Bailee: Definition, Relationship to Bailor and Bailment, Examples

What Is a Bailee?

A bailee is an individual who temporarily gains possession, but not ownership, of a good or other property. The bailee, who is also called a custodian, is entrusted with the possession of the good or property by another individual known as the bailor.

This relationship, referred to in legal terms as a bailment, is based on a contractual agreement between the bailor and the bailee. The bailment specifies the terms and purpose of the change in custody and is outlined in writing such as a receipt or chit.

The bailee's relationship to the bailor is outlined in a contractual agreement known as a bailment.

Key Takeaways

  • A bailee is an individual who temporarily gains possession, but not ownership, of a good or other property.
  • The bailee's relationship to the bailor, who hands over the property, is established by a contractual agreement called a bailment.
  • Bailees include coat check attendants, valet car services, banks, jewelers, and dry cleaners.
  • A bailee assumes a legal and fiduciary responsibility to safeguard the bailor's property while under their care.

Understanding a Bailee

As mentioned above, the bailee is given custody of a piece of property, but cannot legally lay a claim of ownership to it. This means the bailor is still the rightful owner, even while the goods are in the bailee's possession. However, the bailee is responsible for the property's safekeeping and the eventual return of the goods. The bailee is typically not entitled to use the goods or property.

A bailee can serve as the overseer of an investment portfolio for a specified time period or can be appointed to manage a rental property in the owner's absence. The bailee ensures the assets are kept safe until the owner of those assets is able to resume management, and cannot use them at any time for personal reasons. Reasonable care must be exercised by the bailee at all times.

The short-term transaction between the bailee and bailor is governed by a contract, often as simple as the reverse side of a dry cleaning tag or receipt, or the chit from a coat check attendant.

Types of Bailees and Bailments

This term bailee is seldom heard, let alone understood. But there are plenty of instances where bailments occur in our everyday lives.

  • A bailee may promise to take care of and protect a bailor's property such as a bank's safety deposit box, where a customer can store valuable items.
  • A bailee may provide a free service for taking possession of an asset. This applies to coat checks at bars, clubs, or restaurants that don't charge their customers for this perk. Because it is a free service, this type of bailment benefits the bailee or the customer.
  • Some bailees are required to take possession of a piece of property but may charge bailors for a particular service. For example, a mechanic becomes a bailee when he agrees to keep and do maintenance work on a customer's car.

Real-World Examples of Bailees

You may be interacting with a bailee on a daily basis and never even realize it. For example, the worker at a dry cleaning shop becomes a bailee when you drop off your suit to be cleaned. The owner of a jewelry repair shop is a bailee after you give her a gold chain to be fixed. The garage attendant in the city acts as a bailee after you hand him the keys to your car as you head off to a restaurant.

Bailees and Liability

When the bailee takes possession of a piece of property, they assume a legal and fiduciary responsibility for its safekeeping. As mentioned above, the bailee is expected to take reasonable care with the property, even if there is no fee involved. The bailee must, therefore, return the goods to the bailor as they were entrusted. The bailor can sue for damages if he can prove the bailee did not use reasonable care during the bailment.

There may come a time when the bailment period has passed and the bailor has not reclaimed the item(s) in question and has made no attempt to do so. The bailee should then make every attempt possible to ensure the property is returned. Once all efforts have been exhausted, the bailee may consider the property abandoned.