Preview Extract
CHAPTER 30-PERSONAL PROPERTY AND BAILMENT
TRUE/FALSE
1. Jerry enters a restaurant and hangs his coat in an unattended cloakroom near the entrance
of the restaurant. Even though no employee of the restaurant is present, the provision of the
cloakroom makes Jerry think it will be safe. In this situation, the restaurant is a bailee of
Jerry’s coat.
Answer: False
2. Charles agrees to store Tuan's car in Charles's garage for the winter months while Tuan
visits his grandmother in California. As a bailee, Charles is automatically entitled to use
Tuan's car while Tuan is away.
Answer: False
3. Ed wants to give Howard his old car, but Howard says he doesn’t want it. Howard later
reconsiders and tells Ed he does want the car. His previous repudiation means there is no gift,
and Howard has no rights in the car.
Answer: True
4. If property is mislaid, the finder of the property will have a superior claim to possession of
the property against everyone except the true owner.
Answer: False
5. While shopping at the mall, Everett's wallet fell out of his pocket. Jon found the wallet.
The wallet is abandoned property and Jon may keep it.
Answer: False
6. The difference between an inter vivos gift and a gift causa mortis is that the inter vivos gift
is made during the donor's lifetime and a gift causa mortis is a gift is made after the donor's
lifetime by the donor's estate.
Answer: False
7. A bailment relationship can be created with respect to either real or personal property.
Answer: False
8. Jimmy stole Dave’s motorcycle and completely revamped the engine and changed the
body. These accessions were very expensive, but Jimmy was completely satisfied with the
results, intending to sell the motorcycle for a huge profit. If the motorcycle is recovered from
Jimmy, Dave must pay Jimmy for the improvements.
Answer: False
9. If one party makes accessions without agreement and the improvements can be “undone”
without damaging the property, the improver must undo them.
Answer: True
10. A bailment was created for the parties' mutual benefit. This means that the bailee must use
ordinary care with the property.
Answer: True
11. Stephen wants to give his niece, Dawn, a piece of jewelry as a gift. Stephen gives Tracy,
his agent, the bracelet to take to Dawn. The delivery element of making a gift has been
completed.
Answer: False
12. Mega Corporation, the bailor, negotiates a bailment agreement with Huge Corporation,
the bailee. Huge Corporation insists that an exculpatory clause be included in the terms and
conditions of the bailment agreement. Later, Huge Corporation negligently (ordinary
negligence, not gross negligence) damages the property which is the subject of the bailment.
Most courts will allow Huge Corp. to stand behind its exculpatory clause and deny liability.
Answer: True
13. After a meeting with his advisor to register for a class at State University, Ron forgot his
calculator in the dean's outer office. Theresa, another student, found the calculator. The
calculator is treasure trove and Theresa may keep it.
Answer: False
14. In January, Erwin told David, his nephew, that he would give him a car when he
graduates from college. David graduated in May. If Erwin refuses to give David a car, David
can sue him for breach of an inter vivos gift.
Answer: False
15. Dersett Trucking hauls granite for the major granite companies in Minnesota. Dersett
Trucking does not make its trucking services available to the general public. Dersett Trucking
is a contract carrier and does not incur strict liability.
Answer: True
16. Jody loaned her neighbor, Phil, her snow blower. Phil set it near his driveway, and later
accidently ran over and destroyed it. In a suit to recover damages, Jody as plaintiff has the
burden of proving that Phil was negligent and caused the destruction of her snow blower.
Answer: False
MULTIPLE CHOICE
1. In order to constitute a valid gift:
a. the donor must intend to transfer ownership of property immediately.
b. the donee must accept the gift.
c. the donor must deliver the gift property to the donee.
d. All of the above are necessary for a valid gift.
Answer: D
2. Percival takes his computer to a repair shop to have the disk drive repaired. This is most
likely a:
a. bailor benefit bailment.
b. bailee benefit bailment.
c. mutual benefit bailment.
d. leasehold arrangement.
