I. BAILMENTS SOLELY FOR BENEFIT OF ONE PARTY 63. Bailments for sole benefit of bailor. These bailments lay on the bailee the lightest duties, since he derives no benefit from them. 1. How created. This bailment may be created by contract, as where, upon the bailee's promise to care for the article gratuitously, the bailor delivers it to the bailee. Some writers do not regard this strictly as contract because the only consideration for the promise is the parting with possession by the promisee. It is, however, convenient to treat the relation as the result of contract. This bailment may also be created by a voluntary undertaking of the bailee without any action on the part of the bailor, as, for example, where one finds lost property and takes it into his possession. It may also be created without a voluntary undertaking of the bailee, as where goods are cast by a flood or other force of nature upon the lands of the bailee. 2. Bailor's obligations. As these are gratuitous bailments the bailor is not bound to compensate the bailee for his services in the care of the property or for any work done upon it. But if the bailee has not by agreement undertaken to bear unusual expenses, the bailor must indemnify him for such actual disbursements. The voluntary bailor is also bound to warn the bailee of any danger of which the former is aware, if such danger increases the ordinary risk of the bailment, and is not apparent to the bailee. Examples: 1. C undertakes without compensation to keep and feed D's dog. C is obliged to pay a dog tax. D must reimburse C. 2. C undertakes without compensation to take and care for D's dog. Known to D but unknown to C the dog is vicious. C is bitten by the dog. D is liable to C for the injury. But D would not be liable if he did not know of the vicious propensities of his dog or if he warned C of them. 3. Duties of bailee. The bailee is not bound to undertake the bailment even after he has promised to do so. This is because there is no consideration for his promise, since the bailor has § 631 Stanford University, Cali J. C. L. FISH FOR BENEFIT OF ONE PARTY promised him nothing in return. But if the bailee does undertake the bailment by receiving the goods, he then comes under certain obligations to the bailor. (a) The bailee must not by gross negligence injure, destroy, or lose the goods. It is said that since the bailee is acting gratuitously he is bound to use only slight care toward the subject of the bailment and is liable only for gross negligence. Whatever this may mean, and it is a matter difficult to define accurately, it is clear that less care is exacted of the gratuitous bailee than of any other. The amount of care must, however, vary in proportion to the risk. Example 3. More care would be required in the keeping of a diamond than in the keeping of a plow; more skill and care would be required in the repairing of a watch than in the repairing of an umbrella. The court instructs the jury that the gratuitous bailee is required to use only slight care and is liable only for gross negligence, that this is the care that persons of less than ordinary prudence, but still of prudence, exercise under like circumstances, and that whether the bailee exercised this care in the case in litigation is a question of fact for the jury to determine. (b) The bailee must not use the article except so far as it's use is reasonable or necessary for its proper care. The bailee might drive a horse to keep it in health, or milk a cow, but he could not use the horse for plowing his own field, or wear a diamond intrusted to him. (c) The bailee must redeliver the article at the termination of the bailment, together with any increase or profit derived from it. If it has been lost, the bailee is liable only if the loss was due to his gross negligence. Examples: 4. B undertakes gratuitously to keep C's furs. He keeps them so negligently that the moths injure them. B is not liable unless this is found to be gross negligence. 5. B wears the furs and loses them. B is liable. He had no right to use the furs, and in doing so assumed the entire risk of their safety. 6. B undertakes gratuitously to keep C's jewels. B locks them up in his desk. Burglars break open the desk and steal the jewels. B is not liable unless he was grossly negligent, which could hardly be the case under these facts. 7. B leaves the jewels in an unlocked drawer and they are stolen. This might be gross negligence. 4. Termination of bailment. The bailment is terminated whenever either party elects to terminate it. This is, perhaps, subject to the qualification that if the bailee has entered upon some work to be done upon the article he is bound to finish it. The death of either party terminates the bailment. So also does the insanity of either. 64. Bailments for bailee's sole benefit. These bailments lay on the bailee the heaviest duties, since he alone benefits from them. 1. How created. This form of bailment arises only by contract, because it requires the assent of the bailor to lend and the assent of the bailee to borrow. A promise to lend is not binding because there is no consideration for it; but after the loan is made the contract is complete. The absence of compensation to the bailor characterizes this class of bailments. 