What is 'Bailment'

Bailment, in common law, describes the contractual transfer of assets or property from a bailor, who temporarily relinquishes possession but not ownership, to a bailee.

BREAKING DOWN 'Bailment'

Bailment arises when property is given to someone for safekeeping, and is a legal course of action independent of contract or tort. To create a bailment, the bailee must both intend to possess, and actually physically possess, the bailable chattel.

In a bailment, the bailor is generally not entitled to use the property while it is in possession of the bailee. This distinguishes bailment from leasing, where ownership remains with the lessor, but the lessee is allowed to use the property. Leaving your car with a valet is a form of bailment, while parking in an unattended garage is a lease or a license of a parking space, as the garage cannot show intent to possess the car.

In finance, a bailor can designate a bailee to supervise an investment portfolio until the bailor can or wishes to resume the duties of managing the portfolio. Other forms of bailment include holding collateral against a secured loan, warehousing and self-storage and the shipping of goods.

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