A formal document that confers or proves ownership is a document of title. In order to be a document of title, a document must purport to be issued by or addressed to a bailee and purport to cover goods in the bailee’s possession. Article 7 of the UCC is known and can be cited as Uniform Commercial Code-Documents of Title. Documents of title include a bill of lading, dock warrant, dock receipt, warehouse receipt, and order for the delivery of goods.
A document used to acknowledge the receipt of a shipment of goods is known as a bill of lading. A transportation company or carrier issues a bill of lading to a shipper. A bill of lading acknowledges the receipt of goods. Moreover, the document indicates a particular vessel on which the goods are placed and their destination. A bill of lading describes the terms and conditions for transporting shipment to its final destination. A dock warrant is an instrument issued by a ware housekeeper, licensed by the state to traders who deposit goods with them. A dock warrant certifies that the holder is entitled to goods imported and warehoused in the docks. A dock receipt is a document of title issued by a shipping company which acknowledges the goods received for shipment. A dock receipt transfers the accountability for the safe custody of the cargo from a shipper to a carrier. A dock receipt serves as the basis for preparing a bill of lading. A document proving ownership of commodities that are stored in a warehouse for safekeeping is a warehouse receipt. Warehouse receipts guarantee the existence and availability of a commodity in a named storage facility. It also describes the quantity and quality of goods. A ware house receipt evidences the transfer of ownership for immediate delivery or delivery at a future date.
A document of title evidences that the person in possession of the document is entitled to receive, hold, and dispose of the document and the goods covered in the document. A document of title obtains legal existence when it is created and transferred to a person entitled to the document. The document usually represents commodities in storage or transportation.
A document of title is negotiable when by its terms the goods are to be delivered to the bearer or to the order of the named person. A document of title is nonnegotiable if at the time it is issued, a document has a conspicuous legend. The UCC lists all negotiable documents of title. All documents that are not specified by the UCC as negotiable are nonnegotiable documents of title[i].
A holder of a duly negotiated document acquires the following rights[ii]:
- title to the document;
- title to the goods;
- all rights accruing under the law of agency or estoppel; and
- direct obligation of the issuer to hold or deliver the goods according to the terms of the document.
When a person negotiates or delivers a document of title for value, the transferor in addition to any warranty made in selling or leasing, warrants to its immediate purchaser that[iii]:
- the document is genuine; the transferor does not have knowledge of any fact that would impair the document’s validity or worth; and
- the negotiation or delivery is rightful and fully effective with respect to the title to the document and the goods it represents.
When a document of title is lost, stolen, or destroyed, a court may order delivery of the goods or issuance of a substitute document. A bailee is liable for conversion when s/he delivers goods to a person claiming under a missing document without a court order[iv].
[i] U.C.C.§ 7-104
[ii] U.C.C.§ 7-502
[iii] U.C.C.§ 7-508
[iv] U.C.C.§ 7-601(2)