Written by attorneys · grounded in primary & secondary sources — see below
A document of title that actually stands for the goods it covers, so that any transfer of the goods requires a surrender of the document.
Sources & Authorities
How it applies
Common Examples
2
Due Negotiation Defeats Prior Security Interest
Nova Pharmaceuticals stored inventory with a warehouse that issued negotiable warehouse receipts. Nova granted City Bank a security interest in the receipts, which the bank perfected by possession. Nova later endorsed the receipts in blank and sold them for value to Nexus Technologies, which took without notice of the bank's interest. Nexus presented the receipts and obtained the goods. Nexus holds the goods free of City Bank's security interest.
Seller Stops Delivery Before Negotiation
Nolan Nunez sold goods to Nathaniel Newman and delivered them to a carrier that issued a negotiable bill of lading. Before Newman paid, Nolan learned of Nathaniel's insolvency and instructed the carrier to stop delivery. Nathaniel had not yet received or negotiated the bill. The carrier properly withheld the goods from Nathaniel.
Put it into practice
Test Yourself
8
Practice Questions5
· 7 primary sources
Select any source to read its text and confirm it supports the definition.
Uniform Acts
Restatements
Casebooks
Course Outlines
Study Supplements
Dictionaries
In re Kellstrom Indus., Inc.282 B.R. 787 (Bankr. D. Del. 2002)
Common questions
Frequently Asked
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How does a secured party perfect a security interest in goods covered by a negotiable document of title?+
A secured party perfects its interest in the goods by perfecting its interest in the negotiable document while the goods remain in the bailee's possession. Possession or filing against the document suffices. No separate step against the goods is required during that period.
What priority does a holder by due negotiation of a negotiable document of title receive against an earlier security interest?+
The holder takes the document and the covered goods free of the earlier security interest, even if that interest was perfected. The priority is governed by Article 7 rules on due negotiation.
Does filing against goods covered by a negotiable document defeat a prior perfected interest in the document?+
No. A security interest perfected in the negotiable document has priority over a later interest perfected directly in the goods by filing while the goods remain with the bailee under the document.
Secured TransactionsRights of third parties; perfected and unperfected security interests; rules of priority (§ 9-301, et seq.) · Requirement of filing and steps to be taken for perfection (§§ 9-308 through 9-316; § 9-501, et seq.); assignment of security interest (§§ 9-514, 9-519)UBEIntermediate