FIU Business Law Carriers Liability Case Study

Debate This:

Carrier’s liability

Chapter 41, p. 990

Vanessa Denai owned forty acres of land in rural Louisiana. On the property were a 1,600-square-foot house and a metal barn. Denai met Lance Finney, who had been seeking a small plot of rural property to rent. After several meetings, Denai invited Finney to live on a corner of her land in exchange for Finney’s assistance in cutting wood and tending her property. Denai agreed to store Finney’s sailboat in her barn.

With Denai’s consent, Finney constructed a concrete and oak foundation on Denai’s property and purchased a 190-square-foot dome from Dome Baja for $3,395. The dome was shipped by Doty Express, a transportation company licensed to serve the public. When it arrived, Finney installed the dome frame and fabric exterior so that the dome was detachable from the foundation. A year after Finney installed the dome, Denai wrote Finney a note stating, “I’ve decided to give you four acres of land surrounding your dome as drawn on this map.” This gift violated no local land-use restrictions. Using the information presented in the chapter, answer the following questions.

1. Is the dome real property or personal property? Explain.
2. Is Denai’s gift of land to Finney a gift causa mortis or a gift inter vivos?
3. What type of bailment relationship was created when Denai agreed to store Finney’s boat? What degree of care was Denai required to exercise in storing the boat?
4. What standard of care applied to the shipment of the dome by Doty Express?

Debate This:

Common carriers should not be able to limit their liability.

