An Act To Implement the Updates to Article 7 of the Uniform CommerCial Code Suggested by the National Conference of Commissioners on Uniform State Laws
Maine Legislature, Session 124, LD 1405
Committee: Judic,iary
Sponsors: HOBBINS
Amends: 10 MRSA §9416, 11 MRSA §2, 11 MRSA §2-S, 11 MRSA §4, 11 MRSA §5, 11 MRSA §8, 11 MRSA §9, 17 MRSA §1663, 17 MRSA §1703

Legislative Document 
No. 1405 
In Senate, April 2, 2009 
An Act To Implement the Updates to Article 7 of the Uniform 
CommerCial Code Suggested by the National Conference of 
Commissioners on Uniform State Laws 
Reference to the Committee on Judic,iary suggested and ordered printed .. 
Presented by Senator HOBBINS of York. 
Printed on recycled paper 
9r8{J~ 
JOY J. O'BRIEN 
Secretary of the Senate 
Be it enacted by the People of the State of Maine as follows: 
PART A 
PREFATORY NOTE 
Article 7 is the last of the articles of the Uniform Commercial Code to be revised. 
The genesis of this project is twofold: 
to provide a framework for the further 
development of electronic documents of title and to update the article for modern times in 
light of state, federal and international developments. Each section has been reviewed to 
determine its suitability given modern practice, the need for 
medium and gender 
neutrality, and modern statutory drafting. 
To provide for electronic documents of title, several defInitions in Article 1 were 
revised including "bearer," "bill oflading," "delivery," "document of title," "holder," and 
"warehouse receipt." 
The concept of an electronic document of title allows for 
commercial practice to determine whether records issued by bailees are "in the regular 
course of business or fmancing" and are "treated as adequately evidencing that the person 
in possession or control of the record is entitled to receive, control, hold, and dispose of 
the record and the gopds the record covers." Rev. Section 1-201(b)(l6). Such records in 
electronic form are electronic documents of title and in tangible form are tangible 
documents of title. Conforming amendment~ to other Articles of the UCC are also 
necessary to fully integrate electronic documents of title into the UCC. Conforming 
amendments to other Articles of the UCC are contained in Appendix I. 
Key to the integration of the electronic document of title scheme is the concept of 
"control" defIned in Section 7-106. 
This defmition is 
adapted from the Uniform 
Electronic Transactions Act § 16 on Transferrable Records and from Uniform 
Commercial Code § 9-105 concerning control of electronic chattel paper. Control of an 
electronic document of title is the conceptual equivalent to possession and indorsement of 
a tangible document of title. Of equal importance is the acknowledgment that parties 
may desire to substitute an electronic document of title for an already-issued paper 
document and vice versa. Section 7-105 sets forth the minimum requirements that need 
to be fulfIlled in order to give effect to the substitute document issued in the alternate 
, medium. To the extent possible, the rules for electronic documents of title are the same 
or as similar as possible to the rules for tangible documents of title. If a rule is meant to 
be limited to one medium or the other, that is clearly stated. Rules that reference 
documents of title, warehouse receipts, or bills of lading without a designation to 
"electronic" or "tangible" apply to documents of title in either medium. As with tangible 
negotiable documents of title, electronic negotiable documents of title may be negotiated 
'and duly negotiated. Section 7-501. 
Other changes that have been made are: 
1. 
New defInitions of "carrier," "good faith," "record", "sign" and "shipper" in 
Section 7-102. 
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2. Deletion of references to tariffs or filed classifications given the deregulation of 
the affected industries. See e.g. section 7-103 and 7-309. 
3. Clarifying the rules regarding when a document is nonnegotiable. Section 7-104. 
4. Making clear when rules apply just to warehouse receipts or bills of lading, thus 
eliminating the need for former section 7-105. 
5. 
Clarifying that particular terms need not be included in order to have a valid 
warehouse receipt. Section 7-202. 
6. Broadeniiig the ability of the warehouse to make an effective limitation of liability 
in its warehouse receipt or storage agreement in accord with commercial practice. 
Section 7-204. 
7. Allowing a warehouse to have a lien on goods covered by a storage agreement and 
clarifying the priority rules regarding the claim of a warehouse lien as against other 
interests. Section 7-209. 
8. Conforming language usage to modern shipping practice. Sections 7-301 and 7-
302. 
9. Clarifying the extent of the carrier's lien. Section 7-307. 
10. Adding references to Article 2A when appropriate. See e.g. Sections 7-503, 7-
504, 7-509. 
11. Clarifying that the warranty made by negotiation or delivery of a document of 
title should apply only in the case of a voluntary transfer of possession or control of the 
document. Section 7-507. 
12. Providing greater flexibility to a court regarding adequate protection against loss 
when ordering delivery of the goods or issuance of a substitute document. Section 7-601. 
13. 
Providing· conforming amendments to the other Articles of the Uniform 
Commercial Code to accommodate electronic documents of title. 
Legislative Note: All cross-references in this draft to Article 1 are to Revised Article 
(2001). In the event a state has not enacted Revised Article 1, the cross-references 
should be changed to refer to the relevant sections informer Article 1. 
Sec. A-l. 11 MRSA art. 7, as amended, is repealed. 
Sec. A-2. 11 MRSA art. 7-A is enacted to read: 
ARTICLE7-A 
DOCUMENTS OF TITLE 
PARTl 
GENERAL 
§7-1101. Short title 
This Article may be !mown and cited as "the Uniform Commercial Code -
Documents of Title." 
UNIFORM COMMENT 
(This is section 7-101 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-101. 
Changes: Revised for style only. 
This Article is a revision of the 1962 Official Text with Comments as amended since 
1962. 
The 1962 Official Text was a consolidation and revision of the Uniform 
Warehouse Receipts Act and the Uniform Bills of Lading Act, and embraced the 
provisions of the Uniform Sales Act relating to negotiation of documents of title. 
This Article does not contain the substantive criminal prOVlSlons found in the 
Uniform Warehouse Receipts and Bills of Lading Acts. These criminal provisions are 
inappropriate to a Commercial Code, and for the most part duplicate portions of the 
ordinary criminal law relating to frauds. This revision deletes the former Section 7-105 
that provided that courts could apply a rule from Parts 2 and 3 by analogy to a situation 
not explicitly covered in the provisions on warehouse receipts or bills of lading when it 
was appropriate. This is, of course, an unexceptional proposition and need not be stated 
explicitly in the statute. Thus former Section 7-105 has been deleted. Whether applying 
a rule by analogy to a situation is appropriate depends upon the facts of each case. 
The Article does not attempt to defme the tort liability of bailees, except to hold 
certain classes ofbailees to a minimum standard ofreasonable care. For important classes 
of bailees, liabilities in case of loss, damages or destruction, as well as other legal 
questions associated with particular documents of title, are governed by federal statutes, 
international treaties, and in some cases regulatory state laws, which supersede the 
provisions of this Article in case of inconsistency. See Section 7-103. 
§7-1102. Definitions and index of definitions 
(1). In this Article, unless the context otherwise requires, the following terms have 
the following meanings. 
(a). "Bailee" means a person that by a warehouse receipt, bill of lading or other 
document of title ac!mowledges possession of goods and contracts to deliver them. 
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(b). "Carrier" means a person that issues a bill oflading. 
(c). "Consignee" means a person named in a bill oflading to which or to whose order 
the bill promises delivery. 
(d). "Consignor" means a person named in a bill of lading as the person from which 
the goods have been received for shipment. 
(e). "Delivery order" means a record that contains an order to deliver goods directed 
to a warehouse, carrier or other person that in the ordinary course of business issues 
warehouse receipts or bills of lading. 
(fl. "Good faith" means honesty in fact and the observance of reasonable commercial 
standards of fair dealing. 
(g). "Goods" means all things that are treated as movable for the purposes of a 
contract for storage or transportation. 
(h). "Issuer" means a bailee that issues a document of title or, in the case of an 
unaccepted delivery order, the person that orders the possessor of goods to deliver. 
The term includes a person for which an agent or employee purports to act in issuing 
a document if the agent or employee has real or apparent authority to issue 
documents, even if the issuer did not receive any goods, the goods were misdescribed 
or in any other respect the agent or employee violated the issuer's instructions. 
(0. 
"Person entitled under the document" means the holder, in the case of a 
negotiable document of title, or the person to which delivery of the goods is to be 
made by the terms of, or pursuant to instructions in a record under, a nonnegotiable 
document of title. 
(D. "Record" means information that is inscribed on a tangible medium or that is 
stored in an electronic or other medium and is retrievable in perceivable form. 
(k). "Sign" means, with present intent to authenticate or adopt a record: 
(i) To execute or adopt a tangible symbol; or 
(ii) To attach to or logically associate with the record an electronic sound, 
symbol, or process. 
(1). "Shipper" means a person that enters into a contract of transportation with a 
camero 
(m). "Warehouse" means a person engaged in the business of storing goods for hire. 
(2). Definitions in other Articles applying to this Article and the sections in which 
they appear are: 
(a). "Contract for sale," section 2-106; 
(b). "Lessee in the ordinary course of business," section 2-1103; and 
(c). "Receipt" of goods, section 2-103. 
(3). In addition, Article 1 contains general definitions and principles of construction 
and intemretation applicable throughout this Article. 
UNIFORM COMMENT 
(This is section 7-102 of the Unifonn Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Fonner Section 7-102. 
Changes: New definitions of "carrier," "good faith," "record," "sign," and "shipper." 