2. Obligations of bailor. The sole obligation of the bailor is to warn the borrower of any defect known to him and not known or obvious to the bailee, which renders the article dangerous. If he does not, and the bailee is injured in consequence of such defect, the bailor is liable to him for the injury. Example 1. B lends his horse to C to drive. Known to B but unknown to C the horse is a runaway. If B does not warn C of this, and the horse runs away and injures C, B is liable. 3. Duties of the bailee. The obligations of the bailee may be fixed by the contract itself. Where they are not specified, the following will be implied. (a) The bailee must exercise great care in keeping or using the article, and is liable for slight negligence. The bailment being for the bailee's sole benefit, the law exacts of him greater care than in the case of any other bailee. He is not liable for inevitable accident but only for such injuries as by the exercise of great diligence he could have prevented. In the presence of any danger he ought to prefer the safety of the borrowed article to the safety of his own property. In this respect this bailment is at the opposite extreme from the one for the bailor's sole benefit. Example 2. C loans B his watch. B loses it. If this was due to a want of great care (more than one ordinarily takes of his own property), B is liable to C. This is a question for the jury under proper instructions. (b) The bailee may, of course, use the article, but he must not lend it to others unless it is understood that he may do so, and must use it in accordance with the contract or understanding. Any material deviation may cast upon him the liability of insuring the safety of the article or may render him liable in tort for its conversion. Examples: 3. C borrows D's horse to drive to A, and drives instead to B in another direction. The horse dies without C's fault. C must pay for the horse. He has technically converted it and is absolutely liable. If the horse had died without C's fault while he was driving to A, he would not have been liable. 4. C borrows D's horse to drive and permits E to drive it. C is absolutely liable for any injury to the horse while in E's hands. But it may be implied that another is to use the article. If C takes D's horse in order to try him before buying, C may permit a competent horseman to make the test. (c) The bailee must redeliver the article with its increase or profits. He cannot deny his bailor's title, that is, he cannot hold the article under a claim that it is his or another person's, but must return it and resort to an action to establish his claim. Examples: 5. C borrows D's bonds to pledge in order to raise money. C must return the bonds and also any income accruing during the loan. 6. C borrows D's team and refuses to return it, alleging that it belongs to his wife, a sister of D. This is not a good defense. C must return the team, and the wife can then bring an action to recover it. C cannot thus dispute his bailor's title. 4. Termination of bailment. A bailment in the nature of a loan may be terminated at the will of the borrower. Whether, if it be for a definite time, the lender may recall it before the time has elapsed is a doubtful question. Any violation of the borrower's duty toward the article justifies the lender in recalling it. The death of the borrower, or his insanity, terminates the bailment. The death or insanity of the lender may not, possibly, terminate a loan for a definite period if that period has not yet elapsed, II. MUTUAL BENEFIT BAILMENTS 65. Pledge or pawn. This is a mutual benefit bailment intended as a species of security, and when it is a bank transaction with stocks, bonds, or other like instruments pledged, it is called collateral security. 1. How created. A pledge or pawn is a bailment of a chattel as security for a debt or other legal obligation, and is usually accompanied by a power in the bailee to sell the article in case of default. When a transaction is on a larger scale the bailment is often called the giving of collateral security, as where one borrows money at a bank and deposits bonds as security for the loan. These transactions by way of pledge can arise only by contract. The statutes generally regulate somewhat strictly the business of pawnbrokers, and prescribe the rate of interest they may lawfully charge for loans secured by pledge. Delivery to the pledgee is essential to the creation of a pledge. The delivery of documents of title, like warehouse receipts or bills of lading, constitutes a pledge of the property they represent. Stock certificates should be accompanied by a power to transfer the title upon the books of the corporation that issued them. 2. Rights and obligations of pledgor. A pledgor of property impliedly warrants that he has good title to it, and is liable to the pledgee for a breach of this warranty if the pledgee is damaged thereby. He has a right to assign to another his interest in the pledged article, that is, the difference between its value and the sum for which it is pledged. He has a right to redeem the pledge by payment of the debt which it secures. No agreement of the parties can make the pledge irredeemable, because this is regarded by the law as oppressive to the debtor, who usually gives a pledge under the stress of necessity. 3. Rights and duties of pledgee. The pledgee has a right to assign his interest in the pledge. He has no right to use the pledged article except so far as its use is necessary to its proper care. Any profits derived from it the pledgee holds to apply toward the debt, but if that is otherwise paid, he must account |