Bailment

Bailment is distinguished from a contract of sale, a gift of property or fractional reserve banking because it only involves the transfer of possession and not its ownership. In order to create a bailment, the bailee must (1) intend to possess, and (2) actually physically possess, the (3) bailable chattel.

In addition, unlike a lease or rental, where ownership remains with the leasor but the lessee is allowed to use the property, the bailee is generally not entitled to the use of the property while it is in his possession. A common example of bailment is leaving your car with a valet. Of course there is no intent to allow the valet to sell, rent, lease, or joyride in your vehicle.

While a bailee cannot lend a bailor’s property in contrast with fractional reserve banking the bank can do whatever they please with the depositor’s money and the depositor is only an unsecured creditor.

DUTY TO DELIVER

No matter how a bailment arises, the bailee has both a duty of care and duty to re-deliver the bailment. The bailee is expected to take, as a minimum, reasonable precautions to safeguard the property.

If the bailee primarily benefits, such as if you borrow your neighbor’s rake to clean your lawn, then the bailee is likely liable for any damages arising from negligence.

If both bailor and bailee are found to benefit from the relationship, such as leaving your clothes at the dry cleaners, then the bailee is only held to a standard of ordinary care.

Bailees are typically strictly liable for any mis-delivery of a bailment. Moreover, a bailee may be liable in conversion if the property is not returned upon the request of the bailor, or if the property is used without permission of the bailor.  The item or property should be kept safe in the vault until the owner wants to take physical possession.

On the other hand, the duty to deliver for bankers engaged in fractional reserve banking is much lower.