What is a Car Bailment Agreement?
The definition of "bailment" in the context of a car can be simply defined as the transfer of possession of your car from you (the bailor) to another person (the bailee) for a particular reason (such as washing, fixing or storing). However, the actual agreement between the parties can be written or unwritten, expressed or implied. Another meaning often used interchangeably with bailment is entrustment, which can also give the other person control over your vehicle.
In other words , bailment will be applied when you allow someone to take care of your car. You could even call it custodianship of property under the common law where the car is the property and you are the custodian until you take it back. Some examples could be:
With what you have read above, it is clear that a bailment for a car can extend to any situation where the possession of your car is transferred from you to someone else by express or implied agreement.
Legal Elements of a Car Bailment Agreement
It is important for any car owner to understand the legal components necessary to create an enforceable bailment agreement with repair shops, valet services, and parking garages. While many such agreements are entered into without much thought, and some car owners do not even give a second thought to the idea that their car is being repaired or it is just being parked in "a garage", they are actually entering into a contract that is binding and enforceable and that very much involves legal issues.
So what exactly does this mean? Well to begin with, a bailment agreement is a contract wherein one party (the bailor) gives a person temporary custody of a thing which remains that person’s possession to the owner (the bailor). In a bailment, there is a transfer of possession back and forth but no transfer of ownership ever takes place. A car owner creating a bailment with a car repair shop is giving the repair shop temporary custody of its car, the repair shop will be allowed to possess the car during the duration of the agreement, but they will never have ownership of the car itself. The owner must be aware that a bailment only exists if the car is physically given over to the repair shop directly. If you tell the repairman to go to your driveway and take the car there without him, then a bailment may very well not exist. The owner must authorize the car’s removal from some point other than his driveway.
But once the bailment is formed, it is critical to remember that it is legally enforceable. The repair shop must stay within the bounds of its duties under the bailment. Otherwise, they have breached their contractual duty to the car owner. A court will enforce the car owner’s rights against the repair shop if reasonable care was not used by the repair shop and this caused the car owner damages.
For example, if the car was stolen and the repair shop did not keep their doors locked at night (one instance where a repair shop may be liable for the loss of a car they are supposed to be protecting for the car owner), causing the damage, the court will likely hold the car repair shop liable in a court of law. Failure to protect the car from foreseeable harm can create liability on the part of the repair shop. This is also true for valet services and parking garages, however, express parking garage and valet service contracts often disclaim liability for any damage.
There are also some potential legal consequences for a car owner as well in these situations. Valets and parking garages may place liens on cars for any unpaid balance owed to them for their services. Please be aware that in Pennsylvania, these liens will only allow a valet or parking garage to impound a car for one of two reasons: (1) failure to pay the service and (2) failure to provide proof of ownership of the car to the operator upon demand. Many times, courts will enforce the lien created by a valet or parking garage and allow them to hold onto the vehicle until the car owner pays the balance owed to them.
Types of Car Bailment and Their Applications
There are several different types of bailment involved in the use of a car. These include:
1. Hire for reward
This bailment is for the sole benefit of the bailee. In legal terms "hires for reward" really means making a profit on an item. This is where the person who has possession of the car uses it to make a profit.
For example, when a car rental company rents out a car to a customer and charges for its use, this is a hire for reward bailment. The rental company charges more than its actual costs in order to make a profit (as it must!)
2. Gratuitous bailment
A gratuitous bailment is one that is for the sole benefit of the bailor (the owner or person who delivers the car). So for example, if I give my car, fully insured, to you, and ask you to just drive it from one place to another—if anything happens to the car you will not have a claim against me because you received a benefit from me for no money and it was not intended as a commercial transaction.
3. Involuntary bailment
When a bailment occurs involuntarily (or not by contract) the standard of care that is applied to the handling of the vehicle is a bit higher and more level headed analysis is applied.
For example, suppose I see someone having an accident and I stop to help. I free the driver from their seatbelt and "bail" them out of their vehicle. Under these circumstances, I am required to exercise great care and provide a safe environment for the person. On the other hand, I am not liable for damages to the driver or their vehicle once I return them to safety and the car is further damaged by fire or explosion.
Rights and Duties of Bailor and Bailee
The rights and duties of a bailor and bailee in a car or auto bailment agreement will depend on the type of bailment that exists under the circumstances, as listed below:
Consensual Bailment
In a consensual bailment, a bailor has the right to require the bailee to exercise ordinary care when the vehicle is possessed by the bailee, and to have the vehicle returned at the end of the bailment agreement. There is, however, no obligation on the part of the bailor not to use the vehicle if that right is not specified in the agreement.
The general duty of the bailee, however, is to use customary care of the vehicle, which is usually the reasonable care exercised by a person of ordinary prudence under like circumstances. A bailee owes a heightened duty of care to a bailor when the bailor has compensated the bailee for the safekeeping of the property.
Without Compensation Bailment
If the bailor is not making any charge for the custody during a bailment without reward or compensation, the bailee has the right to use the vehicle only if the bailor has expressly said it is permissible. Also, the bailee is unauthorized to let anyone else use the vehicle, and the bailee must return the vehicle upon demand.
Compensated Bailment
A compensated bailment is one that requires the payment of express, stipulated compensation for the use of the property. Generally, the greater the compensation element, the more exigent the duty of care by the bailee.
