A bailor retains ownership of property while giving it to someone else for safekeeping. Custodians must keep the property safe and return it, except in cases where they have a lien. Different standards apply to different situations, such as a bank’s safety deposit boxes versus a dry cleaner’s temporary storage. Legal issues can arise, and contracts should be carefully read to understand liability.
A bailor is a person who retains title to property while giving it to someone else for physical safekeeping. There are a wide range of situations where bail can arise, such as when someone leaves a car with a mechanic for a tune-up. In this case the driver is the trustee, as the car legally belongs to the driver while the mechanic has the car in physical custody for the agreed service. The laws surrounding bail can get complex.
As a general rule, the custodian, the person who takes control of the property, undertakes to keep the property in reasonable care and to return it. The asset can be returned at the end of the service, at the end of an established period of time, or at the request of the curator. The exception to this rule is a case where a custodian has a lien on the property, where the property may be retained if the custodian fails to meet the terms of a contract.
The law distinguishes between cases where individuals are specifically considered to act as custodians and situations where individuals become custodians due to circumstances. A bank, for example, is paid to store valuables in safety deposit boxes and is held to a high standard of care because it offers a security deposit service. On the other hand, a dry cleaner that accepts temporary storage of clothes for cleaning needs is held to less stringent standards.
Other legal considerations include when the property can be considered abandoned by law and what happens when someone finds stolen or lost property and acts as custodian by mistake. These issues can arise in court when liability issues are raised, such as if someone sues someone for not properly caring for property while it was in custody.
In formal business agreements, a contract is signed to spell out the rights and responsibilities of both parties. We recommend that you read the agreements carefully to make sure you understand them. In the mechanic’s example above, for example, the mechanic may guarantee the safety and security of the vehicle, but will not offer such guarantees for items left inside the vehicle. It is important to understand where the liability lies so that a receiver knows what can be done and what to do if something goes wrong.
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