Other definitions revised to accommodate electronic mediums. 
Purposes: 
1. "Bailee" is used in this Article as a blanket tenn to designate carriers, 
warehousemen and others who nonnally issue documents of title on the basis of goods 
which they have received. The definition does not, however, require actual possession of 
the goods. If a bailee acknowledges possession when it does not have possession, the 
bailee is bound by sections of this Article which declare the "bailee's" obligations. (See 
definition of "Issuer" in this section and Sections 7-203 and 7-301 on liability in case of 
non-receipt.) A "carrier" is one type of bailee and is defmed as a person that issues a bill 
of lading. A "shipper" is a person who enters into the contract of transportation with the 
carrier. The definitions of "bailee," "consignee," "consignor," "goods", and "issuer", are 
unchanged in substance from prior law. "Document of title" is defined in Article 1, and 
may be in either tangible or electronic fonn. 
2. The definition of warehouse receipt contained in the general definitions section of 
this Act (Section 1-201) does not require that the 
issuing warehouse be "lawfully 
engaged" in business or for profit. The warehouse's compliance with applicable state 
regulations such as the filing of a bond has no bearing on the substantive issues dealt with 
in this Article. 
Certainly the issuer's violations of law should not diminish its 
responsibility on documents the issuer has put in commercial circulation. But it is still 
essential that the business be storing goods "for hire" (Section 1-201 and this section). A 
person does not become a warehouse by storing its own goods. 
3. When a delivery order has been accepted by the bailee it is for practical purposes 
indistinguishable from a warehouse receipt. Prior to such acceptance there is no basis for 
imposing obligations on the bailee other than the ordinary obligation of contract which 
the bailee may have assumed to the depositor of the goods. Delivery orders may be either 
electronic or tangible documents of title. See defmition of "document of title" in Section 
1-201. 
4. The obligation of good faith imposed by this Article and by Article 1, Section 1-
includes the observance of reasonable commercial standards of fair dealing. 
5. 
The definitions of "record" and "sign" are included to facilitate electronic 
mediums. See comment 9 to Section 9-102 discussing "record" and the comment to 
amended Section 2-103 discussing "sign." 
6. "Person entitled under the document" is moved from fonner Section 7-403. 
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7. These defInitions apply in this Article unless the context otherwise requires. The 
"context" is intended to refer to the context in which the defmed tenn is used in the 
Unifonn Commercial Code. The defmition applies whenever the defIned tenn is used 
unless the context in which the defmed tenn is used in the statute indicates that the tenn 
was not used in its defIned sense. See comment to Section 1-201. 
Cross References: 
Point 1: Sections 1-201,7-203 and 7-301. 
Point 2: Sections 1-201 and 7-203. 
Point3: Section 1-201. 
Point 4: Section 1-304. 
Point 5: SeCtion 9-102 and 2-103. 
See general comment to document of title in Section 1-201. 
Definitional Cross References: 
"Bill oflading". Section 1-201. 
"Contract". Section 1-201. 
"Contract for sale". Section 2-106. 
"Delivery". Section 1-201. 
"Document of title". Section 1-201. 
"Person". Section 1-201. 
"Purchase". Section 1-201. 
"Receipt of goods". Section 2-103. 
"Right". Section 1-201. 
"Warehouse receipt". Section 1-201. 
§7-1103. Relation of Article to treaty or statute 
(1). This Article is subject to any treaty or statute of the United States or regulatory 
statute of this State to the extent the treaty, statute or regulatory statute is applicable. 
(2). This Article does not modify or repeal any law prescribing the fonn or content of 
a document of title or the services or facilities to be afforded by a bailee or otherwise 
regulating a bailee's business in respects not specifIcally treated in this Article. However, 
violation of such a law does not affect the status of a document of title that otherwise is 
within the defInition of a document of title. 
(3). This Article modifIes, limits and supersedes the federal Electronic Signatures in 
Global and National Commerce Act, 15 United States Code, Section 7001, et seq., but 
does not modify, limit or supersede Section 101(c) of that Act, 15 United States Code, 
Section 7001 (c), or authorize electronic delivery of any of the notices described in 
Section 103(b) of that Act, 15 United States Code, Section 7003(b). 
(4). To the extent there is a conflict between the Unifonn Electronic Transactions 
Act and this Article, this Article governs. 
UNIFORM COMMENT 
(This is section 7-103 of the Unifonn Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Fonner Sections 7-103 and 10-104. 
Changes: Deletion of references to tariffs and classifications; incorporation of fonner 
Section 10-104 into subsection (b), provide for intersection with federal and state law 
governing electronic transactions. 
Purposes: 
1. To make clear what would of course be true without the Section, that applicable 
Federal law is paramount. 
2. To make clear also that regulatory state statutes (such as those fixing or authorizing 
a commission to fix rates and prescribe services, authorizing different charges for goods 
of different values, and limiting liability for loss to the declared value on which the 
charge was based) are not affected by the Article and are controlling on the matters which 
they cover unless preempted by federal law. The reference in fonner Section 7-103 to 
tariffs, classifications, and regulations filed or issued pursuant to regulatory state statutes 
has been deleted as inappropriate in the modem era of diminished regulation of carriers 
and warehouses. If a regulatory scheme requires a carrier or warehouse to issue a tariff or 
classification, that tariff or classification would be given effect via the state regulatory 
scheme that this Article recognizes as controlling. Permissive tariffs or classifications 
would not displace the provisions of this act, pursuant to this section, but may be given 
effect through the ability of parties to incorporate those tenns by reference into their 
agreement. 
3. The document of title provisions of this act supplement the federal law and 
regulatory state law governing bailees. 
This Article focuses on the commercial 
importance and usage of documents of title. State ex. reI Public Service Commission v. 
Gunkelman & Sons, Inc., 219 N.W.2d 853 (N.D. 1974). 
4. Subsection (c) is included to make clear the interrelationship between the federal 
Electronic Signatures in Global ,and National Commerce Act and this article and the 
conforming amendments to other articles of the Unifonn Commercial Code promulgated 
as part of the revision of this article. Section 102 of the federal act allows a State statute 
to modify, limit, or supersede the provisions of Section, 101 of the federal act. 
See the 
comments to Revised Article 1, Section 1-108. 
5. 
Subsection (d) makes clear that once this article is in effect, its prOVlSlons 
regarding electronic commerce and regarding electronic documents of title control in the 
event there is a conflict with the provisions of the Unifonn Electronic Transactions Act or 
other applicable state law governing electronic transactions. 
Cross References: 
Sections 1-108, 7-201, 7-202, 7-204, 7-206, 7-309, 7-401, 7-403. 
Definitional Cross Reference: 
"Bill oflading". Section 1-201. 
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§7-1104. Negotiable and nonnegotiable document of title 
(1). Except as otherwise provided in subsection (3), a document of title is negotiable 
ifby its tenns the goods are to be delivered to bearer or to the order of a named person. 
(2). A document of title other than one described in subsection (1) is nonnegotiable. 
A bill of lading that states that the goods are consigned to a named person is not made 
negotiable by a provision that the goods are to be delivered only against an order in a 
record signed by the same or another named person. 
(3). A document of title is nonnegotiable if, at the time it is issued, the document has 
a conspicuous legend, however expressed, that it is nonnegotiable. 
UNIFORM COMMENT 
(This is section 7-104 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-104. 
Changes: Subsection (a) is revised to reflect modern style and trade practice. 
Subsection (b) is revised for style and medium neutrality. Subsection (c) is new. 
Purposes: 
1. This Article deals with a class of commercial paper representing commodities in 
storage or transportation. This "commodity paper" is to be distinguished from what 
might be called "money paper" dealt with in the Article of this Act on Commercial Paper 
(Article 3) and "investment paper" dealt with in the Article of this Act on IDvestment 
Securities (Article 8). The class of "commodity paper" is designated "document of title" 
following the terminology of the Uniform Sales Act Section 76. Section 1-201. The 
distinctions between negotiable and nonnegotiable documents in this section makes the 
most important subclassification employed in the Article, in that the holder of negotiable 
documents may acquire more rights than its transferor had (See Section 7-502). The 
former Section 7-104, which provided that a document of title was negotiable if it runs to 
a named person or assigns if such designation was recognized in overseas trade, has been 
deleted as not necessary in light of current commercial practice. 
A document of title is negotiable only if it satisfies this section. 
"Deliverable on 
proper indorsement and surrender of this receipt" will not render a document negotiable. 
Bailees often include such provisions as a means of insuring return of nonnegotiable 
receipts for record purposes. Such language may be regarded as insistence by the bailee 
upon a particular kind of receipt in connection with delivery of the goods. Subsection (a) 
makes it clear that a document is not negotiable which provides for delivery to order or 
bearer only if written instructions to that effect are given by a named person. Either 
tangible or electronic documents of title may be negotiable if the document meets the 
requirement of this section. 
2. Subsection (c) is derived from Section 3-104(d). Prior to issuance of the document 
of title, an issuer may stamp or otherwise provide by a notation on the document that it is 
nonnegotiable even if the document would otherwist: comply with the requirement of 
subsection (a). Once issued as a negotiable document of title, the document cannot be 
changed from a negotiable document to a nonnegotiable document. A document of title 
that is nonnegotiable cannot be made negotiable by stamping or providing a notation that 
the document is negotiable. The only way to make a document of title negotiable is to 
comply with subsection (a). A negotiable document of title may fail to be duly negotiated 
if the negotiation does not comply with the requirements for "due negotiation" stated in 
Section 7-501. 