Answer: C
3. Buck, fearing death from severe injuries suffered in a machinery accident, assigned over a
certificate of deposit worth $100,000 and delivered the certificate to Pearl, a friend, who
gladly accepts. Buck ends up recovering from the injuries. Why must Pearl give the
certificate of deposit back to Buck?
a. This type of gift is known as a gift causa mortis. It is a conditional gift which is
conditioned on Buck's actually dying. Because Buck recovered, the gift is automatically
revoked.
b. This is an inter vivos gift because Buck was still alive when the gift was made. Any inter
vivos gift is revocable because there is no consideration to make Buck's delivery of the
certificate binding under contract law.
c. This is an inter vivos gift and due to state laws, gifts in contemplation of death must be
written into a valid will or otherwise the deceased's assets will be distributed according to
state statute.
d. This gift is an ordinary gift, but it is revocable because we don't know if the certificate of
deposit has matured or not.
Answer: A
4. Rhonda is a server in a restaurant. One day she finds a purse while clearing a table. The
purse is most likely:
a. lost property.
b. mislaid property.
c. treasure trove.
d. abandoned property.
Answer: B
5. Which of the following occurs when a person uses labor and/or materials to add value to
personal property belonging to another?
a. Accession.
b. Bailment.
c. An inter vivos gift.
d. A mutual-benefit bailment.
Answer: A
6. A bailee always has a right:
a. to possession of the bailed property. Anyone who interferes with this right is liable to the
bailee. Even the bailor himself is liable for wrongful interference with the bailee’s possession.
b. to use the bailed property.
c. to compensation.
d. All of the answers are correct.
Answer: A
7. George gave his great-grandfather's pocket watch to Nurse Nadene because he expected to
die soon. This is:
a. a testamentary gift.
b. an inter vivos gift.
c. an executed gift.
d. a gift causa mortis.
Answer: D
8. Hanna intends to give her granddaughter, Melodee, her antique hat pin. This heirloom has
been kept under lock and key in the wall vault in the library of Hanna’s house in Virginia.
The hat pin is currently the only item in the vault. When Hanna is visiting Melodee in
Connecticut, Hanna gives Melodee the only key to the vault. Melodee is grateful for the
present and excitedly accepts. In this situation has there been a completed gift?
a. No. There has been no physical delivery of the hat pin.
b. Yes. There has been physical delivery of the hat pin.
c. No. There has only been constructive delivery of the hat pin.
d. Yes. There has been constructive delivery of the hat pin.
Answer: D
9. Bertha, from Chicago, traveled to San Francisco to attend a conference. Her sister, Martha,
lives in San Francisco and consequently, Bertha made arrangements to spend a couple of days
with her sister. The next morning sitting at the breakfast table, Bertha realizes that she packed
a mismatched pair of shoes (one is black and the other is blue). Luckily, Martha wears the
same size of shoes and lends Bertha a pair of black leather pumps. During the day, the shoes
are damaged while Bertha is wearing the shoes. Bertha's duty of care would be a duty of:
a. extraordinary care, because this is a bailment for the sole benefit of the bailee.
b. ordinary care, because this is a bailment with both parties receiving mutual benefits.
c. only slight care, because this is a bailment for the sole benefit of the bailor.
d. none, as the sisters would share without condition.
Answer: A
10. The element that distinguishes a contract from a gift is:
a. performance of the offeror's or donor's promise.
b. the element of consideration which is present in a contract, but not in a gift.
c. whether or not the offeree or donee accepts the offer.
d. whether or not the subject of the gift or contract is illegal.
Answer: B
11. Personal property means all property other than:
a. soil, plants, and trees removed from the land.
b. minerals and crops removed from the land.
c. land and all things permanently attached to the land.
d. intangible property.
Answer: C
12. Select the correct answer:
a. Rosie rents a locker at the airport, and she puts a bag in the locker. Rosie keeps the locker
key. In this case, the bag has been delivered to and accepted by the airport. The airport is a
bailee.
b. Hill rents a boat to Dan. The boat is located at a lake 30 miles away. Hill gives Dan keys to
the boat. Dan drives to the lake and takes possession of the boat. In this case, the boat has
been delivered to and accepted by Dan, and Dan is a bailee.
c. Unknown to Lon, Jeff left a bike at Lon's house. Lon has not found the bike and he is not
likely to find it because Jeff left the bike under the front porch. In this case, Lon is a bailee of
the bike.
d. Ken parked a car in a self-service lot and Ken kept the keys. The parking lot is a bailee.
Answer: B
13. Which of the following is/are generally subject to a standard of strict liability for bailed
goods?
a. Contract carriers and common carriers.
b. Common carriers and innkeepers.
c. Common carriers.
d. Contract carriers.
