift, a gift causa mortis, or a gift inter vivos? Denai’s gift of the land

was a gift inter vivos—a gift made during one’s lifetime and not in contemplation of imminent death.

3. What type of bailment relationship was created when Denai agreed to store Finney’s boat? What degree of care

was Denai required to exercise in storing the boat? Finney was the bailor and Denai was the bailee in an ordinary,

4. What standard of care applied to the shipment of the dome by Doty Express? Doty was a c common carrier (a

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regardless of care, for all loss or damage to goods, except damage caused by: (1) an act of God, (2) an act of a public

enemy, (3) an order of a public authority, (4) an act of the shipper, or (5) the inherent nature of the goods. Common

carriers cannot contract away this liability but they can limit their dollar liability to an amount stated on the shipment

contract.

 DEBATE THIS: 

Common carriers should not be able to limit their liability. Those who use common carriers for shipping should

not have to worry about what happens if a parcel is lost or damaged. After all, customers of common carriers do not

control in what manner their parcels are handled during shipping. Liability should be shouldered uniquely by the

carrier.