DEFINITION of 'Bailor'

A bailor is an individual who temporarily relinquishes possession but not ownership of a good or other property under a bailment. The bailor entrusts the possession of the good or property to another individual, known as the bailee. A bailment is usually a contractual agreement between the bailor and the bailee that specifies the terms and purpose of the change in possession.

BREAKING DOWN 'Bailor'

A bailor transfers possession, but not ownership, of a good to another party, known as the bailee, in the event of a bailment. While the good is in the bailee's possession, the bailor is still the rightful owner. A bailor/bailee relationship can be illustrated in the management of investment portfolios. A bailor can designate a bailee to supervise an investment portfolio for a particular time period. While the bailee does not own the portfolio, the bailor entrusts the chosen individual to ensure that the portfolio is in good hands until such time that the bailor can or wishes to resume the duties of managing the portfolio.

Responsibilities of a Bailor in a Bailment Agreement

The bailor does not necessarily have to be the owner of the property they entrust to the bailee. A bailor could be a person who found a lost item such as a wallet dropped in a shopping mall. If they bring the wallet to customer service at the mall and transfer custody, they enter into a form bailor/bailee relationship. The customer service staff would then be responsible as the bailee for attempting to return to the wallet to the rightful owner.

A bailor and the bailee should determine the type of bailment agreement they enter into, whether it is gratuitous, non-gratuitous, or bailment for mutual benefit. Each type of agreement carries different responsibilities and duties for the bailor.

A bailor must disclose any defects with the property they are entrusting to the bailee. This includes any issues that might cause harm or injury during the use of the property. For example, if the bailor grants possession of a summer home to the bailee they must disclose any known faults with the property. This could include electrical wiring that needs repair or plumbing that is not functional. The bailee in turn may hold certain degrees of responsibility for the property while it is in their custody. The bailee could owe monetary compensation to the bailor in the event the property is damaged or otherwise mishandled while in their possession. A bailor could also retain the right to inform the bailee that they are not giving the property appropriate care and direct them to make changes. For instance, if a bailor learns that a car they entrusted to a bailee is being driven recklessly or dangerously, they might direct the bailee to change their behavior and usage of the vehicle.

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