Business Laws Between US and Europe

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Definition of Law

Law is the set of rules governing the conduct of people living in a society. These rules, which pertain to a complete legal system of a government and framed by a competent authority, are meant to run the affairs of a community smoothly. No society can be imagined to live cohesively if people are allowed to do just as they please and without regard for the rights of others. Also no society can be imagined to exist harmoniously if people are indifferent about their obligations toward one another. Therefore, law refers to both the rights as well as the responsibilities of a citizen. (O’Brien, n.p.)

Branches of Law

The two main branches of law are:

The Private Law, and
The Public Law.

The private law relates to the obligations or responsibilities of people toward one another, while public law deals with the rights, which people enjoy as citizens of the society they live in. However both the above branches of law can be subdivided into many branches, which are sometimes so closely related that they appear to be overlapping each other.

Some of the areas of Commercial and Contract Law, which are covered under the Private Law head include:

Credit purchases
Employment contracts
Guarantees
Insurance policies
Patents
Promissory notes
Sales contracts
Subscriptions

Areas relating Corporation Law, which are also covered under the Private Law include:

Corporate finance
Documents of incorporation
Mergers and acquisitions (Table – Branches of Law, n.p.)

Business Laws – Introduction

Business law refers to the body of law that governs trades and businesses. These commercial laws pertain to:

Business Laws and
Business Regulations

Business Law section relates mostly to:

Regulating corporate contracts
Hiring practices, and
The manufacture and sales of consumer goods.

It is further subdivided into following areas:

Consumer Credit Law
Consumer Protection Law
Contract Law
Employment Law
Environmental Law
Insurance & Liability
Intellectual Property Law
Tax Law
Tools & Resources

Whereas the Business Regulations section deals with information that relates to government regulations. The business regulations are divided into two subdivisions; the Federal Regulations and the State Regulations.

The Federal Regulations refer to:

Small business Laws and Regulations
Laws and regulations
Federal Register
Code of Federal Regulations
Federal Codes
Regulatory Alerts
Government Regulations
Regulations Email

The State Regulations refer to:

The State Codes
Permits & Licenses (Business Laws & Regulations, n.p.)

Bailment – Definition

The term ‘Bailment’ is defined as the delivery of personal goods on terms that the same goods will be returned to the owner (deliverer) as soon as the conditions of the bailment like time or usage, have either been performed or over and done. It is the bailer who delivers goods and the bailee takes the delivery of these goods. Some examples of a bailee include:

A dry cleaner who takes delivery of your washable clothes.
An office looking after your left luggage
A garage taking your vehicle for repair, and
A neighbor looking after spare door keys.

Bailment, which arises during the physical transfer of goods from one person or party to another, is a legal area, about which people doing direct marketing should have knowledge. The three types of bailment are:

Bailment for the benefit of the Bailor,
Bailment (gratuitous) for the benefit of the Bailee, and
Bailment for the mutual benefit of both i.e. the bailor and the bailee.

To determine whether a bailment has taken place, the direct marketer should be aware of the occurrence of delivery; the bailee’s goals upon custody of property and whether charges have been paid.

Note: Bailment and Consignment are two different terms as frequently used and understood in the business today. Bailment is an agreement of temporary possession of goods or movable property returnable to the owner, while consignment is a proper Sale. (Posch, R.1994, p.52)

Therefore existence of claims in bailment does not depend on a contract. What is required in a bailment is the bailee’s consent to take the bailer’s goods into custody and not a contract as such in the technical sense. As is seen in many bailment cases, it is the consent is largely interpreted and which plays a major role in the creation of bailment. Therefore this consent, which is so important to bailment reasoning, is often written like a typical contract spelling out the terms of bailment

