Essentials of Canadian Business Law - Lecture Slides

January 5, 2018 | Author: Anonymous | Category: Social Science, Law, Contract Law
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CHAPTER

12

Bailment and Insurance Law

Microsoft® PowerPoint® Presentation Prepared By Gail McKay, LLB, Thompson Rivers University

© 2008 McGraw-Hill Ryerson Ltd. Ltd., All Rights Reserved.

OBJECTIVES 1. To explore the nature of bailment and its effect on risk allocation in business 2. To examine various forms of bailment 3. To survey various forms of insurance and their uses in business risk management 4. To examine the nature of insurance and the concept of indemnity for loss, and to identify the parties to insurance contracts Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-1

NATURE OF BAILMENT A bailment is an express or implied contractual arrangement having three parts: 1. Delivery of goods by the bailor to the bailee 2. Possession of the goods by the bailee for a specific purpose 3. An understanding that the goods will be returned to the bailor at a future time, or the delivery of the goods according to the bailor’s directions

Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-2

BAILOR - BAILEE RELATIONSHIP Delivery of goods to the bailee may be either a physical or a constructive (implied by conduct) transfer of possession Only possession of the goods is transferred, not title; however a bailee can sue anyone who wrongfully interferes with the bailor’s goods The bailee has a duty either to return the exact goods (or interchangeable commodities) or to follow instructions for disposition of the goods Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-3

SUB BAILMENT A sub bailment generally requires the previous express agreement of the bailor if there will be a bailment of the goods on the part of the bailee to a sub bailee

An exception to the consent requirement arises if it is the routine custom of the trade to sub contract to another bailee A bailee arranging for a sub bailment must ensure consistency with the terms of the original bailment to avoid breaching it Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-4

Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-5

LIABILITY FOR LOSS OR DAMAGE The standard of care depends on the type of bailment arrangement, but if goods are lost, damaged or not returned, the onus shifts to the bailee since he or she is in the position of being most likely to know what actually happened to the goods To meet this onus, the bailee must demonstrate that he or she met and maintained the appropriate standard of care, and that the harm to or loss of the goods was not a result of the bailee’s negligence Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-6

TYPES OF BAILMENT In a gratuitous bailment, the bailee takes the goods at no charge and liability depends on who benefits: if for the benefit of the bailor, low liability; if for the benefit of the bailee, the highest liability; if for the benefit of both, moderate liability In a bailment for reward, the bailee receives a fee for holding or handling the goods In the storage of goods, possession and control of goods passes to the proprietor of the facility Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-7

WAREHOUSE STORAGE A warehouse operator is expected to meet the reasonable standard of care expected of a skilled storekeeper, protecting the goods from all foreseeable risk A warehouse receipt allows the person who presents it to claim the bailed goods and, similarly, a bill of lading (used by carriers) represents title to the goods

Statutory liens allow a bailee to retain goods until he or she is paid or, after notice to the bailor, auction them off Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-8

PARKING LOTS Transfer of possession is the key element that distinguishes a bailment from mere rental of a parking space – a licence arrangement If the lot operator either takes the keys and parks the vehicle, or if the vehicle owner is directed where to park and then the lot operator requests the keys, a bailment occurs Exemption clauses on tickets must be brought to the attention of the bailor before or at the time of bailment, or be visible on large signs Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-9

BAILMENT FOR REPAIR OR SERVICE Bailment of a chattel left for service or repair, even though no specific charge is made for the bailment, nevertheless is viewed as a bailment for reward creating reasonable liability for the proprietor A bailee who professes to have a particular skill will be held to the standard of care for that skill

A bailee has a common law right of lien against a chattel owner who does not pay for service or repair, including the right to auction the chattel after notice to the bailor Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-10

RENTAL OF A CHATTEL When a bailor rents a chattel to a bailee, it is the temporary possession in exchange for payment that creates a bailment The bailee must not use the chattel for any purposes other than those intended and must not sub bail the goods without permission Bailors must ensure the goods provided are fit for the purpose described by the bailee, are free from defects and, if the chattel is inherently dangerous, that appropriate warnings are provided Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-11

CARRIAGE OF GOODS A common carrier is a specialist in the business of transporting goods for reward and is therefore held to a high standard of care – since essentially the company is an insurer of the goods totally within its care and control for the duration of the bailment An act of God, or a bailor’s improper packing or labelling, would preclude liability of a carrier

A private carrier may transport goods and must exercise reasonable care over them, but is not in the business of the carriage of goods Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-12

Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-13

PLEDGE OF PERSONAL PROPERTY If a debtor delivers personal property to a creditor to be held as security for a loan (a transfer to the creditor which is called a pledge), a bailment is created Temporary possession by the bailee is what is anticipated; but if there is a default on the loan, the security (usually bonds, share certificates or life insurance policies) may be sold – with payment of any surplus to the debtor

Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-14

INNKEEPERS Governed by provincial and territorial statutes, an inn is defined as an establishment that offers both food and lodging to guests The statutes require that the liability section of the legislation be posted in guests’ rooms and in public areas since it restricts the liability of the innkeeper for loss or damage to guest property to between $40 and $100, depending on the jurisdiction If valuables are placed in the innkeeper’s vault, a bailment occurs and the innkeeper is liable Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-15

FORMS OF INSURANCE Insurance is an contractual undertaking by an insurance company (the insurer) to indemnify a person or business (the insured) for an agreed consideration from loss or liability which arises from an event or events, the occurrence of which is uncertain It is a form of risk management which shifts the risk of loss to the insurer for events such as employee dishonesty, business interruption, fire, accidents, theft or the death of key personnel Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-16

FIRE INSURANCE The purpose of fire insurance is the indemnification of any person with an interest in property for damage or loss that arises as a result of fire The scope of loss includes damage to buildings, equipment, and chattels The cause of the damage may include the fire itself as well as smoke, water damage, and sometimes lightning Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-17

LIFE INSURANCE The purpose of life insurance is the protection of beneficiaries by insuring either one’s own life or the life of another person in whom one has an insurable interest

The application for insurance is an utmost good faith document which allows the insurer to assess the risk of insuring the potential insured and to determine how much the premium for the policy should be Statements discovered to be fraudulent allow the insurer to avoid payment under the policy Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-18

OTHER FORMS OF INSURANCE Sickness and accident insurance has the purpose of reducing income loss that arises from illness or accident and may be provided as part of a benefits package by an employer Liability and negligence insurance is intended to indemnify a business or person for claims made by others about the performance of their work, including professional errors and omissions, environmental accidents, occupiers’ liability, manufacturers’ product liability and automobile accident liability Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-19

THE NATURE OF AN INSURANCE POLICY Changes in standard form contracts of insurance are made by means of either a rider or additional clause added at the time the contract is created, or alternatively by means of an endorsement - a change to an existing contract which saves rewriting the original one An insurable interest is defined as a financial interest that would result in a loss to the insured on the occurrence of some event, but excludes a wilfull act on the part of the insured against themselves or an insured interest Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-20

NATURE OF POLICY, continued An insurable interest must exist both at the time the contract of insurance is made and when the event occurs that causes the loss The one exception to this rule is a contract for life insurance There is also one exception to the full disclosure rule for utmost good faith insurance contracts: innocent misrepresentation (or innocent non disclosure) Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-21

CHANGE OF RISK Notification is required from the insured to the insurer if there is to be a substantial change in the property itself or to the type of business carried on there The notification allows the insured to decide if it still wishes to provide coverage for the business, and if so, what the change in the amount of the premium should be

Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-22

THE CONCEPT OF INDEMNITY FOR LOSS Indemnity permits an insured business to be placed in the position it would have been in prior to the loss, but not to make a profit An insurer has 3 rights respecting the insured’s losses: salvage, if the insurer has paid the insured the value of the goods; subrogation, if the insurer has compensated the insured for loss and wishes to sue the third party who caused it; and contribution, if there are 2 policies covering the same loss, the insurers have the right to share indemnification for the loss between themselves Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-23

Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-24

PARTIES ASSOCIATED WITH INSURANCE Agents of the insurer negotiate insurance contracts and are liable to insurers; if an insured relies on an agent’s word that a risk is covered, he or she can sue the agent if it is not

Brokers, who may work for either party, determine risks and complex insurance needs and seek insurers who will provide coverage Insurance adjusters investigate reported losses on behalf of the insurer and then assess the extent of the loss; insurers use this amount to make an offer to settle the claim Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-25

SUMMARY Bailment is the temporary transfer of possession, but not title, to goods - either gratuitously or for reward Bailment for reward includes storage, carriage of goods, deposit of goods for repair, rental of goods, and the pledge of securities for a loan Insurance is used to indemnify an insured with an insurable interest at the time of contract formation and the time of the event causing the loss; after indemnification, the insurer has salvage, subrogation and contribution rights Fundamentals of Canadian Business Law, Second Edition

© 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved.

12-26

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