The Concept of Bailment Generally

Introduction

The purpose of this paper is to explore the role that bailment plays in relation to carriage of goods matters. In the modern context, goods are required to be carried across jurisdictional borders and by various modes of transport. As a result a significant amount of legislation and international law has developed on this issue and, often, the concepts of choice of law and conflict of laws are often relevant. Bailment is a principle which has its roots firmly entrenched in English common law, and therefore can only be relied upon when the jurisdiction of the English court is invoked. The scope of this paper is, therefore, to explore the role that bailment plays in carriage of goods matters where the jurisdiction of the English courts is so invoked. In doing so, it is important to this paper to attempt to discuss the general concept of bailment, the general principles associated with carriage of goods, how these two issues tied together and finally whether this is consistent with jurisdictions outside of the United Kingdom.

The Concept of Bailment Generally

Bailment is not a concept that is new to English common law. Rather it is a principle which is firmly entrenched in English property and contract law. It has been recorded as early as the seventeenth and eighteenth centuries in cases in these areas of law. The most significant and well-known of these cases would be the case of Coggs v Bernard , where Holt CJ sought to define the concept of bailment in arguably its most comprehensive form:

And there are six sorts of bailments. The first sort of bailment is, a bare naked bailment of goods, delivered by one man to another to keep for the use of the bailor; and this I call a depositum, and it is that sort of bailment which I mentioned in Southcote’s case (1601) Cro Eliz 815.

The second sort is, when goods or chattels that are useful, are lent to a friend gratis, to be used by him; and this is called commodatum , because the thing is to be restored in specie .

The third sort is, when goods are left with the bailee to be used by him for hire; this is called locatio et conductio, and the lender is called locator , and the borrower conductor .

The fourth sort is, when goods or chattels are delivered to another as a pawn, to be a security to him for money borrowed of him by the bailor; and this is called in Latin vadium, and in English a pawn or a pledge.

The fifth sort is when goods or chattels are delivered to be carried, or something is to be done about them for a reward to be paid by the person who delivers them to the bailee, who is to do the thing about them.

The sixth sort is when there is a delivery of goods or chattels to somebody, who is to carry them, or do something about them gratis, without any rewards for such his work or carriage, which is this present case. I mention these things, not so much that they are all of them so necessary in order to maintain the proposition which is to be proved, as to clear the reason of the obligation, which is upon persons in cases of trust.

In light of the above, it is clear to see the concept of bailment can relate to everyday scenarios which one might encounter whereby possession of property is transferred; however the ownership of the property remains unchanged. Perhaps the most common illustrative example of bailment operating would be when a person hands their car to a valet to park it, naturally fully expecting to receive it back at some point. This differs considerably from, for example, a car park where the person uses a particular space in the car park under licence from the proprietor and on such terms and conditions as may be agreed between the parties.

Not all academics and scholars tend to agree that bailment is a useful concept in relation to contract and property law. In fact one scholar has even gone as far as saying that bailment has done more harm than good in a commercial sense. It has even been likened to stultifying the development of a rational law of personal property, acting as an unnecessary straitjacket, having no autonomous legal content, and that it is a principle that is contextual rather than conceptual. However this may in fact be incorrect, as there has been much case law on the concept of bailment and its importance in a commercial environment. As such one particular academic has sought to redefine bailment as:

A bailment occurs when a person (the bailor), having the legal right to exclusive possession of a chattel, exercises a legal power by performing an act or action prescribed by law thereby intentionally (emphasis added) conferring the legal right to exclusive possession of that chattel upon another person (the bailee) and concurrently intentionally conferring upon itself the reversionary interest in that chattel.

It is important at this point to isolate the key terms of the above definition, and recognise their importance to the operation of the doctrine of bailment. First of all a bailor must have the legal right to exclusive possession of the particular chattel in question and also has the ability to confer the legal right of exclusive possession to the bailee. Next a bailor must exercise a legal right by performing ‘an act’, and the law generally prescribes what acts are legal and illegal to perform in this regard. The bailor is also entitled to expect to receive the item back from the bailee either after the effluxion of time or after the performance of a contingency or conditions. Finally, and perhaps most importantly, the bailor must have either a factual or apparent intention to confer such legal rights upon the bailee, that is to have the “power and intent to ‘exclude unauthorised interference’. That is effectively the English law concept of possession”.

The theory therefore is that once the above tests have been satisfied, a bailment exists. The bailment which does exist will generally take the form of one of the six types defined in the Coggs case and, on face value, one can see how such an important doctrine in relation to goods and chattels can apply in situations where legal principles applicable to carriage of goods and the like. It is perhaps important now to discuss the general scope of English law in relation to carriage of goods by sea and air, so that this paper can appropriately discussed how the two issues interrelate with one another.