Cross Reference: Sections 7-501 and 7-502. 
Definitional Cross References: 
"Bearer". Section 1-201. 
"Bill of lading". Section 1-201. 
"Delivery". Section 1-201. 
"Document of title". Section 1-201. 
"Person". Section 1-201. 
"Sign". Section 7-102 
"Warehouse receipt". Section 1-201. 
§7-1105. Reissuance in alternative medium 
(1). Upon request of a person entitled under an electronic document of title, the 
issuer of the electronic document may issue a tangible document of title as a substitute for 
the electronic document if: 
(a). The person entitled under the electronic document surrenders control of the 
document to the issuer; and 
(b). The tangible document when issued contains a statement that it is issued in 
substitution for the electronic document. 
(2). Upon issuance of a tangible document of title in substitution for an electronic 
document of title in accordance with subsection 0): 
(a). The electronic document ceases to have any effect or validity; and 
(b). The person that procured issuance of the tangible document warrants to all 
subsequent persons entitled under the tangible document that the warrantor was a 
person entitled under the electronic document when the warrantor surrendered control 
of the electronic document to the issuer. 
(3). Upon request of a person entitled under a tangible document of title, the issuer of 
the tangible document may issue an electronic document of title as a substitute for the 
tangible document if: 
(a). The person entitled under the tangible document surrenders possession of the 
document to the issuer; and 
(b). The electronic document when issued contains a statement that it is issued in 
substitution for the tangible document. 
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(4). Upon issuance of an electronic document of title in substitution for a tangible 
document oftitle in accordance with subsection (3): 
(a). The tangible document ceases to have any effect or validity; and 
(b). The person that procured issuance of the electronic document warrants to all 
subsequent persons entitled under the electronic document that the warrantor was a 
person entitled under the tangible document when the warrantor surrendered 
possession of the tangible document to the issuer. 
UNIFORM COMMENT 
(This is section 7-105 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provisions: None. 
Other relevant law: UNCITRAL Draft Instrument on the Carriage of Goods by 
SeaTransport Law. 
Purpose: 
1. This section allows for documents of title issued in one medium to be reissued in 
another medium. This section applies to both negotiable and nonnegotiable documents. 
This section sets forth minimum requirements for giving the reissued document effect and 
validity. The issuer is not required to issue a document in an alternative medium and if 
the issuer chooses to do so, it may impose additional requirements. Because a document 
of title imposes obligations on the issuer of the document, it is imperative for the issuer to 
be the one who issues the substitute document in order for the substitute document to be 
effective and valid. 
2. The request must be made to the issuer by the person entitled to enforce the 
document of title (Section 7-102(a)(9)) and that person must surrender possession or 
control of the original document to the issuer. The reissued document must have a 
notation that it has been issued as a substitute for the original document. These minimum 
requirements must be met in order to give the substitute document effect and validity. If 
these minimum requirements are not met for issuance of a substitute document of title, 
the original document of title continues to be effective and valid. Section 7-402. 
However, if the minimum requirements imposed by this section are met, in addition to 
any other requirements that the issuer may impose, the substitute document will be the 
document that is effective and valid. 
3. To protect parties who subsequently take the substitute document of title, the 
person who procured issuance of the substitute document warrants that it was a person 
entitled under the original document at the time it surrendered possession or control ofthe 
original document to the issuer. This warranty is modeled after the warranty found in 
Section 4-209. 
Cross Reference: Sections 7-106, 7-402 and 7-601. 
Definitional Cross Reference: "Person entitled to enforce," Section 7-102. 
§7-1106. Control of electronic document of title 
(1). A person has control of an electronic document of title if a system employed for 
evidencing the transfer of interests in the electronic document reliably establishes that 
person as the person to which the electronic docUment was issued or transferred. 
(2). A system satisfies subsection (1), and a person is deemed to have control of an 
electronic document of title, if the document is created, stored and assigned in such a 
manner that: 
(a). A single authoritative copy of the document exists that is unique, identifiable 
and, except as otherwise provided in paragraphs (d), (e) and (0, unalterable; 
(b). The authoritative copy identifies the person asserting control as: 
(i) The person to which the document was issued; or 
(ii) If the authoritative copy indicates that the document has been transferred, the 
person to which the document was most recently transferred; 
(c). 
The authoritative copy is communicated to and maintained by the person 
asserting control or its designated custodian; 
. (d). 
Copies or amendments that add or change. an identified assignee of the 
authoritative copy can be made only with the consent of the person asserting control; 
(e). Each copy of the authoritative copy and any copy of a copy is readily identifiable 
as a copy that is not the authoritative copy; and 
(D. Any amendment of the authoritative copy is readily identifiable as authorized or 
unauthorized. 
UNIFORM COMMENT 
(This is section 7 ... 106 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Uniform Electronic Transactions Act Section 
16. 
Purpose: 
1. The section defmes "control" for electronic documents of title and derives its rules 
from the Uniform Electronic Transactions Act § 16 on transferrable records. Unlike 
VETA § 16, however, a document of title may be reissued in an alternative medium 
pursuant to Section 7-105. 
At any point in time in which a document of title is in 
electronic form, the control concept of this section is relevant. As under VET A § 16, the 
control concept embodied in this section provides the legal framework for developing 
systems for electronic documents of title. 
2. 
Control of an electronic document of title substitutes for the concept of 
indorsement and possession in the tangible document of title context. See Section 7-501. 
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A person with a tangible document of title delivers the document by voluntarily 
transferring possession and a person with an electronic document of title delivers the 
document by voluntarily transferring control. (Delivery is defined in Section 1-201). 
3. Subsection (a) sets forth the general rule that the "system employed for evidencing 
the transfer of interests in the electronic document reliably establishes that person as the 
person to which the electronic document was issued or transferred." The key to having a 
system that satisfies this test is that identity of the person to which the document was 
issued or transferred must be reliably established. Of great importance to the functioning 
of the control concept is to be able to demonstrate, at any point in time, the person 
entitled under the electronic document. For example, a carrier may issue an electronic 
bill of lading by having the required information in a database that is encrypted and 
accessible by virtue of a password. 
If the computer system in which the required 
information is maintained identifies the person as the person to which the electronic bill 
of lading was issued or transferred, that person has control of the electronic document of 
title. That identification may be by virtue of passwords or other encryption methods. 
Registry systems may satisfy this test. For example, see the electronic warehouse receipt 
system established pursuant to 7 C.F.R. Part 735. This Article leaves to the market place 
the development of sufficient technologies and business practices that will meet the test. 
An electronic document of title is evidenced by a record consisting of information 
stored in an electronic medium. Section 1-201. For example, a record in a computer 
database could be an electronic document of title assuming that it otherwise meets the 
definition of document of title. To the extent that third parties wish to deal in paper 
mediums, Section 7-105 provides a mechanism for exiting the electronic environment by 
having the issuer reissue the document of title in a tangible medium. Thus if a person 
entitled to enforce an electronic document of title causes the information in the record to 
be printed onto paper without the issuer's involvement in issuing the document of title 
pursuant to Section 7-105, that paper is not a document of title. 
4. Subsection (a) sets forth the general test for control. Subsection (b) sets forth a 
safe harbor test that if satisfied, results in control under the general test in subsection (a). 
The test in subsection (b) is also used in Section 9-105 although Section 9-105 does not 
include the general test of subsection (a). 
Under subsection (b), at any point in time, a 
party should be able to identify the single authoritative copy which is unique and 
identifiable as the authoritative copy. This does not mean that once created that the 
authoritative copy need be static and never moved or copied from its original location. 
To the extent that backup systems exist which result in multiple copies, the key to this 
idea is that at any point in time, the one authoritative copy needs to be unique and 
identifiable. 
Parties may not by contract provide that control exists. The test for control is a 
factual test that depends upon whether the general test in subsection (a) or the safe harbor 
in subsection (b) is satisfied. 
5. Article 7 has historically provided for rights under documents of title and rights of 
transferees of documents of title as those rights relate to the goods covered by the 
document. Third parties may possess or have control of documents of title. While 
misfeasance or negligence in failure to transfer or misdelivery of the document by those 
third parties may create serious issues, this Article has never dealt with those issues as it 
relates to tangible documents of title, preferring to leave those issues to the law of 
contracts, agency and tort law. In the electronic document of title regime, third party 
registry systems are just beginning to develop. It is very difficult to write rules regulating 
those third parties without some definitive sense of how the third party registry systems 
will be structured. Systems that are evolving to date tend to be "closed" systems in which 
all participants must sign on to the master agreement which provides for rights as against 
the registry system as well as rights among the members. In those closed systems, the 
document of title never leaves the system so the parties rely upon the master agreement as 
to rights against the registry for its failures in dealing with the document. This article 
contemplates that those "closed" systems will continue to evolve and that the control 
mechanism in this statute provides a method for the participants in the closed system to 
achieve the benefits of obtaining control allowed by this article. 
This article also contemplates that parties will evolve open systems where parties 
need not be subj ect to a master agreement. In an open system a party that is expecting to 
obtain rights through an electronic document may not be a party to the master agreement. 
To the extent that open systems evolve by use of the control concept contained in this 
section, the law of contracts, agency, and torts as it applies to the registry's misfeasance or 
negligence concerning the transfer of control of the electronic document will allocate the 
risks and liabilities of the parties as that other law now does so for third parties who hold 
tangible documents and fail to deliver the documents. 