Answer: C
14. Sarah works for a company that has offered a promotion if she was willing to relocate.
Sarah accepted the position and put her house on the market right away. She sold her house
the first day that the realtor held an open house. The buyer agreed to pay cash for the full
purchase price of the house. Sarah was thrilled, except that it meant that she would have to
put her furniture in storage until she found another house in her new city. She entered into a
written contract with Safe Storage, Inc. The agreement included a clause excusing Safe
Storage, Inc. from any liability for loss or damage, even if the loss or damage resulted from
Safe Storage's negligent acts. Because of Self Storage's negligence, a fire destroyed the
warehouse and all of its contents, including Sarah's household goods and furniture. Sarah
claims that Safe Storage, Inc. is liable for the full value of the contents, which is
approximately $10,000. Is Sarah correct?
a. Yes, because storage warehouses are strictly liable for loss or damage, regardless of fault
and regardless of exculpatory clauses.
b. No, because there was equal bargaining power between Sarah and Safe Storage, Inc.
c. Yes, because exculpatory clauses are illegal and never enforceable.
d. Probably, because often a court will reject an exculpatory clause against a bailor who is a
consumer.
Answer: D
15. Jeannie carelessly packed her grandmother's antique glassware and had it shipped to her
30-year-old daughter, Abby, via Common Freight Carriers. When the china arrived at Abby's
house, most of the pieces were broken. As between Jeannie and Common Freight Carriers,
who will bear the loss?
a. Under the Carmack Amendment, Jeannie is liable for the loss if Common Freight Carriers
shows it was not negligent and that the loss was caused by Jeannie’s failure to wrap and pack
the glassware properly.
b. Under the Carmack Amendment, Common Freight Carriers is liable. A common carrier is
strictly liable.
c. Under the Carmack Amendment, Common Freight Carriers is liable because of its
negligence in not inspecting Jeannie's packing job.
d. Liability is governed by state statute and will depend on which state law will control.
Answer: A
16. Ali took a seat at a booth at Midway Diner. Between the salt and pepper shakers, Ali
noticed something glittering. It was a diamond ring. The ring is:
a. abandoned property.
b. an accession.
c. mislaid property.
d. treasure trove.
Answer: C
17. Lacy sets her textbook under her chair in her business law class and then forgets to take it
with her when she leaves the classroom. A janitor later discovers the textbook and gives it to
the Dean of the Business College. In this situation:
a. the college is a constructive bailee, obligated to return the textbook to Lacy, and until it
does, it is liable for harm to the property.
b. the college is a bailee by agreement because holding items in a lost and found box is
generally part of the college-student agreement when the student enrolls for classes.
c. the college is responsible for the discovered textbook because in this situation, the college
is subject to implied warranties unless the college has disclaimed such warranties in the
student handbook.
d. this is a bailment for the sole benefit of the bailee.
Answer: A
18. A bailment is different from a gift because:
a. a gift requires consideration, but a bailment does not.
b. a gift requires delivery, but a bailment does not.
c. in a bailment, only possession of the property is transferred to the bailee, whereas with a
gift, both possession and ownership must pass to the donee.
d. a gift is always a contract, but a bailment is generally not a contract.
Answer: C
19. Farmer Fred is leasing pasture land from Wealthy Warren. Farmer Fred is working the soil
to turn the pasture land into land that will be able to grow crops. As Farmer Fred is preparing
the field, he discovers a treasure chest full of gold and silver coins. The coins are all dated
before 1810. A finder of treasure trove under common law:
a. was entitled to keep the treasure trove.
b. was required to turn the property over to the owner. Here, under common law, Farmer Fred
is required to turn the treasure trove over to Wealthy Warren.
c. was required to turn the treasure trove over to the State.
d. was required to turn the treasure trove over to the federal government who will give the
treasure trove to the closest Native American reservation.
Answer: A
20. In the Tannenbaum v. New York Dry Cleaning, Inc. case:
a. there was a bailment for hire, and the fact that the bailee was unable to return the bailed
item except in a damaged condition created an irrebuttable presumption that the damage to
the item was attributable to the bailee’s negligence.
b. the court stated that a company cannot, under New York law, use an exculpatory clause to
relieve itself from liability for the consequences of its own negligence.
c. the court found that the claimant was not bound by the terms of the dry cleaning company’s
limitation clause because, even if it applied to the situation before the court, the claimant had
not read the clause nor had he assented to its terms.
d. the court found that the claimant was negligent in not reading the limitation clause on the
back of his claim ticket, so he could not recover the cost of his shirt.