Unauthorized Use by a Bailee
If a bailee uses the subject vehicle in some manner other than that allowed by the agreement, it is likely to constitute a conversion of the bailor’s property. While a bailee may not be charged with common law conversion for some acts of negligence or breach of contract, there is no defense of "mere negligence" where the bailment expressly forbids the unauthorized use.
Whatever the agreement, the bailor and bailee must comply with the obligations expressed therein, whether direct or implied.
Implications of a Bailment Agreement for Cars or Autos
In negotiating the terms of a bailment, be mindful of whether the transaction is supported by consideration (payment) or just a loan or gratuitous bailment. Also, consider whether the property is likely to be used by anyone other than the bailee, and whether the bailee is authorized to transfer use or possession to anyone else. Depending on the nature of the transaction may affect the rights and duties of either party when it is unhappy.
Common Legal Issues in Car Bailment Agreements
As with any legal contract, disputes may inevitably arise as to the interpretation and application of car bailment agreements. For example, where a vehicle is physically damaged while in the possession of a bailee, a court may be called upon to determine whether the bailee acted "reasonably" or "with care" in handling the vehicle. Likewise, if a bailee fails to return the vehicle as agreed, either during the term of the bailment or at its expiration, this may constitute a breach of contract for which legal relief can be granted. Any such disputes are typically governed by the principles of contract law , which will vary slightly depending upon the jurisdiction and also the particular set of facts. A bailee who has wrongfully damaged or failed to return a bailed vehicle is often liable to the bailor for damages sustained. In a suit for damages, courts may award recovery to the bailor for the cost of repairs, including depreciation of the vehicle, or even replacement costs (depending on the circumstances). In some cases, however, bailors may also be entitled to recover consequential and incidental damages, including lost profits, loss of use, extra-judicial costs, and may even recover punitive damages. In addition to termination of the bailment agreement and/or claim for damages, it may be possible to obtain other equitable relief, including specific performance and/or a writ replevin (to return the vehicle to the owner).
Drafting a Car Bailment Agreement: Tips and Guidance
A well-drafted car bailment agreement should address the key elements of a bailment relationship, including the identification of the parties, the description of the car, the terms of custody, and desired outcome if the car is damaged or lost. To create a comprehensive car bailment agreement, you should include the following provisions:
• Identification of the parties – including full names and contact information for both the car owner and the bailee.
• Description of the car – this should include any identifying features of the car (e.g., VIN number) as well as its value and any other information that may be necessary to identify the car in the event of a loss.
• Terms of custody – this should specify who is responsible for securing the car, where it will be kept, how it will be moved and what consequences may follow if its security is compromised.
• Agreements regarding damages – this should include damage insurance, how damage will be repaired and by whom, how damages will be calculated, etc.
• Agreements regarding lost or damaged property – this should include what happens if the bailee loses or damages property belonging to third parties as a result of damage to the car, as well as what happens if third-party property is damaged as a result of the car when in possession of the bailee.
• Other matters – These might include liability limitations, dispute resolution procedures, governing law provisions, severability provisions, enforceability clauses and attorneys’ fee provisions.
In order to ensure that your car bailment agreement is legally sound, you should not draft the agreement yourself. Experienced bailment attorneys can draft the agreement for you or advise you regarding what sections must be included to protect your interests.
Case Examples: Real-World Scenarios
The application of bailment agreements is widespread in various industries, particularly in the automotive sector where they often become the foundation of the relationship between consumers and service providers. The facts below demonstrate how these relationships have evolved, and how they have been tested in the courts.
A 1996 case (Baker v. Interstate Parkway) began as an ordinary dispute over a car service contract and turned into a case of criminal negligence resulting in the case being tried by the Oklahoma Court of Criminal Appeals, as the service provider for the injured party was charged with misdemeanor for recklessly causing an accident with bodily injury or death. Baker was injured when a retaining wall collapsed onto his car damaging his person and vehicle. Baker sued the repair facility, but when the mechanics arrived to testify they were told not to appear as their actions were the basis of an ongoing criminal investigation. One of the mechanics was granted immunity, in which the mechanic testified that he was well aware of the sign on the office wall that warned all employees to properly install the safety bolts in the car’s wheel, and knowing this, he "just never got around to installing them on Mr. Baker’s car." Baker admitted that before taking his testimony, the attorney made it clear to all present that his purpose was for use in trial regarding his civil suit. Despite the fact that the manager of the necktie shop failed to verify intuitions of the employees , the Court found Baker failed to visit the shop before leaving in his car, and his own negligent conduct contributed to the injury in this instance.
A 2005 case (Davis v. La-Z-Boy South, Inc.) reinforced the need for a bailment agreement when leaving a car for service after an employee stripped the screws of a mother’s car seat, causing serious injuries to a child. Davis took her car to have its window tinted. The family waited in the waiting room with a visible car seat while the son played nearby, unaware that the employees were moving the car without securing the child’s shoulder straps. The son fell out of his seat and onto the ground, touching his face, and was hospitalized for five days. The trial court granted summary judgment to the repair company, and later, the Supreme Court affirmed this decision, stating a basic bailment contract existed with both parties’ responsibilities clearly defined. As in Baker, the customer was responsible for securing all occupants in the vehicle prior to dropping off the car for service which fulfilled their duty of care. The court explained that the repair shop is not liable for any risk the car may have presented prior to service. The court also explained that its decision was due in part to the role of La-Z-Boy South’s workers in the accident itself, which clearly shows the need for a bailment agreement for parties to directly define their relationship and obligations to another.