Cross Reference: Sections 7-105 and 7-501. 
Definitional Cross-References: 
"Delivery", 1-201. 
"Document of title", 1-201. 
PART 2 
WAREHOUSE RECEIPTS: SPECIAL PROVISIONS 
§7-1201. Person that may issue a warehouse receipt; storage under bond 
(1). A warehouse receipt may be issued by any warehouse. 
(2). If goods, including distilled spirits and agricultural commodities, are stored 
under a statute requiring a bond against withdrawal or a license for the issuance of 
receipts in the nature of warehouse receipts, a receipt issued for the goods is deemed to be 
a warehouse receipt even if issued by a person that is the owner of the goods and is not a 
warehouse. 
UNIFORM COMMENT 
(This is section 7-201 of the Uniform Commercial Code - Article 7 (2004).) 
(-'j 
Prior Uniform Statutory Provision: Fonner Section 7-201. 
Changes: Update for style only. 
Purposes: 
It is not intended by re-enactment of subsection (a) to repeal any provisions of special 
licensing or other statutes regulating who may become a warehouse. Limitations on the 
transfer of the receipts and criminal sanctions for violation of such limitations are not 
impaired. Section 7-103. Compare Section 7-401(4) on the liability of the issuer in such 
cases. Subsection (b) covers receipts issued by the owner for whiskey or other goods 
stored in bonded warehouses under such statutes as 26 U.S.C. Chapter 51. 
Cross References: Sections 7-103, 7-401. 
Definitional Cross References: 
"Warehouse receipt". Section 1-201. 
"Warehouse". Section 7-102. 
§7-1202. Form of warehouse receipt; effect of omission 
(1). A warehouse receipt need not be in any particular fonn. 
(2). Unless a warehouse receipt provides for each of the following, the warehouse is 
liable for damages caused to a person injured by its omission: 
Cal. A statement of the location of the warehouse facility where the goods are stored; 
(b). The date of issue of the receipt; 
(c). The unique identification code of the receipt; 
(d). A statement whether the goods received will be delivered to the bearer, to a 
named person or to a named person or its order; 
(e). The rate of storage and handling charges, unless goods are stored under a field 
warehousing arrangement, in which case a statement of that fact is sufficient on a 
nonnegotiable receipt; 
(0. A description ofthe goods or the packages containing them; 
(g). The signature of the warehouse or its agent; 
(4). If the receipt is issued for goods that the warehouse owns, either solely, jointly 
or in common with others, a statement of the fact of that ownership; and 
(n. A statement of the amount of advances made and of liabilities incurred for which 
the warehouse claims a lien or security interest, unless the precise amount of 
advances made or liabilities incurred, at the time of the issue of the receipt, is 
unknown to the warehouse or to its agent that issued the receipt, in which case a 
statement of the fact that advances have been made or liabilities incurred and the 
purpose of the advances or liabilities is sufficient. 
(3). A warehouse may insert in its receipt any terms that are not contrary to this Title 
and do not impair its obligation of delivery under section 7-1403 or its duty of care under 
section 7-1204. Any contrary provision is ineffective. 
UNIFORM COMMENT 
(This is section 7-202 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-202. 
Changes: Language is updated to accommodate electronic commerce and to reflect 
modern style. 
Purposes: 
1. This section does not displace any particular legislation that requires other terms 
in a warehouse receipt or that may require a particular form of a warehouse receipt. This 
section does not require that a warehouse receipt be issued. A warehouse receipt that is 
issued need not contain any of the terms listed in subsection (b) in order to qualify as a 
warehouse receipt as long as the receipt falls within the definition of "warehouse receipt" 
in Article 1. Thus the title has been changed to eliminate the phrase "essential terms" as 
provided in prior law .. The only consequence of a warehouse receipt not containing any 
term listed in subsection (b) is that a person injured by a term's omission has a right as 
against the warehouse for harm caused by the omission. Cases, such as In re Celotex 
Corp., 134 B. R. 993 (BanIa. M.D. Fla. 1991), that held that in order to have a valid 
warehouse receipt all of the terms listed in this section must be contained in the receipt, 
are disapproved. 
2. The unique identification code referred to in subsection (b)(3) can include any 
combination of letters, number, signs, and/or symbols that provide a unique 
identification. Whether an electronic or tangible warehouse receipt contains a signature 
will be resolved with the definition of sign in Section 7-102. 
Cross References: Sections 7-103 and 7-401. 
Definitional Cross References: 
"Bearer". Section 1-201. 
"Delivery". Section 1-201. 
"Goods". Section 7-102. 
"Person". Section 1-201. 
"Security interest". Section 1-201. 
"Sign". Section 7-102. 
"Term". Section 1-201. 
"Warehouse receipt". Section 1-201. 
"Warehouse". Section 7-102. 
) 
) 
) 
(~ 
§7-1203. Liability for nonreceipt or misdescription 
A party to or purchaser for value in good faith of a document of title, other than a bill 
of lading, that relies upon the description of the goods in the document may recover from 
the issuer damages caused by the nonreceipt or misdescription of the goods, except to the 
extent that: 
0). The document conspicuously indicates that the issuer does not mow whether all 
or part of the goods in fact were received or conform to the description, such as a case in 
which the description is in terms of marks or labels or kind, quantity or condition, or the 
receipt or description is qualified by "contents, condition and quality unlmown," "said to 
contain" or words of similar import, ifthe indication is true; or 
(2). The party or purchaser otherwise has notice ofthe nonreceipt or misdescription. 
UNIFORM COMMENT 
(This is section 7-203 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-203. 
Changes: Changes to this section are for style only. 
Purpose: 
This section is a simplified restatement of existing law as to the method by which a 
bailee may avoid responsibility for the accuracy of descriptions which are made by or in 
reliance upon information furnished by the depositor. The issuer is liable on documents 
issued by an agent, contrary to instructions of its principal, without receiving goods. No 
disclaimer of the latter liability is permitted. 
Cross Reference: Section 7-301. 
Definitional Cross References: 
"Conspicuous". Section 1-201. 
"Document of title". Section 1-201. 
"Goods". Section 7-102. 
"Good Faith". Section 1-201. [7-102] 
"Issuer". Section 7-102. 
"Notice". Section 1-202. 
"Party". Section 1-201. 
"Purchaser". Section 1-201. 
"Receipt of goods". Section 2-103. 
"Value". Section 1-204. 
§7-1204. Duty of care; contractual limitation of warehouse's liability 
(1). A warehouse is liable for damages for loss of or injury to the goods caused by its 
failure to exercise care with regard to the goods that a reasonably careful person would 
exercise under similar circumstances. Unless otherwise agreed, the warehouse is not 
liable for damages that could not have been avoided by the exercise of that care. 
(2). 
Damages may be limited by a term in the warehouse receipt or storage 
agreement limiting the amount of liability in case of loss or damage beyond which the 
warehouse is not liable. Such a limitation is not effective with respect to the warehouse's 
liability for conversion to its own use. On request of the bailor in a record at the time of 
signing the storage agreement or within a reasonable time after receipt of the warehouse 
receipt, the warehouse's liability may be increased on part or all of the goods covered by 
the storage agreement or the warehouse receipt. In this event, increased rates may be 
charged based on an increased valuation of the goods. 
(3). Reasonable provisions as to the time and manner of presenting claims and 
commencing actions based on the bailment may be included in the warehouse receipt or 
storage agreement. 
UNIFORM COMMENT 
(This is section 7-204 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-204. 
Changes: Updated to reflect modern, standard commercial practices. 
Purposes of Changes: 
1. Subsection (a) continues the rule without change from former Section 7-204 on 
the warehouse's obligation to exercise reasonable care. 
2. Former Section 7-204(2) required that the term limiting damages do so by setting 
forth a specific liability per article or item or of a value per unit of weight. 
This 
requirement has been deleted as out of step with modern industry practice. Under 
subsection (b) a warehouse may limit its liability for damages for loss of or damage to the 
goods by a term in the warehouse receipt or storage agreement without the term 
constituting an impermissible disclaimer of the obligation of reasonable care. The parties 
cannot disclaim by contract the warehouse's obligation of care. 
Section 1-302. For 
example, limitations based upon per unit of weight, per package, . per occurrence, or per 
receipt as well as limitations based upon a mUltiple of the storage rate may be 
commercially appropriate. As subsection (d) makes clear, the states or the federal 
government may supplement this section with more rigid standards of responsibility for 
some or all bailees. 
3. Former Section 7-204(2) also provided that an increased rate can not be charged if 
contrary to a tariff. That language has been deleted. If a tariff is required under state or 
federal law, pursuant to Section 7-103(a), the tariff would control over the rule of this 
section allowing an increased rate. The provisions of a non-mandatory tariff may be 
incorporated by reference in the parties' agreement. See Comment 2 to Section 7-103. 
Subsection (c) deletes the reference to tariffs for the same reason that the reference has 
been omitted in subsection (b). 
) 
) 
) 
(--"') 
c 
4. As under fonner Section 7-204(2), subsection (b) provides that a limitation of 
damages is ineffective if the warehouse has converted the goods to its own use. A mere 
failure to redeliver the goods is not conversion to the warehouse's own use. See Adams v. 
Ryan & Christie Storage, Inc., 563 F. Supp. 409 (E.D. Pa. 1983) afrd 725 F.2d 666 (3rd 
Cir. 1983). Cases such as I.C.c. Metals Inc. v. Municipal Warehouse Co., 409 N.B. 2d 
(N.Y. Ct. App. 1980) holding that mere failure to redeliver results in a presumption 
of conversion to the warehouse's own use are disapproved. 
