Detailed comparison between Sale and Bailment: Sale Bailment Possession Possession of goods is transferred to the buyer. Possession of goods is transferred to the bailee. Ownership Ownership is transferred to the buyer. Ownership resides with the bailor. Usage The buyer may use the goods in any way he likes. A bailee can use the goods only according to the directions of the bailor.
Return There is no return of goods from the buyer to the seller, unless there is breach. The goods are returned after the specified time or accomplishment of the purpose. Consideration The consideration is the price in terms of money. The consideration is an undertaking to return the goods after the accomplishment of the purpose. Needless to say, this threatened transfer of the cows upset Carpenter, who went to court to stop Griffin from taking the cows.
The question was whether Spencer was a bailee, in which case the cows would still belong to Carpenter and Griffin could not levy against them , or a purchaser, in which case Spencer would own the cows and Griffin could levy against them.
The court ruled that title had passed to Spencer—the cows were his. The court reasoned that Spencer was not obligated to return the identical cows to Carpenter, hence Spencer was not a bailee. Carpenter v. Section 1 of the UCC confirms this position, declaring that whenever the price of a sale is payable in goods, each party is a seller of the goods that he is to transfer. Note the implications that flow from calling this transaction a sale. Creditors of the purchaser can seize the goods. The risk of loss is on the purchaser.
Fungible goods goods that are identical, like grain in a silo present an especially troublesome problem. In many instances the goods of several owners are mingled, and the identical items are not intended to be returned. For example, the operator of a grain elevator agrees to return an equal quantity of like-quality grain but not the actual kernels deposited there. This distinction between a sale and a bailment is important. When there is a loss through natural causes—for example, if the grain elevator burns—the depositors must share the loss on a pro rata basis meaning that no single depositor is entitled to take all his grain out; if 20 percent of the grain was destroyed, then each depositor can take out no more than 80 percent of what he deposited.
Bailment law applies to the delivery of goods—that is, to the delivery personal property. Personal property is usually defined as anything that can be owned other than real estate. As we have just seen in comparing bailments to sales, the definition implies a duty to return the identical goods when the bailment ends. But one word in the definition is both critical and troublesome: possession.
Possession requires both a physical and a mental element. We examine these in turn. In most cases, physical control is proven easily enough. A car delivered to a parking garage is obviously within the physical control of the garage. But in some instances, physical control is difficult to conceptualize. For example, you can rent a safe-deposit box in a bank to store valuable papers, stock certificates, jewelry, and the like.
You may then inspect, add to, or remove contents of the box in the privacy of a small room maintained in the vault for the purpose. Because the bank cannot gain access to the box without your key and does not know what is in the box, it might be said to have no physical control. Nevertheless, the rental of a safe-deposit box is a bailment. Certainly [the renter] was not, because she could not obtain access to the property without the consent and active participation of the defendant.
The price of the goods is also one of the significant differences between sale and bailment. In bailment bailee generally pays a nominal amount of good as in bailment they only hire the goods for few days and cannot claim ownership over it while in sales buyer has to pay the full price of the goods as in sales there is the transfer of ownership.
In the sale, consideration is always in terms of money while in bailment it is not necessary also there is no freedom of use of goods as bailee is not the owner of goods while in sale buyer has ownership over goods so he has freedom of its use. All rights reserved. No part of these pages, either text or image may be used for any purpose. Register with 5th Voice. Bailment and Sale : A comparison. India Four new sites of India added to Ramsar list as wetlands of International importance.
Entertainment MV Abhijit Roy's short film commends parenthood and women empowerment. International MV Russia would be departing from the International space station by Legal disputes can arise if anything happens to the asset while in the bailee's possession. As mentioned above, bailments also take place in finance. Bailors have the option to legitimately transfer their securities , such as shares of stock, to others to conduct short sales. The short seller borrows shares on margin to sell them even though the short seller does not own those borrowed shares.
Other financial applications for bailment include:. There are three different types of bailments—those that benefit both parties, those that benefit only the bailor, and those that only benefit the bailee. We've outlined some of the most important details about each below. This type of bailment is referred to as a service agreement bailment. For instance, parking your car in a paid parking lot benefits both parties because the bailor is able to park their car in a secure lot while the lot owner is paid for the service.
In service bailments, a bailee is liable for any damage that results to the bailed items if they are negligent in their duties. This is referred to as a gratuitous free bailment. Free valet service would be an example of this because the valet service in this case, the bailee doesn't receive compensation for parking your car. A bailee can face liability for damaging the bailed items if they are grossly negligent or act in bad faith while safeguarding the asset. These bailments are called constructive bailments.
Checking a book out of the library is a common example. When you check the book out, you become the bailee while the library is the bailor, who gets no benefit from the relationship. It does, however still expect that you return the book at the end of the rental period. In this type of bailout, the bailee faces liability for basically any damage to the bailed item. This is the highest standard of care required out of the three categories. Bailments come with certain rights for both parties. Bailors can expect that bailees will take care of their assets to the best of their ability using the most reasonable amount of caution.
After the relationship ends, bailors can expect to get their property back in its original state. If this isn't possible, bailees must account for any actions that led to damage or loss. Bailors have the right to end the agreement and to legal recourse, including compensatory damages, if the bailee can't produce the asset when the agreement ends.
Bailees, on the other hand, can expect to be compensated for their services, take action against any other parties that damage the asset, or can exercise liens if the bailor doesn't live up to their end of the deal.
All of these rights, of course, depend on the nature of the bailment. The liabilities depend on the type of agreement, as well.
In service agreement bailments where both parties benefit , bailees are required to take reasonable steps to ensure that the asset is well cared for or they may be responsible for damages that result from their negligence. The burden of responsibility lessens slightly when the bailor is the only one who benefits.
In gratuitous bailments, the bailee has a responsible duty of care but is only liable if they are deemed to be grossly negligent in their duties.
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