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Liability in Bailment in Israeli Law — Rethinking Benefit
Published online by Cambridge University Press: 04 July 2014
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While “classical” tort law deals with the liability of those unlawfully in possession of goods for their damage or loss, the law of bailment deals with the liability of those lawfully in possession of goods for their damage or loss.
The Israeli statute relating to bailment, The Bailees Law, more closely resembles the law of bailment in common law, than its civil law counterpart, the law of deposit. Similar to the law of bailment in common law, Israel's Bailees Law covers both possession where the primary object is the safekeeping of goods, e.g., a warehouseman, and possession where the primary object is other than safekeeping of goods, e.g., chattel hire, hire of work and labour to be performed upon a chattel, and a pledge.
In terms of liability for the loss of or damage to the goods, the Israeli statute roughly resembles the “traditional” law of bailment in the common law, which distinguishes different kinds of bailment according to the existence and location of benefit received.
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References
1 (1967) 21 L.S.I. 49.
2 See, for example, sec. 688 et seq. of the German B.G.B. and sec. 1915 et seq. of the French Code Civil.
3 The law of deposit, by contrast, covers only possession where the primary object is safekeeping of goods, and possession which is the result of a contract between the bailor and the bailee.
4 This classification was first suggested in common law scholarship by J. Story, in Commentaries on the Law of Bailments (1878) sec. 3, although the idea that the element of reward should be relevant to the bailee's measure of liability was already suggested in Lord Holt's famous judgment, Coggs v. Bernard 2 Ld. Raym. 909, 92 Eng. Rep. 107 (1703). For a modern statement of the classification according to benefit, see Palmer, N.E., Bailment (2nd ed., 1991) 125 Google Scholar et seq.
5 See sec. 1 of the Bailees Law, supra n. 1.
6 See sec. 2(b) of the Bailees Law, supra n. 1.
7 See Palmer, supra n. 4, at 125. See also Autor, K.P., “Bailment Liability: Toward a Standard of Reasonable Care” (1988) 61 S. Cal. L.R. 2119 Google Scholar.
8 See Palmer, supra n. 4, at 504-505. Compare also Helmholz, R.H., “Bailment Theories and the Liability of Bailees: The Elusive Uniform Standard of Reasonable Care”(1992/1993) 41 U. Kansas L.R. 97 Google Scholar.
9 See Posner, and Rosenfield, , “Impossibility and Related Doctrines in Contract Law: An Economic Analysis”, (1977) 6 J. of Legal Studies 83, at 91 CrossRefGoogle Scholar. Even though the Israeli law of bailment is not confined to possession which emerges from contractual or, atleast, consensual situations, a contract is still the typical source of possession subject to the Israeli Bailees Law. It follows that, despite the close relationship between the law of bailment and the law of tort, Posner and Rosenfield's analysis of voluntary transactions may be applicable to the law of bailment.
10 One cannot point to the fact that a bailee for reward who holds the goods for the purpose of their safekeeping is better equipped than other bailees to prevent certain risks, since this fact is the outcome of such a bailee's liability, not its origin.
11 See Posner and Rosenfield, supra n. 9, at 91: “The former comprise the costs of determining (a) the probability that the risk will materialize and (b) the magnitude of the loss if it does materialize … The relevant transaction costs are the costs involved in eliminating or minimizing the risk through pooling it with other uncertain events, that is, diversifying away the risk. This can be done either through self-insurance or through the purchase of an insurance policy (market insurance)”. See Posner and Rosenfield, supra.
12 See Zamir, E., “The Contractor's Liability as a Bailee — Policy Considerations”, (1992) 17 Iyunei Mishpat 95, at 109–110 Google Scholar.
13 Even though not all bailments under Israeli law are contractual, or at least consensual, most non-voluntary bailments fall into one category, i.e., gratuitous bailment for the bailor's sole benefit. The inclusion of these non-voluntary bailments within the law of bailment does not therefore interfere with my analysis.
14 This, of course, is based on the assumption that no special reference has been made to an insurance premium.
15 This assumption underlies the liability of the gratuitous bailee.
16 The argument is not that a different price is paid for bearing the same risk. Rather, the term “risk” here relates to a spectrum of potential risks, the realization of each one of which might cause damage to or loss of the goods at stake.
17 In the case of a pledge, potential damage or loss will affect the pledge's value as a security, while in the case of work to be performed upon a chattel, potential damage or loss will affect the right to be paid for performing such work.
18 Take, for example, the market for rental cars. Perfect inelasticity of the supply curve implies that the market is characterized by car owners' readiness to rent a car at “any price”, which in turn implies that the bailees might be more than fully compensated for any risk borne by them.
19 The opposite assumption is unreasonable.
20 As long as the expected cost of the risk is lower than the value of the right to use the goods.