Bailment in Indiana Law

Although many people may be unfamiliar with the term “bailment,” almost everyone has been a party to a bailment at some point in their life. A bailment is legally defined as a non-ownership transfer of possession. A bailor is an individual who is giving property to another individual and a bailee is other individual receiving said property. In Kottlowski v. Bridgestone/Firestone, Inc., 670 N.E.2d 78 (Ind. Ct. App. 1996), the Court states, “A bailment is an express or implied agreement between a bailor and a bailee in which the bailee is entrusted to accomplish a specific purpose with the bailor’s personal property; when the purpose is accomplished, the property is returned to the bailor.” In this case, employees’ tools were stolen from their employer’s workshop. The Court of Appeals was tasked with determining whether there was a valid bailment between the employer and employees and whether the employer failed to take appropriate steps to protect its employees’ tools.

When does a bailment exist between two individuals? The Court in Kottlowski identifies a two-factor test to determine when a bailment arises. First, the personal property of the bailor is delivered to, and in sole possession of, the bailee. Second, the bailor’s personal property is accepted by the bailee. On the issue of delivery and acceptance, the Kottlowski Court states that as a general rule, “[T]here must be such a full transfer, either actual or constructive, of the property to the bailee as to exclude the possession of the owner and all other persons and give to the bailee, for the time being, the sole custody and control of the property. Acceptance requires either an express contract to take the article and later redeliver it, or circumstances from which such a contract can be implied.” In other words, if the employer allowed the employees to store their tools at the workshop overnight and during weekends when the shop was closed, and the employees did not have access to their tools outside of working hours, then a bailment existed.

The standard of care required in a bailment is laid out in Norris Automotive Service v. Melton, 526 N.E.2d 1023, 1026 (Ind. Ct. App. 1988). There are three types of standards of care for the three types of bailments under Indiana law. The Court in Norris measures the standard of care in each bailment by the benefit each party is awarded from the bailment. “The bailee must use:

• slight care when the bailment is for the sole benefit of the bailor,
• great care when the bailment is for the sole benefit of the bailee, or
• ordinary care when the bailment is for the mutual benefit of the bailor and bailee.”

Determining which type of bailment you are entering into is very important to know the liability and obligations you or the other party in your bailment are under based on the standard of care required.

If you have any questions or want assistance with bailment agreements, please reach out to one of our attorneys at McNeelyLaw LLP by calling (317)825-5110.

This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.