"Conversion to its own use" 
is narrower than the idea of conversion generally. Cases such as Lipman v. Peterson, 575 
P .2d 19 (Kan. 1978) holding to the contrary are disapproved. 
5. 
Storage agreements commonly establish the contractual relationship between 
warehouses and depositors who have an on-going relationship. The storage agreement 
may allow for the movement of goods into and out of a warehouse without the necessity 
of issuing or amending a warehouse receipt upon each entry or exit of goods from. the 
warehouse. 
Cross References: Sections 1-302, 7-103, 7-309 and 7-403. 
Definitional Cross References: 
"Goods". Section 7-102. 
"Reasonable time". Section 1-204. 
"Sign". Section 7-102. 
"Tenn". Section 1-201. 
"Value". Section 1-204. 
"Warehouse receipt". Section 1-201. 
"Warehouse". Section 7-102. 
§7-1205. Title under warehouse receipt defeated in certain cases 
A buyer in ordinary course of business of fungible goods sold and delivered by a 
warehouse that is also in the business of buying and selling such goods takes the goods 
free of any claim under a warehouse receipt even if the receipt is negotiable and has been 
duly negotiated. 
UNIFORM COMMENT 
(This is section 7-205 of the Unifonn Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Fonner Section 7-205. 
Changes: Changes for style only. 
Purposes: 
1. The typical case covered by this section is that of the warehouse-dealer in grain, 
and the substantive question at issue is whether in case the warehouse becomes insolvent 
the receipt holders shall be able to trace and recover grain shipped to fanners and other 
purchasers from the elevator. 1bis was possible under the old acts, although courts were 
eager to fmd estoppels to prevent it. The practical difficulty of tracing fungible grain 
means that the preservation of this theoretical right adds little to the commercial 
acceptability of negotiable grain receipts, which really circulate on the credit of the 
warehouse. Moreover, on default of the warehouse, the receipt holders at least share in 
what grain remains, whereas retaking the grain from a good faith cash purchaser reduces 
the purchaser completely to the status of general creditor in a situation where there was 
very little the purchaser could do to guard against the loss. Compare 15 U.S.C. Section 
714p enacted in 1955. 
2. This provision applies to both negotiable and nonnegotiable warehouse receipts. 
The concept of due negotiation is provided for in 7-501. The definition of "buyer ih 
ordinary course" is in Article 1 and provides, among other things, that a buyer must either 
have possession or a right to obtain the goods under Article 2 in order to be a buyer in 
ordinary course. This section requires actual delivery of the fungible goods to the buyer 
in ordinary course. Delivery requires voluntary transfer of possession of the fungible 
goods to the buyer. See amended Section 2-103. 
This section is not satisfied by the 
delivery of the document of title to the buyer in ordinary course. 
Cross References: Sections 2-403 and 9-320. 
Definitional Cross References: 
"Buyer in ordinary course of business". Section 1-201. 
"Delivery". Section 1-201. 
"Duly negotiate". Section 7-501. 
"Fungible" goods. Section 1-201. 
"Goods". Section 7-102. 
"Value". Section 1-204. 
"Warehouse receipt". Section 1-201. 
"Warehouse". Section 7-102. 
§7-1206. Termination ofstorage at warehouse's option 
(1). A warehouse, by giving notice to the person on whose account the goods are 
held and any other person mown to claim an interest in the goods, may require payment 
of any charges and removal of the goods from the warehouse at the termination of the 
period of storage fixed by the document of title or, if a period is not fixed, within a stated 
period not less than 30 days after the warehouse gives notice. If the goods are not 
removed before the date specified in the notice, the warehouse may sell them pursuant to 
section 7-1210. 
(2). If a warehouse in good faith believes that goods are about to deteriorate or 
decline in value to less than the amount of its lien within the time provided in subsection 
(1) and section 7-1210, the warehouse may specify in the notice given under subsection 
(1) any reasonable shorter time for removal of the goods and, if the goods are not 
removed, may sell them at public sale held not less than one week after a single 
advertisement or posting. 
.) 
) 
(--~"') 
(3). If, as a result of a quality or condition of the goods of which the warehouse did 
not have notice at the time of deposit, the goods are a hazard to other property, the 
warehouse facilities or other persons, the warehouse may sell the goods at public or 
private sale without advertisement or posting on reasonable notification to all persons 
lmown to claim an interest in the goods. If the warehouse, after a reasonable effort, is 
unable to sell the goods, it may dispose of them in any lawful manner and does not incur 
liability by reason of that disposition. 
(4). A warehouse shall deliver the goods to any person entitled to them under this 
Article upon due demand made at any time before sale or other disposition under this 
section. 
(5), A warehouse mav satisfy its lien from the proceeds of anv sale or disposition 
under this section but shall hold the balance for delivery on the demand of any person to 
which the warehouse would have been bound to deliver the goods. 
UNIFORM COMMENT 
(This is section 7-206 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-206. 
Changes: Changes for style. 
Purposes: 
1. This section provides for three situations in which the warehouse may terminate 
storage for reasons other then enforcement of its lien as permitted by Section 7-210. Most 
warehousing is for an indefinite term, the bailor being entitled to delivery on reasonable 
demand. It is necessary to defme the warehouse's power to terminate the bailment, since 
it would be commercially intolerable to allow warehouses to order removal of the goods 
on short notice. The thirty day period provided where the document does not carry its 
own period of termination corresponds to commercial practice of computing rates on a 
monthly basis. The right to terminate under subsection (a) includes a right to require 
payment of "any charges", but does not depend on the existence of unpaid charges. 
2. In permitting expeditious disposition of perishable and hazardous goods the pre-
Code Uniform Warehouse Receipts Act, Section 34, made no distinction between cases 
where the warehouse lmowingly undertook to store such goods and cases where the 
goods were discovered to be of that character subsequent to storage. The former situation 
presents no such emergency as justifies the summary power of removal and sale. 
Subsections (b) and (c) distinguish between the two situations. The reason of this section 
should apply if the goods become hazardous during the course of storage. The process for 
selling the goods described in Section 7-210 governs the sale of goods under this section 
except as provided in subsections (b) and (c) for the situations described in those 
subsections respectively. 
3. Protection of its lien is the only interest which the warehouse has to justify 
summary sale of perishable goods which are not hazardous. This same interest must be 
recognized when the stored goods, although not perishable, decline in market value to a 
point which threatens the warehouse's security. 
4. The right to order removal of stored goods is subject to provisions of the public 
warehousing laws of some states forbidding warehouses from discriminating among 
customers .. Nor does the section relieve the warehouse of any obligation under the state 
laws to secure the approval of a public official before disposing of deteriorating goods. 
Such regulatory statutes and the regulations under them remain in force and operative. 
Section 7-103. 
Cross References: Sections 7-103 and 7-403. 
Definitional Cross References: 
"Delivery". Section 1-201. 
"Document of title". Section 1-102. 
"Good faith". Section 1-201 [7-102]. 
"Goods". Section 7-102. 
"Notice". Section 1-202. 
"Notification". Section 1-202. 
"Person". Section 1-201. 
"Reasonable time". Section 1-205. 
"Value". Section 1-204. 
"Warehouse". Section 7-102. 
§7-1207. Goods must be kept separate; fungible goods 
(1). 
Unless the warehouse receipt provides otherwise, a warehouse shall keep 
separate the goods covered by each receipt so as to permit at all times identification and 
delivery of those goods. However, different lots of fungible goods may be commingled. 
(2). If different lots of fungible goods are commingled, the goods are owned in 
common by the persons entitled thereto and the warehouse is severally liable to each 
owner for that owner's share. If, because of overissue, a mass of fungible goods is 
insufficient to meet all the receipts the warehouse has issued against it, the persons 
entitled include all holders to which overissued receipts have been duly negotiated. 
UNIFORM COMMENT 
(This is section 7-207 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-207. 
Cbanges: Changes for style only. 
Purposes: 
No change of substance is made from former Section 7-207. Holders to whom 
overissued receipts have been duly negotiated shall share in a mass of fungible goods. 
) 
) 
) 
(r-) 
----------------------
Where individual ownership interests are merged into claims on a common fund, as is 
necessarily the case with fungible goods, there is no policy reason for discriminating 
between successive purchasers of similar claims. 
Definitional Cross References: 
"Delivery". Section 1-20l. 
"Duly negotiate". Section 7-50l. 
"Fungible goods". Section 1-20l. 
"Goods". Section 7-102. 
"Holder". Section 1-20 l. 
"Person". Section 1-201. 
"Warehouse receipt". Section 1-20l. 
"Warehouse". Section 7-102. 
§7-120S. Altered warehouse receipts 
If a blank in a negotiable tangible warehouse receipt has been filled in without 
authority, a good faith purchaser for value and without notice of the lack of authority may 
treat the insertion as authorized. Any other unauthorized alteration leaves any tangible or 
electronic warehouse receipt enforceable against the issuer according to its original tenor. 
UNIFORM COMMENT 
(This is section 7-208 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-208. 
Changes: To accommodate electronic documents of title. 
Purpose: 
1. The execution of tangible warehouse receipts in blank is a dangerous practice. As 
between the issuer and an innocent purchaser the risks should clearly fall on the former. 