990
UNIT SEVEN: Property and Its Protection
Practice and Review
Vanessa Denai owned forty acres of land in rural Louisiana. On the property were a 1,600-square-foot
house and a metal barn. Denai met Lance Finney, who had been seeking a small plot of rural property to
rent. After several meetings, Denai invited Finney to live on a corner of her land in exchange for Finney’s
assistance in cutting wood and tending her property. Denai agreed to store Finney’s sailboat in her barn.
With Denai’s consent, Finney constructed a concrete and oak foundation on Denai’s property
and purchased a 190-square-foot dome from Dome Baja for $3,395. The dome was shipped by Doty
Express, a transportation company licensed to serve the public. When it arrived, Finney installed the
dome frame and fabric exterior so that the dome was detachable from the foundation. A year after
Finney installed the dome, Denai wrote Finney a note stating, “I’ve decided to give you four acres of
land surrounding your dome as drawn on this map.” This gift violated no local land-use restrictions.
Using the information presented in the chapter, answer the following questions.
1. Is the dome real property or personal property? Explain.
2. Is Denai’s gift of land to Finney a gift causa mortis or a gift inter vivos?
3. What type of bailment relationship was created when Denai agreed to store Finney’s boat? What
degree of care was Denai required to exercise in storing the boat?
4. What standard of care applied to the shipment of the dome by Doty Express?
Debate This
Common carriers should not be able to limit their liability.
Key Terms
abandoned property 980
accession 978
bailee 982
bailee’s lien 984
bailment 982
bailor 982
chattel 973
confusion 978
constructive delivery 976
dominion 977
estray statute 980
gift 975
gift causa mortis 978
gift inter vivos 978
lost property 979
mislaid property 979
personal property 973
real property 972
Chapter Summary: Personal Property and Bailments
PERSONAL PROPERTY
Personal Property
versus Real Property
Personal property (personalty or chattel) includes all property not classified as real property (realty). Personal
property can be tangible (such as a car) or intangible (such as stocks or bonds). The two types of property
are usually subject to different types of taxes. In addition, acquiring or transferring real property requires a
greater degree of formality than acquiring or transferring personal property.
Acquiring Ownership
of Personal Property
The most common way of acquiring ownership in personal property is by purchasing it. The following are
additional methods of acquiring personal property:
1. Possession—Property may be acquired by possession if no other person has title to the property (for
instance, capturing wild animals).
2. Production—Any item produced by an individual (with minor exceptions) becomes the property of that
individual.
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CHAPTER 41: Personal Property and Bailments
991
3. Gifts—A gift is effective under the following conditions:
a. There is evidence of intent to make a gift of the property in question.
b. The gift is delivered (physically or constructively) to the donee or the donee’s agent.
c. The gift is accepted by the donee.
4. Accession—When value is added to personal property by the use of labor or materials, the owner of the
original property generally retains title to the property and benefits from the added value.
5. Confusion—If confusion of fungible goods occurs as a result of agreement, an honest mistake, or the act
of some third party, the owners share ownership as tenants in common. If goods are confused due to an
intentional wrongful act, the innocent party ordinarily acquires title to the whole.
Mislaid, Lost, and
Abandoned Property
The finder of property acquires different rights depending on whether the property was mislaid, lost, or abandoned.
1. Mislaid property—Property that is placed somewhere voluntarily by the owner and then inadvertently
forgotten. The finder does not acquire title.
2. Lost property—Property that the owner has involuntarily parted with and then cannot find or recover.
The finder can claim title to the property against the whole world except the true owner.
3. Abandoned property—Property that is discarded by the owner, who has no intention of reclaiming it in the
future. The finder can claim title to the property against the whole world, including the original owner.
BAILMENTS
Elements
of a Bailment
1. Personal property—Bailments involve only personal property.
2. Delivery of possession without title—For an effective bailment to exist, the bailee (the one receiving the
property) must be given exclusive possession and control over the property. In a voluntary bailment, the
bailee must knowingly accept the personal property.
3. The bailment agreement—The agreement expressly or impliedly provides for the return of the bailed
property to the bailor or a third party, or for the disposal of the bailed property by the bailee.
Ordinary Bailments
1. Types of bailments—
a. Bailment for the sole benefit of the bailor—A gratuitous bailment undertaken for the sole benefit of the
bailor (for example, as a favor to the bailor).
b. Bailment for the sole benefit of the bailee—A gratuitous loan of an article to a person (the bailee)
solely for the bailee’s benefit.
c. Mutual-benefit (contractual) bailment—This is the most common kind of bailment and involves
compensation between the bailee and bailor for the service provided.
2. Rights of a bailee (duties of a bailor)—
a. The right of possession—Allows a bailee to sue any third persons for damage or loss of the bailed property.
b. The right to use the property—Allowed to the extent it is necessary to carry out the purpose of the bailment.
c. The right to be compensated and reimbursed for expenses—In the event of nonpayment, the bailee
has the right to place a possessory (bailee’s) lien on the bailed property until fully compensated.
d. The right to limit liability—An ordinary bailee can limit his or her liability for loss or damage, provided
proper notice is given and the limitation is not against public policy. In special bailments, limitations