The Scope of English Carriage of Goods Law

The arena of carriage of goods is generally governed by two key pieces of United Kingdom legislation and one international convention, namely the Carriage of Goods by Road Act 1965 , Carriage of Goods by Sea Act 1971 and the Warsaw Convention of 1929 in relation to carriage of goods by air (sometimes also referred to collectively as ‘Lex Mercatoria’ in the English context). This paper will now discuss these three areas individually.

Carriage of Goods by Road

The Carriage of Goods by Road Act 1965 (hereinafter referred to as “COGRA”) seeks to implement the international Convention on the Contract for the International Carriage of Goods by Road of 1956 into English law. Perhaps the most salient provision of the Convention is in relation to the liability of the carrier as to the goods carried:

1. The carrier shall be liable for the total or partial loss of the goods and for damage thereto occurring between the time when he takes over the goods and the time of delivery, as well as for any delay in delivery.
2. The carrier shall, however, be relieved of liability if the loss, damage or delay was caused by the wrongful act or neglect of the claimant, by the instructions of the claimant given otherwise than as the result of a wrongful act or neglect on the part of the carrier, by inherent vice of the goods or through circumstances which the carrier could not avoid and the consequences of which he was unable to prevent.
3. The carrier shall not be relieved of liability by reason of the defective condition of the vehicle used by him in order to perform the carriage, or by reason of the wrongful act or neglect of the person from whom he may have hired the vehicle or of the agents or servants of the latter…

Therefore the Act expressly provides that a carrier is liable for the goods from the moment it takes possession of them until such time as they are delivered, however its liability is limited in certain circumstances as described. The English courts are generally quite embracing of the Convention and the way it is incorporated into English law, as a number of cases have shown. the point remains that, in relation to carriage of goods by road under English law, the carrier of the goods as a strict liability in relation to loss and damage suffered during the course of transit, unless it can be demonstrated that the consignor had contributed in some way to the demise of the goods (e.g. poor packing quality and the like).

Carriage of Goods by Sea

This area of law is governed generally by the operation of the Carriage of Goods by Sea Act 1971 (hereinafter referred to as “COGSA”). While it could be argued that most shipping of goods now occurs by air, one should not underestimate the importance of carrying goods by sea. As one author puts it:

In England, most litigated in reported cases in carriage of goods are cases of carriage of goods by sea. This is because Britain is an island and has, after centuries, been one of the world’s great trading nations. The result is, indeed, that many of the leading cases in general contract law are cases involving carriage of goods by sea.

The classical model involved the contract for the carriage of goods by road to a port, carriage of goods by sea from a port in England to a port in another country or vice versa and a land contract at the destination. Historically, the land transport contracts gave rise to relatively few disputes as compared with the sea carriage contract. Although it is possible today to carry goods by air, relative costs mean that it is usually only sensible to do so in the case of relatively small, high-value items, where it is worth paying a significant premium for speed and delivery.

The above passage demonstrates the significance of carriage of goods by sea in a commercial context in England. Without the ability to carry goods by sea, and a sound form of regulation of same, international carriage of goods would be significantly more expensive and less commercially viable.

The issue however that needs to be addressed is that relating to liability of the carrier. It is important to understand that issue relating to liability often depends upon the type of sea carriage contract that is entered into between the consignor and the carrier. As one author puts it:

If the owner of good wishes to arrange for his goods to be carried by sea, he has three alternatives. The first is to buy a ship. This would only be a sensible alternative if the owner knew that he had a long-term and continuing need to move goods around the world. An example of such goods’ owner would be a major oil company. Even with such a good designer, however, it would be very unlikely that all the carriage of goods by sea needs would be met by buying ships, because this would be a very inflexible solution. Second alternative is to make the contract for the use of a whole ship, either for a voyage, or a series of voyages, author a period of time. Such a contract is called the charter party… The third possibility is to put a cargo on board a ship which is available at a cargo to the destination point, which the cargo owner wishes his goods to reach. Such a contract is called a bill of lading contract. The bill of lading is the name of the document which is normally issued by the shipowner to the cargo owner to show that the goods are being put on board and will be carried to the destination.