The purchaser must have purchased the tangible negotiable warehouse receipt in good 
faith and for value to be protected under the rule of the first sentence which is a limited 
exception to the general rule in the second sentence. Electronic document of title systems 
should have protection against unauthorized access and unauthorized changes. See 7-
106. Thus the protection for good faith purchasers found in the first sentence is not 
necessary in the context of electronic documents. 
2. Under the second sentence of this section, an unauthorized alteration whether 
made with or without fraudulent intent does not relieve the issuer of its liability on the 
warehouse receipt as originally executed. The unauthorized alteration itself is of course 
ineffective against the warehouse. The rule stated in the second sentence applies to both 
tangible and electronic warehouse receipts. 
Definitional Cross References: 
"Good faith". Section 1-201 [7-102]. 
"Issuer". Section 7-102. 
"Notice". Section 1-202. 
"Purchaser". Section 1-201. 
"Value". Section 1-204. 
"Warehouse receipt". Section 1-201. 
§7-1209. Lien of warehouse 
(1). A warehouse has a lien against the bailor on the goods covered by a warehouse 
receipt or storage agreement or on the proceeds thereof in its possession for charges for 
storage or transportation, including demurrage and terminal charges, insurance, labor or 
other charges, present or future, in relation to the goods, and for expenses necessary for 
preservation of the goods or reasonably incurred in their sale pursuant to law. If the· 
person on whose account the goods are held is liable for similar charges or expenses in 
relation to other goods whenever deposited and it is stated in the warehouse receipt or 
storage agreement that a lien is claimed for charges and expenses in relation to other 
goods, the warehouse also has a lien against the goods covered by the warehouse receipt 
or storage agreement or on the proceeds thereof in its possession for those charges and 
expenses, whether or not the other goods have been delivered by the warehouse. 
However, as against a person to which a negotiable warehouse receipt is duly negotiated, 
a warehouse's lien is limited to charges in an amount or at a rate specified in the 
warehouse receipt or, if no charges are so specified, to a reasonable charge for storage of 
the specific goods covered by the receipt subsequent to the date of the receipt. 
(2). A warehouse may also reserve a security interest against the bailor for the 
maximum amount specified on the receipt for charges other than those specified in 
subsection (1), such as for money advanced and interest. 
The security interest is 
governed by Article 9-A. 
(3). A warehouse's lien for charges and expenses under subsection (1) or a security 
interest under subsection (2) is· also effective against any person that so entrusted the 
bailor with possession of the goods that a pledge of them by the bailor to a good faith 
purchaser for value would have been valid. However, the lien or security interest is not 
effective against a person that before issuance of a document of title had a legal interest 
or a perfected security interest in the goods and that did not: 
(a). Deliver or entrust the goods or any document of title covering the goods to the 
bailor or the bailor's nominee with: 
en Actual or apparent authority to ship, store or sell; 
(ii) Power to obtain delivery under section 7-1403; or 
(iii) Power of disposition under section 2-403; section 2-1304, subsection (2); 
section 2-1305, subsection (2); section 9-1320; or section 9-1321, subsection (3) 
or other statute or rule oflaw; or 
(b). Acquiesce in the procurement by the bailor or its nominee of any document. 
(4). A warehouse's lien on household goods for charges and expenses in relation to 
the goods under subsection (1) is also effective against all persons if the depositor was the 
) 
) 
) 
() 
,.. 
legal possessor of the goods at the time of deposit. In this subsection, "household goods" 
means furniture, furnishings or personal effects used by the depositor in a dwelling. 
(5). 
A warehouse loses its lien on any goods that it voluntarily delivers or 
unjustifiably refuses to deliver. 
UNIFORM COMMENT 
(This is section 7-209 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Sections 7-209 and 7-503. 
Changes: Expanded to recognize warehouse lien when a warehouse receipt is not 
issued but goods are covered by a storage agreement. 
Purposes: 
1. Subsection (a) defmes the warehouse's statutory lien. 
Other than allowing a 
warehouse to claim a lien under this section when there is a storage agreement and not a 
warehouse receipt, this section remains unchanged in substance from former Section 7-
209(1). Under the first sentence, a specific lien attaches automatically without express 
notation on the receipt or storage agreement with regard to goods stored under the 
receipt or the storage agreement. That lien is limited to the usual charges arising out of a 
storage transaction. 
Example 1: Bailor stored goods with a warehouse and the warehouse issued a 
warehouse receipt. A lien against those goods arose as set forth in subsection (a), the first 
sentence, for the charges for storage and the other expenses of those goods. 
The 
warehouse may enforce its lien under Section 7-210 as against the bailor. Whether the 
warehouse receipt is negotiable or nonnegotiable is not important to the warehouse's 
rights as against the bailor. 
Under the second sentence, by notation on the receipt or storage agreement, the lien 
can be made a general lien extending to like charges in relation to other goods. Both the 
specific lien and general lien are as to goods in the possession of the warehouse and 
extend to proceeds from the goods as long as the proceeds are in the possession of the 
warehouse. The same rules apply whether the receipt is negotiable or non-negotiable. 
Example 2: Bailor stored goods (lot A) with a warehouse and the warehouse issued a 
warehouse receipt for those goods. 
ill the warehouse receipt it is stated that the 
warehouse will also have a lien on goods covered by the warehouse receipt for storage 
charges and the other expenses for any other goods that are stored with the warehouse by 
the bailor. The statement about the lien on other goods does not specify an amount or a 
rate. Bailor then stored other goods (lot B) with the warehouse. Under subsection (a), 
first sentence, the warehouse has a lien on the specific goods (lot A) covered by the 
warehouse receipt. Under subsection (a), second sentence, the warehouse has a lien on the 
goods in lot A for the storage charges and the other expenses arising from the goods in lot 
.18 
B. That lien is enforceable as against the bailor regardless of whether the receipt is 
negotiable or nonnegotiable. 
Under the third sentence, if the warehouse receipt is negotiable, the lien as against a 
holder of that receipt by due negotiation is limited to the amount or rate specified on the 
receipt for the specific lien or the general lien, or, if none is specified, to a reasonable 
charge for storage of the specific goods covered by the receipt for storage after the date of 
the receipt. 
Example 3: Same facts as Example 1 except that the warehouse receipt is negotiable 
and has been duly negotiated (Section 7-501) to a person other than the bailor. Under the 
last sentence of subsection (a), the warehouse may enforce its lien against the bailor's 
goods stored in the warehouse as against the person to whom the negotiable warehouse 
receipt has been duly negotiated. Section 7-502. That lien is limited to the charges or 
rates specified in the receipt or a reasonable charge for storage as stated in the last 
sentence of subsection (a). 
Example 4: Same facts as Example 2 except that the warehouse receipt is negotiable 
and has been duly negotiated (Section 7-501) to a person other than the bailor. Under the 
last sentence of subsection (a), the lien on lot A goods for the storage charges and the 
other expenses arising from storage of lot B goods is not enforceable as against the 
person to whom the receipt has been duly negotiated. Without a statement of a specified 
amount or rate for the general lien, the warehouse's general lien is not enforceable as 
against the person to whom the negotiable document has been duly negotiated. However, 
the warehouse lien for charges and expenses related to storage of lot A goods is still 
enforceable as against the person to whom the receipt was duly negotiated. 
Example 5. Same facts as Examples 2 and 4 except the warehouse had stated on the 
negotiable warehouse receipt a specified amount or rate for the general lien on other 
goods (lot B). Under the last sentence of subsection (a), the general lien on lot A goods 
for the storage charges and the other expenses arising from storage of lot B goods is 
enforceable as against the person to whom the receipt has been duly negotiated. 
2. Subsection (b) provides for a security interest based upon agreement. Such a 
security interest arises out of relations between the parties other than bailment for storage 
or transportation, as where the bailee assumes the role of financier or performs a 
manufacturing operation, extending credit in reliance upon the goods covered by the 
receipt. Such a security interest is not a statutory lien. Compare Sections 9-109 and 9-
333. It is governed in all respects by Article 9, except that subsection (b) requires that the 
receipt specify a maximum amount and limits the security interest to the amount 
specified. A warehouse could also take a security interest to secure its charges for storage 
and the other expenses listed in subsection (a) to protect these claims upon the loss of the 
statutory possessory warehouse lien if the warehouse loses possession of the goods as 
provided in subsection (e). 
Example 6: Bailor stores goods with a warehouse and the warehouse issues a 
warehouse receipt that states that the warehouse is taking a security interest in the bailed 
goods for charges of storage, expenses, for money advanced, for manufacturing services 
) 
) 
) 
(-~') 
(, 
rendered, and all other obligations that the bailor may owe the warehouse. That is a 
security interest covered in all respects by Article 9. Subsection (b). As allowed by this 
section, a warehouse may rely upon its statutory possessory lien to protect its charges for 
storage and the other expenses related to storage. For those storage charges covered by 
the statutory possessory lien, the warehouse is not required to use a security interest under 
subsection (b). 
3. Subsections (a) and (b) validate the lien and security interest "against the bailor." 
Under basic principles of derivative rights as provided in Section 7-504, the warehouse 
lien is also valid as against parties who obtain their rights from the bailor except as 
otherwise provided in subsection (a), third sentence, or subsection (c). 
Example 7: Bailor stores goods with a warehouse and the warehouse issues a 
nonnegotiable warehouse receipt that also claims a general lien in other goods stored with 
the warehouse. A lien on the bailed goods for the charges for storage and the other 
expenses arises under subsection (a). Bailor notifies the warehouse that the goods have 
been sold to Buyer and the bailee aclrnowledges that fact to the Buyer. Section 2-503. 
