Bailment: Difference between revisions
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{{a|security|}}A special type of | {{a|security|}}A special type of [[security interest]], most commonly articulated in the word of finance in the shape of a [[pledge]]. A [[bailee]] has possession of but no [[legal title]] to the chattel, but this operates as good practical [[security]], because the [[bailee]] can demand the [[bailor]] pay its bill before giving the item back. | ||
This is why your mechanic has that smug look when you roll up in the Disco for your MOT. | This is why your mechanic has that smug look when you roll up in the Disco for your MOT. | ||
Latest revision as of 13:30, 14 August 2024
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A word about credit risk mitigation
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A special type of security interest, most commonly articulated in the word of finance in the shape of a pledge. A bailee has possession of but no legal title to the chattel, but this operates as good practical security, because the bailee can demand the bailor pay its bill before giving the item back.
This is why your mechanic has that smug look when you roll up in the Disco for your MOT.
To be compared with a trust relationship, where the person holding the item has legal title to it, but not possession.
Registration of charges
The possessory nature of bailments — pledges, liens, that kind of thing — means they are not as susceptible to the sort of bailor jiggery-pokery that necessitates a centralised register of charges for security interests granted over assets to which the bailor retains possession. Since the bailor has given the bailee the asset in question, it is hard thereafter for the bailor to give the asset to someone else — nemo dat quod non habet — nor to create a non-possessory security interest in it in favour of someone else that isn’t obviously trumped by the bailee’s common law claim. By contrast, where the bailor has possession of the asset (as it does in a conventional floating or fixed charge) then the rest of the world needs formal notice of that security interest to avoid subsequent disappointment. hence, a register of charges.
Thus, “pledge” style arrangements — even if nominally called “charges” — ought to be out of scope for registration, though you should of course check local regulations which may say something different. But this is the underlying ethos of the EU collateral directive.
Cash and bitcoin
Can you have a bailment over cash? The Jolly Contrarian has heard it said — by persons of good repute — that one can, but he struggles with that idea. If I deliver you cash, even by way of surety, it is in the nature of cash that you take title to it absolutely. Any third person to whom you give it takes title to it absolutely without need to enquire as to competing interests. If cash didn’t have this quality, it would be less valuable as cash.
What of crypto assets? An emerging question. The more they look like an asset, the more you can bail it. The more it looks like cash, the harder that would be. The importance of code in determining who has it — as to which, see Code: Version 2.0 — makes it look, in practice, more like cash.