However, broadly speaking, the COGSA (incorporating the Hague-Visby Rules) prescribes certain duties that need to be adhered to by the shipowner as well as the person shipping the goods. For example, by accepting goods the carriage the shipowner warrants that the ship is seaworthy and is fit and sound to carry these goods. Conversely the person shipping the goods agrees that the shipowner will not be liable in circumstances where loss or damage occurs out of the normal risks of sea travel, acts of God, deviations to save or attempt to save a life and other circumstances beyond the scope of control of either party. Therefore whereas in relation to carriage of goods by road, the relevant law imposes absolute liability upon the carrier, the law relating to carriage of goods by sea appears to protect the carrier. The Hague-Visby Rules apply to any contract of carriage by sea where the bill of lading is issued in a jurisdiction which is a signatory to the Rules, and therefore the English courts have jurisdiction over these matters where such jurisdiction can be invoked pursuant to COGSA.

Carriage of Goods by Air

This particular area is governed the United Kingdom by the Carriage by Air Act 1932 (as amended). This Act implements the Warsaw Convention into English law relating to the carriage of goods by air. However it is also important to note that a number of international conventions operate to complement the Warsaw Convention. In particular four key regimes appear to exist in international law in relation the carriage of goods by air:

1. carriage governed by the original Warsaw Convention of 1929 as amended by The Hague Protocol (“the Warsaw Convention”);
2. carriage governed by the Warsaw Convention as amended by the 1975 Montréal Protocol No. 4 (“the amended Warsaw Convention”);
3. carriage governed by the Convention known as the Montréal Convention of 1999 (“the Montréal Convention”); and
4. non-Convention carriage.

Therefore while statute law exists in the English jurisdiction, the fact that a number of international conventions also exist make it difficult to establish which law effectively governs a contract of carriage relating to air transport. As a consequence the issue of liability is not so easily determined. Under both the amended and unamended versions of the Warsaw Convention, the carrier is pervasive liable for any loss or damage to cargo or damage occasioned by any delay unless the carrier can show that it took “all necessary measures” to avoid damage or that it was impossible to take such measures in the circumstances. Naturally in matters where it is not subject to any international convention, the remedies for loss or damage lie in breach of contract, and therefore the aggrieved party must be to demonstrate that a contract of carriage exists and that there has been a fundamental breach of same.

Conclusion

this chapter was not intended to be a comprehensive guide to the laws relating to the various modes of transport that good can be carried on, but rather provide a brief overview and introduction to these areas are the purposes of being able to establish how the concept of bailment fits within this framework. Irrespective of the motor transport chosen, it is clear that the operation of the various laws relies upon the existence of a contract between the parties. The different legislation then implies compulsory turns into these contracts and the English courts have jurisdiction to hear these disputes where empowered to do so under the operation of domestic law.

Why is ‘Bailment’ Relevant to Carriage of Goods?

As can be gauged from the above discussion, it is clear that contractual principles are paramount in relation to carriage of goods. These relationships are essentially contractual nature, and therefore contractual legal principles operate to regulate this. However the question in this paper seeks to answer is: what role does bailment play in contracts for the carriage of goods? Consider, for example, the recent case of East West Corporation v DKBS 1912 and AKTS Svenborg, Utaniko Ltd v P & O Nedlloyd BV . This case centred on the claimant (a shipping corporation) apparently bailing their goods to two carriers after endorsing the bills of lading as required. The intention was for the goods to be sent on consignment to banks in Chile, which the carriers attended to, however they release the goods to the banks without requesting presentation of the bill of lading and without payment of the purchase price. The claimant then sued the carriers. This particular case tested it be existing definition of bailment insofar as it related to carriage of goods contracts, as the author explains in the following:

On ordinary principles of the law of carriage by sea, the claimants’ action should have failed. In circumstances in which the claimants have bailed goods to the carriers for carriage and the carriers have issued bills of lading, the title to the goods represented by the bills of lading (i.e. the documents of title) must be reversionary only-ex hypothesi the claimants have conferred the legal right to exclusive possession of the goods upon the carriers. The delivery of the bills of lading to the consignee banks operated to convey the shippers’ title (i.e. the bailors’ reversionary interests) to the banks, thereby ending the relationship of bailment. The naming of the banks as consignees with delivery of the bills of lading also rendered the banks ‘lawful holders of the bill of lading’ and this status operated to assign the contractual rights of the shippers, evidenced by the bills of lading, to the banks pursuant to the Carriage of Goods by Sea Act 1992. The banks redelivered, but did not endorse, the bills of lading to the shippers. This fact should have proved fatal to the shippers’ claims because such failure meant the undischarged contractual obligations of the carriers continued to enure for the benefit of the banks with whom the reversionary interest itself also remained.