Answer: C
21. Jake owns an old piece of exercise equipment. He has been using the equipment merely to
hang his clothes on, so Jake decides to get rid of the thing. He takes the unused exercise
machine to the landfill and throws it off the back of the truck. Maggie, a teenager, is at the
landfill rummaging for useful items. Maggie sees the exercise equipment and decides it is just
the thing to give her sister for Christmas, so she decides to take it home. As she is loading it
into the back of her pickup truck, Jake stops and tries to get it back. The landfill owner sees
the commotion and decides he would like to have the equipment as well. Who has the best
rights in the exercise equipment?
a. They are all joint owners.
b. Maggie.
c. Jake.
d. The landfill owner.
Answer: B
22. Beth owned an original United States flag. She had previously loaned the flag to Ross, a
lawyer, so that he could display the flag on the wall behind his office desk. One day while
visiting Ross in his office and admiring the flag, Beth said to Ross, "You are so fond of that
flag, I would like you to have it!" Ross responded with a gracious "thank you." In this
situation:
a. Beth has not made a valid, binding gift of the flag because gifts are never binding and can
always be revoked by the donor.
b. Beth has not made a valid, binding gift of the flag because the donor must deliver the
property to the donee, which was not done here.
c. Beth has made a valid, binding gift if Beth agreed to give the flag in exchange for Ross's
legal services.
d. Beth has made a valid, binding gift because she intended to transfer present ownership to
Ross and Ross accepted the flag.
Answer: D
23. Mitch takes his two best suits to Quality Cleaners and receives a ticket as a receipt.
Quality tells Mitch his suits will be cleaned and will be ready to be picked up on Monday.
Another customer overhears the exchange and early on Monday goes to Quality, convinces
the worker he is Mitch but that he has lost his receipt. He identifies and retrieves the suits,
which happen to fit him perfectly, too. Quality Cleaners:
a. is strictly liable to Mitch for the suits.
b. is liable to Mitch only if Mitch can prove Quality was grossly negligent.
c. has no liability unless Mitch proves Quality did not use ordinary care.
d. will avoid liability if the receipt contained an exculpatory clause excluding gross
negligence.
Answer: A
24. Bruce tells his son, “You can have my 1990 truck, but if your grades fall, I’m taking it
back.” Bruce:
a. has made no gift.
b. has made a “revocable gift,” which is effective as a gift as long as the stated condition is
met.
c. intended to transfer ownership.
d. has made a constructive gift.
Answer: A
25. An estray statute:
a. governs the ownership of livestock that have strayed from the rest of the herd.
b. is a federal statute that governs the rights of ownership of found property.
c. is both of the above.
d. is neither of the above.
Answer: D
26. Griffith Manufacturing ships 40 crates of goods by Trusty Shipping, a common carrier.
Trusty offers Griffith a shipping rate of $725 for a limited liability of $5,000 or a rate of $975
for full liability for any harm to the goods. Griffith chooses the $725 rate. In transit, Trusty’s
driver has an accident during an ice storm and all of Griffith’s goods are destroyed, causing a
loss of $12,000. If Griffith sues Trusty:
a. Trusty will be liable for only $5,000 because a common carrier is allowed to limit its
liability by contract.
b. Trusty will be liable for the full $12,000 because common carriers have strict liability.
c. Trusty will automatically be liable for the full $12,000 under the Carmack Amendment.
d. Trusty is subject to normal bailment rules and can escape liability for any damage to the
goods by proving that it exercised due care of the property and that the loss was caused by an
act of God.
Answer: A
ESSAY
1. Bill was shopping at the mall. As he was walking to Tonne's Department Store, his wallet
fell out of his pants. While trying on a new suit, Bill left his leather jacket in the change
room. Sue found Bill's wallet. Arnie, a sales associate, found his coat. What kind of found
property is Bill's wallet? What kind of property is his jacket? What rights do Sue and Arnie
have in the found property?
Answer: Lost property is something accidentally given up. The wallet is lost property.
Usually the finder has the superior rights to all except the true owner. Mislaid property is
something the owner has intentionally placed somewhere and then forgotten. The jacket is
mislaid property. Generally the finder gets no rights in property that has simply been mislaid.
