Bailment Agreement

Possession Transfer

Safe custody of stock remains the core operational requirement when products leave the owner’s direct control. The execution of a bailment agreement separates physical possession from legal ownership, ensuring the owner retains title while the bailee handles logistics. This division prevents the custodian’s creditors from seizing the stored inventory during a financial default.

It also allows the owner to recall the goods or redirect the shipment if market conditions change.

Liability Allocation

Parties must define who bears the financial loss if the goods suffer damage while in storage. Under this risk allocation, the custodian must exercise reasonable care to prevent spoilage, theft, or physical degradation. Failure to maintain specified storage conditions results in a breach of contract and obligates the custodian to compensate the owner for the wholesale value of the lost inventory.

Return Obligation

The custodian must return the goods on demand.