Bailments in Business

Having defined bailment, there is a need to know how it operates in our day-to-day lives. Let us examine some common bailment examples from our everyday business transactions especially when the goods may pass through between the company and the customer. Most common example is that of warehouses. A business engaged in storing products for hire is called warehousing. In a warehousing business the law takes for granted the equality of distant bargaining. The warehouse may limit its liability for damages by making a storage agreement in writing. The warehouses then exercise such care as would prevent loss or damage to your property. However, the warehouse is not responsible for unavoidable damages or damages beyond their legal capacity. The warehouses must honor the written request though it has the right to receive an appropriate storage fee. And it is also binding upon you not to treat the receipt or storage agreement as a non-negotiable document. You must go about carefully; assess this legal tender with your counselor, and discuss the necessary protection you need and have your attorney draft an agreement accordingly. Confirm your address payment before the commodities are stored, in order to eliminate later problems of having your goods released and placed with a carrier on time.

The owner of the warehouse owner has a legal right to withhold your goods until all lawful payments, other charges involving storage, transportation, insurance, labor, terminal charges are cleared. Without receiving such payments, your warehouse may not be inclined to release your goods to you

Recovery for Damages

The warehouse receipt or storage agreement limits the amount of liability in case of damage or loss, and settlement on a precise liability per article or item, or value per unit of weight, without which the warehouse administrator shall not be held responsible provided that such a liability has been asked for by the bailor in writing. However, it must be remembered that in all such warehouse bailment agreements, your bailee is not your agent, and you as bailor are not a principal. As such there cannot possibly be a particular allocation of control, the bailee being a mere depository or custodian of your goods as per a written agreement signed by both parties, in this case the bailor and the bailee.

Common Carriers

A common carrier is an unit that will take goods from anyone in return for payment. This is distinguishable from a private carrier, which may be more selective as to users. The responsibility of a private carrier is limited to carelessness.

On the other hand the common carrier, is an insurer of your goods upon their receipt with certain exceptions. It is responsible for a missing shipment of your goods irrespective of any blame-removing language in the bill of lading. Moreover, it can’t free from itself if another connecting carrier causes a loss or damage to your goods. The carrier is held to the degree of care, a reasonable person would exercise in like circumstances both as to carriage and the delivery date. In this relationship an important document is the bill of lading. The bill of lading serves the below three purpose:

Receipt of goods
Contract for their carriage and delivery
As a document of title.

From your carrier, you must be sure you receive a clean bill of lading. This signifies the goods as delivered in good order and condition. This is a clean bill of health, which puts you in a strong recovery position in the event of damage to the goods while in transit and until your buyer assumes control. For instance against a common carrier, usually in an action brought by a shipper, the shipper need only to prove delivery of the shipment to the carrier in good condition and its later damage. However, if the shipper is responsible for loading, then such shipper is responsible for damages resulting from a hidden defect in the loading. Although, if the improper or insufficient loading is apparent to the ordinary and reasonable carrier, the carrier is liable despite the negligence of the shipper. You are well-served by and can make a prima facie case of good order and condition at shipment if you’re holding a clean on board bill of lading. In many ways, the carrier can become a bailee. Two important instances are where it holds the goods pending orders to ship or when, after timely notice of arrival is given, the goods are not picked up by the buyer. A carrier has a lien on the goods similar to the warehouse operator, covered by the bill of lading for charges subsequent to the date of its receipt of the goods for storage or transportation and for expenses necessary for the preservation of the goods or incident to their sale pursuant to law. The carrier lien is lost on any goods voluntarily delivered, as with the warehouse lien.

Lastly, the telegraph and telephone companies are carriers whose competent services can be critical to you at times. If you are injured in your business dealings as a result of their foul-ups, you may not have to simply swallow it. Consult with your counsel. For misreporting your message, a telegraph company may be legally responsible. Their outright failure to deliver improves your chances for recovery. The telephone company is liable for “gross negligence” or determined misconduct [Posch, R. (Direct Marketing –1994, p.52)].