The warehouse lien for storage of those goods is effective against Buyer for both the 
specific lien and the general lien. Section 7-504. 
Example 8: Bailor stores goods with a warehouse and the warehouse issues a 
nonnegotiable warehouse receipt. A lien on the bailed goods for the charges for storage 
and the other expenses arises under subsection (a). Bailor grants a security interest in the 
goods while the goods are in the warehouse's possession to Secured Party (SP) who 
properly perfects a security interest in the goods. See Revised 9-312(d). The warehouse 
lien is superior in priority over SP's security interest. See Revised 9-203(b)(2) (debtor 
can grant a security interest to the extent of debtor's rights in the collateral). 
Example 9: Bailor stores goods with a warehouse and the warehouse issues a 
negotiable warehouse receipt. A lien on the bailed goods for the charges for storage and 
the other expenses arises under subsection (a). Bailor grants a security interest in the 
negotiable document to SP. SP properly perfects its interest in the negotiable document 
by taking possession through a 'due negotiation.' Revised 9-312(c). 
SP's security 
interest is subordinate to the warehouse lien. Section 7-209(a), third sentence. Given that 
bailor's rights are subject to the warehouse lien, the bailor cannot grant to the SP greater 
rights than the bailor has under Section 9-203(b)(2), perfection of the security interest in 
the negotiable document and the goods covered by the document through SP's filing of a 
financing statement should not give a different result. 
As against third parties who have interests in the goods prior to the storage with the 
warehouse, subsection (c) continues the rule under the prior uniform statutory provision 
that to validate the lien or security interest of the warehouse, the owner must have 
entrusted the goods to the depositor, and that the circumstances must be such that a 
pledge by the depositor to a good faith purchaser for value would have been valid. Thus 
the owner's interest will not be subjected to a lien or security interest arising out of a 
deposit of its goods by a thief. The warehouse may be protected because of the actual, 
implied or apparent authority of the depositor, because of a Factor's Act, or because of 
other circumstances which would protect a bona fide pledgee, unless those circumstances 
are denied effect under the second sentence of subsection (c). The language of Section 
7-503 is brought into subsection (c) for purposes of clarity. The comments to Section 7-
are helpful in interpreting delivery, entrustment or acquiescence .. 
Where the third party is the holder of a security interest, obtained prior to the 
issuance of a negotiable warehouse receipt, the rights of the warehouse depend on the 
priority given to a hypothetical bona fide pledgee by Article 9, particularly Section 9-322. 
Thus the special priority granted to statutory liens by Section 9-333 does not apply to 
liens under subsection (a) of this section, since subsection (c), second sentence, 
"expressly provides otherwise" within the meaning of Section 9-333. 
As to household goods, however, subsection (d) makes the warehouse's lien "for 
charges and expenses in relation to the goods" effective against all persons if the 
depositor was the legal possessor. 
The purpose of the exception is to permit the 
warehouse to accept household goods for storage in sole reliance on the value of the 
goods themselves, especially in situations of family emergency. 
Example 10: Bailor grants a perfected security interest in the goods to SP prior to 
storage of the goods with the warehouse. Bailor then stores goods with the warehouse 
and the warehouse issues a warehouse receipt for the goods. A warehouse lien on the 
bailed goods for the charges for storage or other expenses arises under subsection (a). 
The warehouse lien is not effective as against SP unless SP entrusted the goods to the 
bailor with actual or apparent authority to ship store, or sell the goods or with power of 
disposition under subsection (c)(1) or acquiesced in the bailor's procurement of a 
document of title under subsection (c)(2). This result obtains whether the receipt is 
negotiable or nonnegotiable. 
Example 11: Sheriff who had lawfully repossessed household goods in an eviction 
action stored the goods with a warehouse. A lien on the bailed goods arises under 
subsection (a). The lien is effective as against the owner of the goods. Subsection (d). 
4. As under previous law, this section creates a statutory possessory lien in favor of 
the warehouse on the goods stored with the warehouse or on the proceeds of the goods. 
The warehouse loses its lien if it loses possession of the goods or the proceeds. 
Subsection (e). 
5. Where goods have been stored under a non-negotiable warehouse receipt and are 
sold by the person to whom the receipt has been issued, frequently the goods are not 
withdrawn by the new owner. The obligations of the seller of the goods in this situation 
are set forth in Section 2 ... 503(4) on tender of delivery and include procurement of an 
aclmowledgment by the bailee of the buyer's right to possession of the goods. If a new 
receipt is requested, such an aclmowledgmentcan be withheld until storage charges have 
been paid or provided for. The statutory lien for charges on the goods sold, granted by 
the first sentence of subsection (a), continues valid unless the bailee gives it up. See 
Section 7-403. But once a new receipt is issued to the buyer, the buyer becomes "the 
person on whose account the goods are held" under the second sentence of subsection (a); 
unless the buyer undertakes liability for charges in relation to other goods stored by the 
seller, there is no general lien against the buyer for such charges. Of course, the bailee 
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may preserve the general lien in such a case either by an arrangement by which the buyer 
"is liable for" such charges, or by reserving a security interest under subsection (b). 
6. A possessory warehouse lien arises as provided under subsection (a) if the parties 
to the bailment "have a storage agreement or a warehouse receipt is issued. In the modem 
warehouse, the bailor and the bailee may enter into a master contract governing the 
bailment with the bailee and bailor keeping track of the goods stored pursuant to the 
master contract by notation on their respective books and records and the parties send 
notification via electronic communication as to what goods are covered by the master 
contract. Warehouse receipts are not issued. See Comment 4 to Section 7-204. There is 
no particular form for a warehouse receipt and failure to contain any of the terms listed in 
Section 7-202 does not deprive the warehouse of its lien that arises under subsection (a). 
See the comment to Section 7-202. 
Cross References: 
Point 1: Sections 7-501 and 7-502. 
Point 2: Sections 9-109 and 9-333. 
Point 3: Sections 2-503, 7-503, 7-504, 9-203, 9-312, and 9-322. 
Point 4: Sections 2-503, 7-501, 7-502, 7-504, 9-312, 9-331, 9-333,9-401. 
Point 5: Sections 2-503 and 7-403. 
Point 6: Sections 7-202 and 7-204. 
Definitional Cross References: 
"Delivery". Section 1-201. 
"Document of Title". Section 1-201 
"Goods". Section 7-102. 
"Money". Section 1-201. 
"Person". Section 1-201. 
"Purchaser". Section 1-201. 
"Right". Section 1-201. 
"Security interest". Section 1-201. 
"Value". Section 1-204. 
"Warehouse receipt". Section 1-201. 
"Warehouse". Section 7-102. 
§7-1210. Enforcement of warehouse's lien 
(1). Except as otherwise provided in subsection (2), a warehouse's lien may be 
enforced by public or private sale of the goods, in bulk or in packages, at any time or 
place and on any terms that are commercially reasonable, after notifying all persons 
known to claim an interest in the goods. The notification must include a statement of the 
amount due, the nature of the proposed sale and the time and place of any public sale. 
The fact that a better price could have been obtained by a sale at a different time or in a 
method different from that selected by the warehouse is not of itself sufficient to establish 
that the sale was not made in a commercially reasonable manner. The warehouse sells in 
a commercially reasonable manner if the warehouse sells the goods in the usual manner 
in any recognized market therefor, sells at the price current in that market at the time of 
the sale or otherwise sells in confonnity with commercially reasonable practices among 
dealers in the type of goods sold. A sale of more goods than apparently necessary to be 
offered to ensure satisfaction of the obligation is not commercially reasonable, except in 
cases covered by the preceding sentence. 
(2). A warehouse may enforce its lien on goods, other than goods stored by a 
merchant in the course of its business, only if the following requirements are satisfied: 
Cal. All persons mown to claim an interest in the goods must be notified; 
(b). The notification must include an itemized statement of the claim, a description 
of the goods subject to the lien, a demand for payment within a specified time not less 
than 10 days after receipt of the notification and a conspicuous statement that unless 
the claim is paid within that time the goods will be advertised for sale and sold by 
auction at a specified time and place; 
Cc). The sale must conform to the terms of the notification; 
(d). The sale must be held at the nearest suitable place to where the goods are held or 
stored; and 
(e). After the expiration of the time given in the notification, an advertisement of the 
sale must be published once a week for 2 weeks consecutively in a newspaper of 
general circulation where the sale is to be held. The advertisement must include a 
description of the goods, the name of the person on whose account the goods are 
being held and the time and place of the sale. The sale must take place at least 15 
days after the first publication. If there is no newspaper of general circulation where 
the sale is to be held, the advertisement must be posted at least 10 days before the 
sale in not fewer than 6 conspicuous places in the neighborhood of the proposed sale. 
(3). Before any sale pursuant to this section, any person claiming a right in the goods 
may pay the amount necessary to satisfy the lien and the reasonable expenses incurred in 
complying with this section. In that event, the goods, may not be sold but must be 
retained by the warehouse subject to the terms of the receipt and this Article. 
(4). A warehouse may buy at any public sale held pursuant to this section. 
(5). A purchaser in good faith of goods sold to enforce a warehouse's lien takes the 
goods free of any rights of persons against which the lien was valid, despite the 
warehouse's noncompliance with this section. 
(6). A warehouse may satisfy its lien from the proceeds of any sale pursuant to this 
section but shall hold the balance, if any, for delivery on demand to any person to which 
the warehouse would have been bound to deliver the goods. 