The point made by the author above is that the ordinary principles of bailment would ordinarily lead to a particular claim failing. However, the Court ruled in favour of the claimants on the basis that the bailment relationship continued between the claimant and the carriers irrespective of the fact that the bills of lading had been delivered to the consignee banks. The main issue arising was whether the banks had sufficient possessory title or, in fact, whether possession of the goods ever left the shippers. Given this doubt, the Court saw fit to rule in favour of the claimant on the basis that the carriers had defaulted on obligations pursuant to the bailment relationship, namely that they had delivered the goods to a party without requiring that the bill of lading be produced as proof of title.

The aforementioned case called into question the recognisable boundaries of our relationship, as the ordinary principles of ‘bailment on terms’ would indicate that the Barman relationship ended once goods were delivered. In other words, the fact that the carriers had assigned the consignor’s otherwise reversionary interest in the goods to the consignee would ordinarily be sufficient to bring the bailment relationship to an end. However this was not so in this case. The above or the later goes on to suggest that, while the Court may have been reasonable in its decision-making, it could not be maintained that either the shippers or the consignee banks had the legal right to exclusive possession of the goods. This, according to the same author is discussed in the previous chapter, is an essential limb of the test for the doctrine of bailment to operate. The absence of this, in this particular author’s view, is sufficient to indicate that the bailment relationship between the consignor and the shipper should have been brought to an end.

Irrespective of the view of the author, the English courts of further endorsed the principles enunciated in the East West Corporation case, such as in the case of The Starsin, Homburg Houtimport BV v Agrosin Private Ltd . this case was different to that of the East West Corporation in the sense that it related to a contract to the carriage of cargo by sea, however the contract was on a time charter basis. The claimants lodged a claim against the owner of a vessel which was the subject of a time charter. The traditional view in these circumstances would ordinarily be that there is a direct bailment from the consignor to the shipowner. However the Court held in this particular case that the consignor bailed goods to the time charterer and then the time charter bailed the goods to the shipowner. This obviously challenged the traditional notion held by the Courts in this regard.

It is clear, then, that the concept of bailment run separate from any remedy which a shipper may have against the carrier in relation to breach of contract. In other words, bailment operates independently from relevant legislation relating to sale of goods, particularly where no formal contract exists between the parties as to the carriage of goods. Furthermore it may also be appropriate to look at the concept of sub-bailment; that is when a carrier contracts with another. As a general rule a shipper cannot sue a head bailee for any act of negligence arising from the actions of a sub-bailee unless the sub-bailment was on terms to which the shipper agreed or consented. The Court has said:

That the plaintiffs cannot prove the bailment upon which, in my judgement, they must rely, without referring to terms upon which the silver was received by Constantine Terminals from International Express. These terms established (a) that Constantine Terminals were bailees for reward but also (b) that the implied duties of such a bailee were qualified by exceptions. And, despite [counsel’s] vigourous argument to the contrary, I really do not see how the plaintiff can rely upon one part of the contract while ignoring the other. Consent seems to me to be relevant only between the bailor and head bailee. If the sub-bailment is on terms to which the bailor consented, he has no cause of action against the head bailee. It was not, the sub-bailee is still protected, but if the bailor is damnified by the terms of the sub-bailment he has a cause of action against the head bailee.

The above passage demonstrates how important the concept of bailment is to the carriage of goods. As discussed in the previous chapter, there are often occasions where goods are carried by more than one mode of transport and, as such, by different carriers. It is also common for one carrier to which goods are bailed to then sub-bail these goods to another carrier. If a bailor seeks to take action against the sub-bailee on grounds of negligence, they must accept the terms as agreed between the head bailee and the sub-bailee and, as a consequence, the terms between the head bailment and the sub bailment may be significantly different. This may, in turn, limit a bailor’s ability to seek damages from a sub-bailee and may leave them in a position where they need to rely on statutory remedies against the head bailee, which would mean avoiding the concept of bailment entirely.

The concept of bailment, while important, is not the only form of remedy for a shipper against a shipowner (or other form of transport). Remedies do exist in statute (which incorporates various international conventions into domestic law) and it may be that these are more appropriate. As the concept of bailment has its roots firmly entrenched in common law, it may be difficult for anyone without legal training to be able to comprehend what remedies are available to them under this doctrine. However, by reference to statute, one’s rights and responsibilities may be significantly clearer. Take, for example, the COGRA which provides that a road carrier is strictly liable to damage the goods unless mitigating circumstances (which are expressly provided for in the convention) exist. A bailment is a much more subjective test, and has regard for all the circumstances of a particular case. It also, arguably, is not as certain in its application is the case law appears to indicate that the application of the doctrine of bailment in carriage of goods matters can differ from case to case. Bailment can be a useful remedy; however it is important to note that it is only one remedy available to a shipper in these types of matters.