Benefits of Bailment

There are many benefits of Bailment. Whose main types include, Service Agreement Bailment; a Construction Bailment, and a Gratuitous Bailment have several benefits. Some of important benefits of Bailment are listed as under:

You have to pay only for actual volume occupied by your cargo with bailment. With rent of space you have to pay for whole rented area irrespective of the space share being occupied.
The cargo owner may take care of cargo traffic increase beforehand and stipulate such possibility under bailment in the circumstances of rent the area is usually limited and increase of goods volume results in extra expenses for search of a new or additional premises.
All-important equipment is available in our warehouse (with rent you will have to buy expensive equipment and mechanisms).
You need not pay for public utilities with bailment, salary to stock personnel, since all mentioned above is included in bailment costs.
Goods handling equipment repair and maintenance, the bailee warehouse performs purchase of consumables.
During handling, you are relieved from reliability for goods damage as the bailee bears all responsibility for your cargo safety.
Complex processing of container cargoes, cross-docking, orders setup, marking, packing, palletizing, forwarding, bailment services include a variety of extra services (Reliable Competitive Shippers, n.p.)

Bailment Laws in the United States and Europe

In order to determine similarities and differences between the bailment laws in the United States and Europe, a satiating discussion on the trends and practices of bailment in these countries has been provided in the ensuing paragraphs separately.

Bailment Law in the US

The bailment law, across the United States remains diverse in various states. The bailment law in Alaska for instance is yet not fully developed as it lacks the technical aspect. Also the common law in Alaska is alleged to classify bailments via different schemes. Out of these schemes the ‘Justice Story’ scheme classified bailment into three different heads. These are:

The bailment for the sole benefit of the bailor.
The bailment for the sole benefit of the bailee, and
The bailment for the mutual benefit of bailee and bailor

But these bailment classifications as above were important for identifying the duty care, which a bailee owed to the bailor under contract of bailment.

In majority of the states in America, the bailee is assumed to be grossly negligent for being liable to the damage in the bailment, provided the bailment is basically to the benefit of the bailor.

While if the bailee primarily benefits, such as if you borrow the mower from your neighbor to mow your lawn, the bailee is responsible for any damages done to mower arising from slight neligence.

If both bailor and bailee are found to gain from the bailment, such as leaving your clothes at the dry cleaners, then the bailee is liable to the ordinary care standard. Bailees are mainly held responsible for the non-delivery of a bailment, although, in the case of involuntary bailments, the bailee is held resposible only to a standard of due care arising from shear negligence and resulting into re-delivery. Also a bailee may be liable to conversion if the property is not returned to the bailor on the latter’s request, or if the property is used without permission of the bailor. Whereas Brown Law -3d ed. W. Rauschenbush (1975) on Personal Property, refers to a bailor’s responsibility for unsafe goods. The Instructions number 21.13. & 12.07A of the law apply to all cases involving damage or destruction of the bailed goods.

While the instruction 21.03 of the Brown law will remain preferable, in case the dispute occurs on whether the destruction took place while the bailee had the goods. But if the dispute involves a temporary loss of goods, Instruction 21.07A would be applied. And if there is a dispute as to whether there was destruction due to non-delivery, Instruction 21.07B would be applied.

Throughout these instructions the focus is on the plaintiff, who should have to only prove that in the bailment, loss was caused only from the misuse and not from reasons as non-delivery or damage to the goods. In turn the defendant must therefore account for the loss. Thus in order to prove that the bailed commodity was lost or actually destroyed, it would not be the liability of the plaintiff because the plaintiff is only required to prove that the goods were not returned. Most commonly and as it usually happens that bailed items, which get lost or destroyed are not to be the bone of contention simply because the jury is informed about the items that get lost or destroyed.

In general practice it is the the defendant who has to prove the manner of loss in order to establish a reasonable care defense if the manner in which they were lost or destroyed is disputed. The only occasion the plaintiff is held responsible for proving how an item was lost is when the plaintiff claims that the goods were not delivered. This assertion from the plaintiff should be enough to prevent the bailee from asserting that the reasonable care is in fact a defense. These instructions can be applied to fix any precise dispute before a court in any given case, the discovery playing a major role in clarifying both parties positions.

