Practical considerations for service providers and consumers
Bailment law disputes - February 2024
Bailment law disputes - February 2024
This resource provides practical considerations for legal workers who are acting for a service provider and/or for a consumer, in circumstances including before a dispute has arisen and after.
This resource is designed to be a quick and accessible guide, offering prompt information without all the detail. Where you require more detailed information, please consult the relevant resource.
This resource provides:
Acting for the service provider:
the scope and extent of a service provider’s obligations – limits on liability
compensation and other relief – limits on liability
disputes
Acting for the consumer
the nature of bailment
duty of care
relief
safeguarding your interests
disputes
As outlined in our resource “Bailment Law Disputes – What are the obligations of a service provider in a bailment relationship“, once a bailment relationship is established, a service provider has a duty to take reasonable care of a consumer’s goods, and to return them to the consumer in the state agreed by the parties. Of course, in the context of a dispute, what is considered ‘reasonable’ can be unpredictable and contentious. Consequently, a service provider would benefit from having greater certainty and clarity as to their obligations. This can be achieved in the form of a contract.
There will usually already be a contract between a service provider and a consumer relating to the provision of services in connection with the relevant goods. In these circumstances, the service provider could amend the contract to insert sections to limit their duty of care over the consumer’s goods. In scenarios where there might not be a formal, written contract, you should look for any emails or order forms that the service provider exchanged with the consumer (usually, at the time of entry to the contract) containing details of the services to be provided. These documents record the contractual terms between the parties and could be amended to clarify (or limit) the service provider’s obligations to the consumer concerning their goods.
Having a contract that deals with the bailment relationship allows the service provider to modify or alter the duty of care owed to a customer. Examples of such modifications include:
allocating specific responsibilities between the service provider and the consumer regarding the care and maintenance of the goods;
providing specific instructions as to how the goods are to be handled, stored, used, or maintained during the bailment period;
limiting the service provider’s liability for force majeure events or ‘acts of God’ – specifically, bushfire and/or flooding; and
specifying which of the parties must arrange and pay for insurance for the goods and, further, limit liability for loss or damage not covered by that insurance.
As discussed above, a service provider will be liable to the consumer if they are unable to prove that they exercised reasonable care over the consumer’s goods, and if the breach of that duty is found to have caused the relevant loss or damage. Generally, the service provider will be required to ‘make good’ the consumer’s loss or damage, and the extent of this liability would typically be determined by factors such as the terms of the bailment agreement, the type of bailment, and the level of care expected. See the resource “Bailment Law disputes – Establishing liability for damage” for a discussion of the types of relief granted on breach of the law of bailment.
A service provider may be able to contract out of liability for the consumer’s loss in some limited circumstances by way of a limitation of liability clause, as long as such a clause does not fall foul of the ACL’s UCT Regime. We have provided an outline of the UCT Regime and discuss the key considerations relevant to disaster events in the resource “Bailment law disputes – Has the common law bailment relationship been modified by contract“.
If a dispute arises over lost or damaged goods, it is important to remember that it will almost always be beneficial for a service provider to try to resolve such disputes outside of a court setting. Prior to engaging in litigation, both parties should try to engage in alternative dispute resolution methods like mediation or private negotiation to reach a settlement outside of court. Please see the resource “Bailment law disputes – Alternative Dispute Resolution” for a detailed explanation of alternative dispute resolution options and processes.
The fundamental consideration for consumers entering into a bailment relationship with a service provider is understanding the nature of the specific arrangement between them. Where there is no contract, the arrangement will be governed by common law as explained our resources “Bailment law disputes – Is there a bailment relationship?” and “Bailment Law Disputes – What are the obligations of a service provider in a bailment relationship“. In essence, a service provider who takes possession of a consumer’s goods has a duty to take reasonable care of those goods and not contribute to damage or loss of the goods.
Where there is a contract, consumers should take care to closely examine the terms of that contract, paying particular attention to any modifications on the service provider’s obligations and any attempts to limit their liability. Service providers may seek to enter into contracts with consumers that modify their obligations to the consumer, including those that apply to the law of bailment.
As per the resource “Bailment Law Disputes – What are the obligations of a service provider in a bailment relationship“, a consumer can expect a service provider to exercise reasonable care in safeguarding their goods. The service provider is expected to safely handle and store the bailed goods, and to take appropriate measures to prevent loss, damage, or theft of the goods.
As per the resource “Bailment Law disputes – Establishing liability for damage“, if a consumer’s goods are damaged, lost or mishandled due to (or in other words, caused by) the service provider’s failure to take reasonable care, the consumer may be entitled to various forms of relief. The specific relief available can depend on the circumstances of the case, the terms of the bailment agreement, and applicable laws.
Generally, a consumer will be entitled to having their loss or damage ‘made good’. This may take the form of:
compensation for damages, where the service provider would be required to compensate the consumer for the cost of repairs or the diminished value of the goods;
reimbursement for loss, such that the service provider is liable to reimburse the consumer for the value of the lost goods;
specific performance, where a court orders the service provider to take particular actions to remedy the damage, or to return the goods in a specific condition;
cancellation of the relevant contract; and/or
legal costs, which would occur in addition to one or more of the other forms of relief listed above. This form of relief is intended to compensate a consumer for any legal costs incurred in pursuing a claim for damages against a service provider.
When entering into a bailment relationship, and prior to a dispute, there are a number of things consumers can do to get informed and protect themselves.
Review terms: A consumer should always review the terms of any bailment agreement thoroughly before entrusting their goods to a service provider. This will give the consumer an idea of the service provider’s responsibilities, the consumer’s responsibilities, any limitations of liability, and any specific instructions or conditions outlined in the agreement.
Record–keeping: It is good practice to maintain detailed documentation of the transaction. This includes keeping all receipts, contracts, emails exchanged with the service provider regarding the handling or storage of the goods, the condition of the goods, or the terms of the agreement. Any conversation that the consumer has with the service provider over the phone or in person, should be recorded in a file note of the matters discussed immediately after the conversation takes place. The consumer should note down the date and time of the conversation and keep the file note together with the rest of their documentation.
Create an inventory: Before giving their goods to the service provider, the consumer should create a list of the goods to be provided. This includes noting down the descriptions of any goods, taking photographs, or being aware of any distinguishing features of the goods and its condition prior to bailment.
Clarify your expectations: The consumer should be upfront and communicate clearly with the service provider about expectations surrounding the care, handling, and return of the goods. Likewise, the consumer should listen to any comments by the service providing about what is expected of the consumer. Clear lines of communication and of the parties’ expectations will reduce the potential for disagreements and disputes later.
In the event that a dispute between the service provider and the consumer arises about lost or damage goods, it is important to remember that it will almost certainly be cheaper, faster, and less stressful to resolve the dispute outside of a court settling.
Prior to engaging in litigation, both parties should engage in alternative dispute resolution methods like mediation or private negotiation to reach a settlement outside of court. Please see the resource “Bailment law disputes – Alternative Dispute Resolution” for a detailed explanation of alternative dispute resolution options and processes.
If your client is unable to resolve their dispute through discussion, they may commence Alternative Dispute Resolution (ADR) processes. Read our resource on ADR here:
This resource was last updated on 14 February 2024. This is legal information only and does not constitute legal advice. You should always contact a lawyer for advice specific to your situation. You can read our full disclaimer here: Disclaimer and copyright for our Disaster Legal Support Resource Hub – Justice Connect.