The International Experience of Bailment and Carriage of Goods Law

In this final chapter this paper proposes to briefly compare and contrast the experience in the English jurisdiction in relation to bailment and carriage of goods with that which exists in other jurisdictions. Given that goods are often carried across jurisdictional borders it is important to have a brief understanding as to how these available remedies may change depending upon the applicable law. In the context of the United States, one particular author attempts to highlight the issue of ‘control’ over the bailee:

In the ordinary bailment, the relationship is arms-length. The bailor has no control over the bailee or the handling of the bailed property. The bailee is an independent party not subservient to the bailor. The bailee is not a fiduciary and owes neither loyalty nor obedience to the bailor. It is in business for itself dealing with a customer and in many cases has interests antagonistic to those of the bailor. The parties do not contemplate that the bailee has power to bind the bailor. In brief, the bailee is a fully independent contractor; it is not an agent.

In clarifying the above, the United States Courts have not hesitated in applying the English concept of bailment and common carriers being insurers of the safe movement of goods as a generally accepted principle of maritime law. One could construe this as suggesting that the English courts are seen as pioneers in this particular area of law, and are therefore the authority as to the concept of bailment.

Conclusion

This paper has taken the opportunity to explore the concept of bailment insofar as it relates to matters regarding carriage of goods. In doing so this paper has concentrated on four key issues. Firstly it attempted to briefly outlined the concept of bailment and identify its rationale at English common law. In doing so it discovered that it is a doctrine which can apply to many situations in day to day life, not the least of which being situations where goods are left with another party on the basis that they are transported to their destination. This party does not acquire the legal right of ownership in the goods, but rather hold of them in trust on behalf of the bailor whilst they are being transported. Secondly this paper attempted to provide a brief outline of relevant carriage of goods laws as they apply in English jurisdiction. It is clear from this discussion that carriage of goods by either sea, air or land are generally well regulated in statutory form, which also generally incorporate provisions of international conventions and treaties on the issue. The idea of this being that international parties can do business with one another with as few hindrances as possible. Thirdly this paper sought to discuss how bailment applies to matters relating to carriage of goods. It discovered that ailment is generally relied upon by a shipper in situations where the statutory remedies make it impossible for them to pursue an action against a shipowner, whether it is as a head bailee or sub-bailee. The conclusion of this was that bailment is intended to complement the existing system of remedies available to shippers by way of statute. Finally drew upon the international experience in relation to bailment, and it discovered that the United States is not reluctant to rely upon the guidance of the English courts in relation to bailment and carriage of goods matters.

In summary, bailment does play a role in carriage of goods matters; however the primary focus is often on statutory remedies. It is due to the fact that many relationships for the carriage of goods are based in contract, and these contracts will generally invoke the jurisdiction of the various legislation. It is generally only where the legislation is silent that bailment can play a role, however it is often difficult to establish whether bailment will be applicable as it is a common law based doctrine.

Bibliography

Furmston, M. P. (2001). Principles of Commercial Law. London: Routledge Cavendish.

Kouladis, N. (2003). Principles of Law Relating to International Trade. New York: Springer.

Norman, P. (1991). Bailment. Sydney: Sweet and Maxwell.

Cases

Coggs v Bernard (1703) 2 Ld Raym 909 1

East West Corporation v DKBS 1912 and AKTS Svenborg, Utaniko Ltd v P & O Nedlloyd BV [2003] EWCA Civ 83; [2003] 1 Lloyd’s Rep 239 at 248 (CA) 6

Elder, Dempster & Co Ltd v Paterson, Zochonis & Co Ltd [1924] AC 522 7

Goldman v Thai Airways International Ltd [1983] 1 All ER 693 5

James Buchanan and Co Ltd v Babco Forwarding and Shipping (UK) Ltd [1977] QB 208; [1978] AC 141 (HL) 3

Johnson Matthey & Co Ltd v Constantine Terminals Ltd [1976] 2 Lloyd’s Rep 215 8

Panalpina International Transport v Densil Underwear [1981] 1 Lloyd’s Rep 187 5

Stag Line v Foscola, Mango and Co [1932] AC 328 3

The Propeller Niagara v. Cordes , 62 U.S. (21 How.) 7 (1858) 9

The Starsin, Homburg Houtimport BV v Agrosin Private Ltd [2003] UKHL 12; [2003] 2 All ER 785 7

Waverley Borough Council v Fletcher [1996] QB 334, 339 (CA) 2

Statutes

Carriage of Goods by Sea Act 1992 6

Treatises

Convention on the Contract of the International Carriage of Goods by Road 1956 3

Hague-Visby Rules 4

Warsaw Convention 5