1. (a) Holding property by way of bailment is the lawful possession thereof, otherwise than by virtue of ownership.
(b) The bailee of property who himself derives no benefit from the bailment, is a gratuitous bailee.
(c) The bailee of property who receives consideration for or derives some other benefit from the bailment, and who is not a borrower, is a bailee for reward.
(d) The bailee of property for use and enjoyment thereof without consideration, is a borrower.

Bailment and Bailees
2. (a) A gratuitous bailee is liable for loss of or damage to the property, if it is caused through his negligence.
(b) A bailee for reward is liable for loss of or damage to the property, unless it is caused by circumstances which he need not have foreseen and the consequences of which he could not have averted; however, if the purpose of safekeeping is subordinate to the principal purpose of his possession, then the bailee is exempt from liability if the loss or damage is caused otherwise than through his negligence.
(c) A borrower is liable for loss of or damage to the property, whatever its cause, provided that his liability will not be more stringent than that of an unlawful possessor.
(d) A bailee who knows that damage for which he is not liable under subsections (a) to (c) is likely to be caused to the property and who does not notify the owner of the property to that effect within a reasonable time and or does not take reasonable steps to notify him will be liable for that damage to the extent that the notification would have enabled the owner to prevent it.

Liability of Bailee
3. When a gratuitous bailee or a bailee for reward, having received any property in order to safekeep it personally, delivers it to another person without being explicitly or implicitly authorized to do so, his liability for loss of or damage to the property will be that of a borrower .

More Stringent Liability

4. A bailee is not liable for loss of or damage to the property caused by ordinary use thereof in accordance with the conditions of the bailment or by natural deterioration or by a defect in it at the beginning of the bailment, but nothing in this provision will reduce his liability for negligence.

Restriction on Liability

5. (a) When a bailee is liable for loss of or damage to the property, the owner will be entitled to the compensation payable for breach of contract.
(b) When a bailee is not liable for loss of or damage to the property, but has the right to compensation or indemnification for such loss or damage against a third party, the owner of property may claim his damage from the bailee out of the compensation or indemnification due to the bailee.

Compensation and Indemnification
6. A bailee may perform any urgent or unforeseen act reasonably required to prevent damage likely to be caused to the property as if the owner of the property had authorized him to do so.

Authority to Act in an Emergency
7. (a) when a bailee has delivered the property to a sub-bailee, the acts and omissions of the sub-bailee are deemed to be the bailee's acts and omissions, and the sub-bailee is liable to the owner of the property to the same extent that he is liable to the bailee.
(b) The provisions of subsection (a) apply whether property was delivered with or without its owner's permission, provided that they will not derogate from the bailee's liability under Section 3 or under any other law.

8. (a) The owner of property will indemnify a gratuitous bailee, as well as the holder of a pledge or other security, for reasonable expenses incurred and liabilities reasonably contracted in consequence of the bailment.
(b) Every bailee is entitled to indemnification, as provided in subsection (a), in consequence of an act performed by him under section 6.

9. The bailee will have a lien on the property to the extent of what is due to him from the owner of the property in consequence of the bailment.Lien
10. The mutual debts of the owner of the property and of the bailee in consequence of the bailment may be set off.Set Off

11. When a bailee is entitled to return the property to its owner and he has done what he was bound to do in order to return it, but the owner has not accepted the property, the bailee may apply to the court for directions on what to do with the property, and he will be exempt from all liability if he acts in good faith in accordance with the Court’s directions; and if he is a bailee for reward or a borrower, his liability for loss of or damage to the property and his right to indemnification will be that of a gratuitous bailee, even if he has not applied to the court for directions.

Property not Taken Back by Owner
12. (a) In this section -
"hotel" includes a boarding house and any other guest house;
"hotel proprietor" includes a person who manages a hotel;
"guest" a person who is given sleeping accommodation in a hotel.
(b) In respect of a guest's property in a hotel, the hotel proprietor will be treated as bailee for reward.
(c) If the property is money, securities or other valuables, subsection (b) will not apply, unless the guest has informed the hotel proprietor about them and - at his request -has delivered them into his possession.
(d) The hotel proprietor is exempt from liability under this section, if he has not been notified of the loss of or damage to the property within a reasonable time after the guest knew or should have known about it.
(e) The hotel proprietor will have a lien on a guest’s property in the hotel or which has been delivered into his possession under subsection (c), to the extent of which is due to him both in consequence of the bailment and of the accommodation.

Provisions as to Hotel Proprietor
13. For purposes of this law, “owner of property”, in relation to a bailee - any person for whom the bailee holds the property.

14. The provisions of this Law apply to the bailment of property where no special provisions applicable to the matter exist in any other law and no different intention appears from the agreement between the parties.

Scope of Application
15. The Sixth Book of the Mejelle, except Section 770 thereof, is hereby repealed.Repeal
16. This Law shall come into effect on October 1, 1967. A bailment of property, which began before this Law came into effect shall continue to be governed by the previous Law.

Commencement and Transitional Provision

Levi Eshkol

Prime Minister

Yaacov S. Shaipro

Minister of Justice

Shneior Zalman Shazar

President of the State of Israel