on liability for negligence or on types of losses usually are not allowed, but limitations on the monetary
amount of liability are permitted.
e. Duty to reveal defects—A bailor must notify the bailee of any known defects and, in mutual-benefit
bailments, hidden defects as well.
f. Warranty liability—A bailor can incur warranty liability for injuries resulting from the bailment of
defective articles.
3. Duties of a bailee (rights of a bailor)—
a. A bailee must exercise appropriate care over property entrusted to her or him. What constitutes appropriate care normally depends on the nature and circumstances of the bailment. See Exhibit 41–2.
b. Bailed goods in a bailee’s possession must be either returned to the bailor or disposed of according
to the bailor’s directions. A bailee’s failure to return the bailed property creates a presumption of
negligence and constitutes a breach of contract or the tort of conversion.
(Continues )
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Special Types
of Bailments
UNIT SEVEN: Property and Its Protection
1. Common carriers—Carriers that are publicly licensed to provide transportation services to the general
public are held to a standard of care based on strict liability.
2. Warehouse companies—Because a warehouse company is a professional bailee, it is expected to exercise
a high degree of care to protect and preserve the bailed goods. Warehouse companies often issue
documents of title (warehouse receipts) for goods, which may be negotiable or nonnegotiable.
3. Hotel operators—Operators of hotels are subject to strict liability for any loss or damage to their guests’ personal property. State statutes may limit liability if the hotel provides a safe and properly notifies its guests.
Issue Spotters
1. While walking to work, Bill finds an expensive ring lying on the curb. Bill gives the ring to his son, Hunter. Two weeks later, Martin
Avery, the true owner of the ring, discovers that Bill found the ring and demands that Hunter return it. Who is entitled to the ring, and
why? (See Mislaid, Lost, and Abandoned Property.)
2. Rosa de la Mar Corporation ships a load of goods via Southeast Delivery Company. The load of goods is lost in a hurricane in Florida.
Who suffers the loss? Explain your answer. (See Bailments.)
—Check your answers to the Issue Spotters against the answers provided in Appendix D at the end of this text.
Business Scenarios and Case Problems
41–1. Duties of the Bailee. Discuss the standard of care traditionally required of the bailee for the bailed property in each
of the following situations, and determine whether the bailee
breached that duty. (See Bailments.)
1. Ricardo borrows Steve’s lawn mower because his own
lawn mower needs repair. Ricardo mows his front yard. To
mow the backyard, he needs to move some hoses and lawn
furniture. He leaves the mower in front of his house while
doing so. When he returns to the front yard, he discovers
that the mower has been stolen.
2. Alicia owns a valuable speedboat. She is going on vacation
and asks her neighbor, Maureen, to store the boat in one
stall of Maureen’s double garage. Maureen consents, and
the boat is moved into the garage. Maureen needs some
grocery items for dinner and drives to the store. She leaves
the garage door open while she is gone, as is her custom,
and the speedboat is stolen during that time.
him through a third party, Mark Lawrence. When Simon spoke
to Lawrence about the wire transfer, she referred to the phone
as hers and asked, “Are you going to send my phone to me?”
Simon paid, but she did not get the phone. Instead, Lawrence
took it to a Best Buy store and traded it in for credit. Charged
with the theft of lost property, Lawrence claimed that he did not
know Simon was the owner of the phone. Was Simon’s phone
lost, mislaid, or abandoned? What is the finder’s responsibility
with respect to this type of property? Can Lawrence successfully argue that he did not know the phone was Simon’s? Explain.
[State of Kansas v. Lawrence, 347 P.3d 240 (Kan.Ct.App. 2015)]
(See Mislaid, Lost, and Abandoned Property.)
41–2. Gifts. Jaspal has a severe heart attack and is taken to
the hospital. He is aware that he is not expected to live. Because
he is a bachelor with no close relatives nearby, Jaspal gives his
car keys to his close friend Friedrich, telling Friedrich that
he is expected to die and that the car is Friedrich’s. Jaspal
survives the heart attack, but two months later he dies from
pneumonia. Sam, Jaspal’s uncle and the executor of his estate,
wants Friedrich to return the car. Friedrich refuses, claiming that
the car was a gift from Jaspal. Discuss whether Friedrich will
be required to return the car to Jaspal’s estate. (See Acquiring
Ownership of Personal Property.)
41–4. Bailments. Christie’s Fine Art Storage Services, Inc.
(CFASS), is in the business of storing fine works of art at its
warehouse in Brooklyn, New York. The warehouse is next to the
East River in a flood zone. Boyd Sullivan owns works of art by
Alberto Vargas, including Beauty and the Beast and Miss Universe. Sullivan contracted to store the works at CFASS’s facility
under an agreement that limited the warehouser’s liability for
damage to the goods to $200,000. A few months later, as Hurricane Sandy approached, CFASS was warned, along with the
other businesses in the flood zone, of the potential for damage
from the storm. CFASS e-mailed its clients that extra precautions were being taken. Despite this assurance, Sullivan’s works
were left exposed on a ground floor and sustained severe damage in the storm. Who is most likely to suffer the loss? Why?
[Sullivan v. Christie’s Fine Art Storage Services, Inc., 2016 WL
427615 (Sup. N.Y. County 2016)] (See Bailments.)
41–3. Lost Property. Sara Simon misplaced her Galaxy cell
phone in Manhattan, Kansas. Days later, Shawn Vargo contacted her, claiming to have bought the phone from someone
else. He promised to mail it to Simon if she would wire $100 to
41–5. Duties of the Bailee. James Heal owned a vehicle salvage yard in Homestead, Iowa. Brian Anderson contracted with
Heal to run the business. Anderson cleaned up the property,
removed trash, installed heat and fixed the plumbing in the
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