The Law of Bailment

The term bailment covers a scenario we all encounter on an almost daily basis, where one party (the Bailee) is in care and control of an item belonging to another (the Bailor). Common examples of bailment include:

· You leave your car with a garage

· You lend someone your TV for the World Cup

· You pay a company to store your furniture

· You have a vehicle of finance (generally the finance company remains the owner)

There are very many more examples we could list. The law considers that the bailee owes the bailor a duty of care to look after the item in question. The extent of that duty will, as always with the law, depend on the facts of each case, and in particular the facts of the case. In particular:

· Was the bailee being paid? A bailee “for reward” will normally have a higher duty of care than one who is doing it for nothing.

· The nature of the goods – the duty of care is likely to be higher the more valuable the goods

· Any terms and conditions of the bailment – of course these are always important

In a recent case a vehicle had been hired by an individual (C) from a hire company (HC) and had then been damaged by a third party’s (D) negligence. C was obliged, under the terms and conditions (T+Cs) with the HC, to pay for the loss of use of the vehicle.

It is well-established legal principle that a person owes a duty of care not to cause physical damage to another's property. Breach of that duty leaves the defendant liable to pay damages for loss of value and other consequent financial loss. This is subject to general principles limiting recovery of damages in such circumstances (for example remoteness, if, say, a long chain of events had been triggered, which arguably ultimately resulted in the damage, but could not be said to be a direct cause ). The law also entitles a bailee themselves to bring a claim against a defendant wrong-doer for any damage done to the bailor’s item.

As a result the SC decided that:

The fact that the loss in question was under a contract between C and HC did not mean it could not be claimed, provided the loss was consequential on the physical damage to the item, which here it was.

The law generally does not allow a claim for what is known as “pure economic loss” which results from negligence. Here it was not pure economic loss, the loss arose from the damage to vehicle in C's possession.

There was no specific pre-existing legal rule preventing T+Cs between a bailee and bailor or from being the basis for recovering losses from a third party.

The SC’s decision was that C was entitled to claim from D the sums that they themselves were contractually obliged to pay to HC. This is actually a more significant case than might initially meet the eye, because as previously stated, bailment takes place quite frequently in both personal and business life.