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Business LibreTexts

22.2: Personal Property

  • Page ID
    49172
  • Property can be classified as real or personal. Real property is land, and certain things that are attached to it or associated with it. Real property is raw land, such as a forest or a field, as well as buildings, like a house or an office. Additionally, things associated with land, like mineral rights, are also real property. People often talk about real property by using the term real estate, which includes both real property and its related ownership interest.

    Figure 22.1 Types of Real Estate Legal Issues

    Diagram showing the types of real estate legal causes of action

    Personal property is property that is not real property. Tangible property is something that can be touched. Moveable, tangible personal property is called chattel. Many businesses exist to sell personal property. For example, the primary purpose of retailers is to sell personal property. Some property can also be described as fungible property. Property that can easily be substituted with identical property is said to be fungible. Types of fungible goods include juices, oil, metals such as steel or aluminum, and physical monetary currency.

    Intangible property does not physically exist, but it is still subject to ownership principles, including acquisition, transfer, and sale. For instance, the right to payment under a contract, the right to exclude others from a patented product, and the right to prohibit others from using copyrighted materials are all examples of intangible property.

    Personal property can become attached to the land as a fixture. A fixture is something that used to be personal property, but it has become attached to the land so that it is legally a part of the land. Fixtures are treated like real property so when real property is transferred, fixtures are transferred as a part of the real property. A ceiling fan for sale at a store is personal property. However, once the fan is installed in a house, it becomes a fixture and is part of the real property.

    Some things that are attached to the land are not fixtures but are part of the real property itself. Imagine a farm with planted corn. The corn crop is an example of real property that can become personal property. While the corn is growing and still attached to the land, the corn is real property. Once it is picked from the stalk, the ear of corn becomes personal property.

    Property also can be classified by ownership. Personal and real property can be private or public. Private property is owned by someone or some entity that is not the government, such as individuals, corporations, and partnerships. Private property can include real property like land or buildings, and personal property, such as vehicles, furniture, and computers. Property that is owned by the government is public property. Rocky Mountain National Park is an example of public property that is real property. Public property can also include personal property, such as vehicles and computers owned by state or local governments.

    Methods of Acquisition of Personal Property

    Personal property may be acquired in several different ways. For example, ownership by production occurs when one produces something. However, if an employee produces a good as part of his or her job, then the employer will own the property, not the employee. Ownership by purchase is the most common method of acquiring property. For example, if a customer buys a good, then the customer owns it through purchase from the manufacturer.

    Property may also be gifted. A gift is a voluntary transfer of property. Generally, the donor of the gift must intend to gift the property, the donor must deliver the gift, and the gift must be accepted by the intended recipient. A conditional gift is a gift that requires a condition to be met before the gift will transfer, such as a wedding or graduation.

    Property that someone finds can be classified in several ways. If property is abandoned, a person who finds it may claim ownership. However, the original owners of abandoned property must intend to relinquish ownership in it. For example, if someone takes a chair to the landfill, he or she has abandoned the chair. Someone may come along and take legal possession of it. However, if the property is simply lost or mislaid, then the finder must relinquish it once the rightful owner demands its return. Another classification of personal property applicable to found property is treasure trove. A treasure trove is money or precious metals, like gold, which is hidden in the ground or other private place by an unknown owner. Whoever finds a treasure trove becomes the owner unless the true owner (i.e. the person who hid it) comes forward.

    Type of Property Description Rights of Finder Rights of Owner
    Abandoned Owner intentionally parted with property with intent to relinquish ownership rights Finder acquires rights to the property None
    Lost Owner unintentionally parted with possession of the property Finder has rights to the property against everyone except the owner Owner has right to have property returned because owner never lost ownership interest
    Mislaid Owner intentionally placed property in a specific place but has forgotten where Finder has no rights and cannot keep property Owner has right to have property returned because owner never lost ownership interest
    Treasure Trove Owner intentionally hid property Finder acquires rights to the property unless the owner comes forward Owner must come forward to maintain right to property; if not, finder becomes new owner

    Bailment

    Sometimes it is necessary to intentionally leave personal property with someone else. A bailor is someone in the rightful possession of personal property who gives the property to someone else to hold, who is called a bailee. A bailment is the arrangement in which the personal property is exchanged. The bailee agrees to accept the property and has the duty to return it. For example, a customer gives clothes to a dry cleaner. The dry cleaner is a bailee and has a duty to return the clothes (personal property) upon demand by the customer, who is the bailor.

    Bailments may be voluntary or involuntary. A voluntary bailment is created when intention exists to create the bailment, as described in the dry cleaner example above. An involuntary bailment is created when someone finds lost or mislaid property. The finder may not destroy the property, though the duties that he or she owes regarding the property may vary from state to state.

    Bailment is common in business, including placing packages with common carriers for delivery, warehousing goods with a third party, or taking clients’ or customers’ automobiles in a valet service.

    The duty of care that the bailee owes to a bailor depends on the nature and value of the property involved, as well as who benefits from the bailment. In general, a higher standard of care is required for more valuable property. Damages in a bailment case are based on the retail replacement value of the property.