Note: In order to create a bailment the bailee must 1) intend to possess, and 11) actually physically possess, the bailable goods. And once the bailment is created the bailee has the duty of care as well as the duty to return the same goods in the same condition vide the bailment contract. The bailee, therefore, is required to take extraordinary precautions to safeguard the property (US Courts – A-21 – 5, n.p.).

The Bailment Law in Europe

For important aspects on the law of obligations and some parts of the movable property, European Civil Code drafted the common European principles. For this reason the bailment law, also founded in 1999 assumed the status of successor body to the commission on European Contract Law. Thus the research so conducted on a European Civil Code sought to advance the process of Europeanization of private law. In England the Contracts Act 1999 relating Rights of Third Parties the doctrine of privities of contract has been much shortened. Third parties are permitted to sue on, by virtue of this clause of the act, and to take the benefit of exclusions of liability in contracts to which they are not parties. But the Bailment reasoning still persists. Bailee can also be defined as a person who takes legal ownership of goods and assumes responsibility for those goods as a result. For example, freight handlers and those involved in shipping are considered bailees. Legal responsibility under the law of bailment applies independently to that of contract. Special property rights attach to the bailee while in possession of the goods.

To landlords and tenants in the UK, the law regarding bailment can be applied; therefore landlords must ensure their leases detail what should happen to goods, still on the location, after a tenant has left the property. When one party leaves their possessions with another party it is known as bailment. Leases should include provisions, which require the landlord to warn the tenant they intend to sell the goods in order to reclaim costs. The landlord may choose to use the Torts (Interference with Goods) Act 1997. They may have to repay the tenant if landlords do not take care of the goods

Notes:

Bailment: Bailment law in Europe, especially England is defined as an arrangement where goods are transferred from one person called bailor to another person called bailee but no transfer of ownership or title occurs. For instance a bailment is said to be created when you leave your car at a garage for repair or leave your clothes to laundry for wash or leave your pet in the custody of someone for grooming. Therefore under a bailment contract, only the possession is transferred not the ownership.

Bailor: Bailor is a person who transfers goods to another person under a bailment contract and in which no ownership or title is transferred. Then the bailor can expect to get back his or her goods at the maturity of period or when the bailment conditions are fulfilled.

Bailee: A person who receives goods under a bailment i.e. in circumstances in which the goods enter his possession but he is under an obligation to return them [Pemble, Stuart. (1999, p.129)].

Conclusion

In view of the above explanation it has sufficiently been made clear that Bailment is an agreement of possession, a kind of Contract and not a Sale. Therefore bailment can be a very important feature in the storage of your goods involving warehousing business at every stage of the distribution process. Also bailment is the only option when you think of surrendering or passing custody and control of your goods and movable property into the hands of another person. The important questions on which you must ponder while surrendering custody of your personal goods or belongings to another include:

Has the delivery of goods by the bailer to the bailee actually taken place?

Has the bailee taken delivery of the goods with intention to possess them (in accordance with the definition of possession in the law)?. The definition of possession can be made further clear by an example of a parking-man having possession (temporary) of the keys of your car in the parking area and which he returns to you when you return and ask for them.

If the bailee has taken possession of your goods, then the next important point to ask yourself is whether the custody or control has only been transferred or the title itself i.e. the ownership. If the custody or control has been transferred, it is Bailment, but if the title or ownership has been transferred then it is very much a sale of you goods in the technical sense of the word (Posch, p. 52).

Works Cited

O’Brien, David M. Law.

O’Brien, David M. Branches of Law.

Table – The branches of law.

Business Law. ‘Definition’. Web.

FindLaw. ‘Business Laws and Regulations’. Web.

Posch, R. (Direct Marketing 1994 v57 n8 p.52). Bailments – a practical legal area.

Bruce S. Nathan. (2006). Bailment or consignment: it makes a difference!

Reliable Competitive Shippers. New Dawn For Shippers.

Pemble, Stuart. The cost of carelessness. (the law of bailment, United Kingdom). Estates Gazette (1999, p.129-1). Web.

US Courts (Article-21.00 – 5). Bailments–Introductory Use Note And Comment.

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