If the true owner cannot be located, the mislaid item belongs to the owner of the premises
where the item was found—in this situation, Tonne's Department Store.
2. Most of the goods contained in a freight train (a common carrier) were destroyed when a
tornado wrecked the train. The carrier was sued for damages by all the shippers that had
merchandise on the train. Is the carrier strictly liable for the damage done to the goods by the
tornado?
Answer: Generally common carriers are strictly liable for harm to the bailor's goods.
Common carriers are governed by a statute known as the Carmack Amendment. If the goods
are delivered to the carrier in good condition and the goods are damaged, the carrier is liable.
An exception to this is if the carrier can show that it was not negligent and the goods were
damaged by an act of God, such as this tornado.
3. Distinguish between a contract and a gift. Give an example of each.
Answer: The factor that distinguishes a contract from a gift is that a gift lacks consideration.
Consideration can be an act or a promise. Normally, it is either doing or promising to do
something you are not legally required to do or refraining from doing something you are
legally entitled to do. A contract usually consists of mutual promises, but a gift is a one-way
transaction. An example of a contract is: Jane promises to pay Whit $1,500 to repair her roof
by October 1 and Whit agrees. Each promise is consideration for the other promise. An
example of a gift is: Myra hands Kim four tickets to a soccer tournament, saying, “We hope
you and your family can use these to go to see Debra play on Saturday.” Kim says, “Thanks,
we’d love to go.” This is an inter vivos gift whereby Myra intends to transfer ownership
immediately. She delivered the tickets to Kim, who accepted them.
4. Discuss whether or not the following common transactions are bailments and if so, who is
the bailor/bailee, and what type of bailment is involved:
A) Renting storage space in Farmer's Frank's huge barn to keep your classic car out of the
snow and ice of winter. The rental agreement provides for $100/month rent and Farmer Frank
has the only access to the barn.
B) Hiring a moving company to move your belongings to a new residence.
C) Loaning your lawn mower to your neighbor.
D) Parking your car in a "park and lock" parking lot.
Answer: A bailment involves transferring possession of goods to one who is not the owner.
To create a bailment, the bailee must assume physical control with intent to possess and
return the property or deliver the property to whomever the bailor designates.
A) This is a bailment. The car owner is the bailor and Farmer Frank is the bailee. The owner
of the classic car delivers physical control to Farmer Frank. The bailment is a mutual benefit
bailment.
B) Yes, this is a bailment. The owner of the residential goods is the bailor. The moving
company is the bailee. The moving company takes physical possession and control of the
residential goods. This is a mutual benefit bailment.
C) Yes, this is a bailment. As the owner of the lawn mower, you are the bailor. The neighbor
is the bailee. The neighbor is taking physical possession of the mower. This is a bailment for
the sole benefit of the bailee.
D) No, this is not a bailment. The owner of the car is not giving up control of the car. The
owner of the parking lot is not in possession of the keys to the car.
5. Discuss a bailor’s liability for defects in the bailed property.
Answer: The bailor’s liability for defects depends on the type of bailment. If the bailor gains
an advantage from the bailment, he has greater potential liability. If the bailment is for the
sole benefit of the bailee, the bailor must notify the bailee of any known defects that are not
obvious to the bailee. If an undisclosed defect injures the bailee or others, the bailor is liable.
In a mutual-benefit bailment, the bailor is liable not only for known defects but also for
unknown defects that the bailor could have discovered with reasonable diligence. If a bailor
operates a business of renting property, the bailment is probably subject to implied
warranties, such as an implied warranty that the goods are fit for their normal purposes.
6. Tommy is going to have heart surgery. He is afraid that he will not survive, so he gives his
favorite ring to his friend, Rod. Rod is aware of Tommy's apprehensions. Tommy survives the
surgery and wants his ring back. Who is entitled to the ring and why?
Answer: Tommy gets the ring back. This type of gift is known as a gift causa mortis. A gift of
this type is made in contemplation of approaching death. The gift is valid if the donor dies as
expected, but revoked if the donor recovers. The law allows the gift causa mortis to act as a
substitute for a will, since the donor's delivery of the property clearly indicates his
intentions. However, the gift is conditioned upon the donor's death.
Test Bank For Introduction to Business Law
Jeffrey F. Beatty, Susan S. Samuelson
9781133188155
