Contracts of bailment
A contract of bailment arises when the owner of goods
(the bailor) entrusts possession of them into the care of
another (the bailee). Examples of bailment include
placing important documents in safe custody at a bank,
taking clothes to be dry-cleaned and hiring a TV set.
The bailee’s main duties are:
■to take reasonable care of the goods whilst they are in
his or her possession; and
■to return them to the bailor, at the end of an agreed
period or when requested.
Hiring is a particular example of a contract of bailment.
Hire
Under a hire agreement, the owner of goods allows
someone else (the hirer) to make use of them in return
for regular rental payments. The hirer obtains possession
of the goods but ownership never passes to him and at
the end of the agreement the goods must be returned to
the owner. Most people are familiar with hire contracts
in the context of TV and video rentals. A typical rental
agreement can be seen in Fig 8.1. Consumer hire agree-
ments are covered by the provisions of the Consumer
Credit Act 1974. Businesses also take advantage of hire
as a method of obtaining the use of equipment which
they require. (Hire in this context is usually referred to
as ‘leasing’, the owner being known as the ‘lessor’ and
the hirer as the ‘lessee’.) The leasing agreement often
includes an undertaking by the lessor to service the
equipment regularly and effect repairs when necessary.
Equipment leasing has allowed businesses to take advant-
age of the opportunities created by the rapidly changing
new technology in the field of information technology.
Goods supplied under hire contracts are subject to
Part I of the Supply of Goods and Services Act 1982 (as
amended by the Sale and Supply of Goods Act 1994 and
the Sale and Supply of Goods to Consumers Regulations
2002). (See Chapter 10 )
Employment contracts
There are two ways in which a person’s services may
be acquired. He or she may be engaged either as an
employee under a contract of service or as an independ-
ent contractor under a contract for services.
1 Contract of service.This type of contract creates
the relationship of employer and employee between
the parties. An employee provides labour for his or her
employer in return for wages. The employer exercises
control over the way in which an employee carries out
his or her work.
2 Contract for services. A self-employed person is
engaged under a contract for services. The self-employed
individual is an independent contractor, agreeing to do
work or provide services as and when he or she wishes,
and enjoys considerable independence from the person
who employs him or her. Thus, a chauffeur has a con-
tract of service, whereas a taxi driver transports passen-
gers under a contract for services.
The distinction between employees and independent
contractors is important for the following reasons:■An employer is vicariously liable only for the torts of
employees, not for those committed by independent
contractors.
■Only employees are entitled to claim the benefit of
various employment rights contained principally in
the Employment Rights Act 1996. These include pro-
tections in respect of unfair dismissal, redundancy,
maternity pay and leave, minimum periods of notice
and so on. A self-employed person cannot claim any
of these rights. The law relating to the contract of
employment will be examined in more detail in
Chapter 16.Contracts of agency
An agent is someone who is employed by a principal
to make contracts on his behalf with third parties. An
employee who makes contracts on behalf of his employer
is acting as an agent. A shop assistant, for example, is
in this category. Alternatively, an agent may be an in-
dependent contractor who is engaged for his specialist
skills and knowledge. A person who wishes to sell his
shares will usually employ the services of a stockbroker
to arrange the sale for him. Travel agents, estate agents,
auctioneers, insurance brokers are all examples of agents.
An agent may fall into one or more of the following
categories:Part 3Business transactions