Documents of Title

Question 1

What are various documents of title?

Answer 1

• bills of lading
• warehouse receipts
• dock warrants and receipts
• orders for delivery
• other documents which serve as evidence of title

Question 2

What is essentially the equivalent of a HDC for documents of title?

Answer 2

Bona Fide Purchaser (BFP)

Must obtain a document of title in the ordinary course of business (as well as in good faith, without notice of claim, etc.)

Question 3

Under what circumstances are documents of title negotiable?

Answer 3

As long as the underying goods are to be delivered to order or to bearer

Question 4

How can documents of title be negotiated?

Answer 4

Same as for negotiable instruments like commercial paper – if payable to order, by endorsement and delivery; but if payable to bearer, merely by delivery

Question 5

What are real defenses for a document of title?

Answer 5

(1) Endorsement was forged

(2) Goods (not document) were stolen

Question 6

What is a personal defense for a document of title?

Answer 6

The document (not goods) was stolen

Question 7

Do documents of title carry with them contractual liability?

Answer 7

No, but they have warranty liability

Question 8

What is a warehouse receipt?

Answer 8

A document issued by a warehouseman proving that he has the good(s) in his possession

Question 9

What all should or might be included on a warehouse receipt?

Answer 9

Location of warehouse
Date of receipt
Number of receipt (i.e. as in a prenumbered form)
To whom the goods will be delivered
Storage rate (fee)
Description of goods
Who owns the goods
Any liens

All these must be included for warehouseman to avoid liability

Question 10

What is a bill of lading?

Answer 10

A document issued by a transporter of goods proving that he has received goods for shipment

Question 11

What is a destination bill?

Answer 11

A bill of lading issued by the carrier at the destination (rather than at the point of shipment) to ensure there is no time lag between the arrival of the bill and the arrival of the goods

Question 12

What is a through bill?

Answer 12

A bill of lading where the carrier is liable for the goods’ transportation all the way from the point of shipment “through” to the destination, even if there are connecting carriers (who then count as agents for the liable carrier)

Question 13

How do negotiable and nonnegotiable documents relate to negotiable and nonnegotiable instruments?

Answer 13

The rules are basically the same: negotiable documents can be negotiated or assigned, whereas nonnegotiable documents can only be assigned

Question 14

For a negotiable document, what is “due negotiation”?

Answer 14

When a transferee takes a document in good faith, in the ordinary course of business, and for present value – this makes him a BFP

Question 15

Does the shelter principle apply for documents of title?

Answer 15

Yes

Question 16

For what is an endorser of a document liable?

Answer 16

He is liable for what he implicitly warrants with an endorsement: that the document is valid, nothing he knows of would undermine it, etc.

He is not liable for performance – the bailee is solely liable for that

Question 17

What happens if an endorsement is forged?

Answer 17

The holder who received the document after the forged endorsement has no rights to the goods – i.e. a forged endorsement is a real defense

Question 18

When might a legitimate holder of a warehouse receipt not have rights to the underlying goods?

Answer 18

If the goods are fungible and limited, and a separate party purchases those fungible goods (e.g. wheat) in his ordinary course of business