(7). The rights provided by this section are in addition to all other rights allowed by 
law to a creditor against a debtor. 
(8). If a lien is on goods stored by a merchant in the course of its business, the lien 
may be enforced in accordance with subsection (1) or (2). 
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(9). 
A warehouse is liable for damages caused by failure to comply with the 
requirements for sale under this section and, in case of willful violation, is liable for 
conversion. 
UNIFORM COMMENT 
(llis is section 7-210 of the Uniform Commercial Code - Article 7 (2004).) 
, 
Prior Uniform Statutory Provision: Former Section 7-210. 
Changes: Update to accommodate electronic commerce and for style. 
Purposes: 
1. Subsection (a) makes "commercial reasonableness" the standard for foreclosure 
proceedings in all cases except non-commercial storage with a warehouse. The latter 
category embraces principally storage of household goods by private owners; and for 
such cases the detailed provisions as to notification, publication and public sale are 
retained in subsection (b) with one change. 
The requirement in former Section 7-
0(2)(b) that the notification must be sent in person or by registered or certified mail has 
been deleted. Notification may be sent by any reasonable means as provided in Section 
1-202. 
The swifter,- more flexible procedure of subsection (a) is appropriate to 
commercial storage. Compare seller's power of resale on breach by buyer under the 
provisions of the Article on Sales (Section 2-706). 
Commercial reasonableness is a 
flexible concept that allows for a wide variety of actions to satisfy the rule of this section, 
including electronic means of posting and sale. 
2. The provisions of subsections (d) and (e) permitting the bailee to bid at public sales 
and confmning the title of purchasers at foreclosure sales are designed to secure more 
bidding and better prices and remain unchanged from former Section 7-210. 
3. 
A warehouses may have recourse to an interpleader action in appropriate 
circumstances. See Section 7-603. 
4. If a warehouse has both a warehouse lien and a security interest, the warehouse 
may enforce both the lien and the security interest simultaneously by using the 
procedures of Article 9. 
Section 7-210 adopts as its touchstone "commercial 
reasonableness" for the enforcement of a warehouse lien. Following the procedures of 
Article 9 satisfies "commercial reasonableness." 
Cross Reference: Sections 2-706, 7-403, 7-603 and Part 6 of Article 9. 
Definitional Cross References: 
"Bill oflading". Section 1-201. 
"Conspicuous". Section 1-201. 
"Creditor". Section 1-201. 
"Delivery". Section 1-201. 
"Docunient of Title". Section 1-201. 
"Good faith". Section 1-201 [7-102]. 
"Goods". Section 7-102. 
"Notification". Section 1-202. 
"Notifies". Section 1-202. 
"Person". Section 1-201. 
"Purchaser". Section 1-201. 
"Rights". Section 1-201. 
"Term". Section 1-201. 
"Warehouse". Section 7-102. 
PART 3 
BILLS OF LADING: SPECIAL PROVISIONS 
§7-1301. Liability for nonreceipt or misdescription; "said to contain;" "shipper's 
weight, load, and count;" improper handling 
1.6 
(1). A consignee of a nonnegotiable bill of lading that has given value in good faith, 
or a holder to which a negotiable bill has been duly negotiated, relying upon the 
description of the goods in the bill or upon the date shown in the bill, may recover from 
the issuer damages caused by the misdating of the bill or the nonreceipt or misdescription 
of the goods, except to the extent that the bill indicates that the issuer does not know 
whether any part or all of the goods in fact were received or conform to the description, 
such as in a case in which the description is in terms of marks or labels or kind, quantity 
or condition or the receipt or description is qualified by "contents or condition of contents 
of packages unknown," "said to contain," "shipper's weight, load and count" or words of 
similar import, if that indication is true. 
(2). If goods are loaded by the issuer of a bill of lading: 
(a). The issuer shall count the packages of goods if shipped in packages and ascertain 
the kind and quantity if shipped in bulk; and 
(b). Words such as "shipper's weight, load and count" or words of similar import 
indicating that the description was made by the shipper are ineffective except as to 
goods concealed in packages. 
(3). If bulk goods are loaded by a shipper that makes available to the issuer of a bill 
of lading adequate facilities for weighing those goods, the issuer shall ascertain the kind 
and quantity within a reasonable time after receiving the shipper's request in a record to 
do so. In that case, "shipper's weight" or words of similar import are ineffective. 
(4). The issuer of a bill of lading, by including in the bill the words "shipper's weight, 
load and count" or words of similar import, may indicate that the goods were loaded by 
the shipper, and, if that statement is true, the issuer is not liable for damages caused by 
the improper loading. However, omission of such words does not imply liability for 
damages caused by improper loading. 
(5). A shipper guarantees to an issuer the accuracy at the time of shipment of the 
description, marks, labels, number, kind, quantity, condition and weight, as furnished by 
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the shipper, and the shipper shall indemnify the issuer against damage caused by 
inaccuracies in those particulars. This right of indemnity does not limit the issuer's 
responsibility or liability under the contract of carriage to any person other than the 
shipper. 
UNIFORM COMMENT 
(This is section 7-301 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-301. 
Changes: Changes for clarity, style and to recognize deregulation in the 
transportation industry. 
Purposes: 
1. This section continues the rules from former Section 7-301 with one substantive 
change. The obligations of the issuer of the bill of lading under former subsections (2) 
and (3) were limited to issuers who were common carriers. Subsections (b) and (c) apply 
the same rules to all issuers not just common carriers. This section is compatible with the 
policies stated in the federal Bills of Lading Act, 49 U.S.C. § 80113 (2000). 
2. The language of the pre-Code Uniform Bills of Lading Act suggested that a carrier 
is ordinarily liable for damage caused by improper loading, but may relieve itself of 
liability by disclosing on the bill that shipper actually loaded. A more accurate statement 
of the law is that the carrier is not liable for losses caused by act or default of the shipper, 
which would include improper loading. D. H. Overmyer Co. v. Nelson Brantley Glass 
Go., 168 S.E.2d 176 (Ga. Ct. App. 1969). There was some question whether under pre-
Code law a carrier was liable even to a good faith purchaser of a negotiable bill for such 
losses, if the shipper's faulty loading in fact caused the loss. Subsection (d) permits the 
carrier to bar, by disclosure of shipper's loading, liability to a good faith purchaser. There 
is no implication that decisions such as Modern Tool Corp. v. Pennsylvania R. Co., 100 
F.Supp. 595 (D.N.J.l95 1), are disapproved. 
3. This section is a restatement of existing law as to the method by which a bailee 
may avoid responsibility for the accuracy of descriptions which are made by or in 
reliance upon information furnished by the depositor or shipper. The wording in this 
section - "contents or condition of contents of packages unknown" or "shipper's weight, 
load and count" - to indicate that the shipper loaded the goods or that the carrier does not 
know the description, condition, or contents of the loaded packages continues to be 
appropriate as commonly understood in the transportation industry. The reasons for this 
wording are as important in 2002 as when the prior section initially was approved. The 
issuer is liable on documents issued by an agent, contrary to instructions of his principal, 
without receiving goods. No disclaimer of this liability is permitted since it is not a 
matter either ofthe care of the goods or their description. 
4. The shipper's erroneous report to the carrier concerning the goods may cause 
damage to the carrier. Subsection (e) therefore provides appropriate indemnity. 
5. 
The word "freight" in the former Section 7-301 has been changed to "goods" to 
conform to international and domestic land transport usage in which "freight" means the 
price paid for carriage of the goods and not the goods themselves. Hence, changing the 
word "freight" to the word "goods" is a clarifying change that fits both international and 
domestic practice. 
Cross References: Sections 7-203, 7-309 and 7-501. 
Definitional Cross References: 
"Bill oflading". Section 1-201. 
"Consignee". Section 7-102. 
"Document of Title". Section 1-201. 
"Duly negotiate". Section 7-501. 
"Good faith". Section 1-201. [7-102]. 
"Goods". Section 7-102. 
"Holder". Section 1-201. 
"Issuer". Section 7-102. 
"Notice". Section 1-202. 
"Party". Section 1-201. 
"Purchaser." Section 1-201. 
"Receipt of Goods". Section 2-103. 
"Value". Section 1-204. 
§7-1302. Through bills of lading and similar documents of title 
(1). The issuer of a through bill of lading, or other document of title embodying an 
undertaking to be performed in part by a person acting as its agent or by a performing 
carrier, is liable to any person entitled to recover on the bill or other document for any 
breach by the other person or the performing carrier of its obligation under the bill or 
other document. 
However, to the extent that the bill or other document covers an 
undertaking to be performed overseas or in territory not contiguous to the continental 
United States or an undertaking including matters other than transportation, this liability 
for breach by the other person or the performing carrier may be varied by agreement of 
the parties. 
(2). 
If goods covered by a through bill of lading or other document of title 
embodying an undertaking to be performed in part by a person other than the issuer are 
received by that person, the person is subject, with respect to its own performance while 
the goods are in its possession, to the obligation of the issuer. The person's obligation is 
discharged by delivery of the goods to another person pursuant to the bill or other 
document and does not include liability for breach by any other person or by the issuer. 
(3). The issuer of a through bill of lading or other document of title described in 
subsection (1) is entitled to recover from the performing carrier, or other person in 
possession of the goods when the breach of the obligation under the bill or other 
document occurred: 
(a). The amount it may be required to pay to any person entitled to recover on the bill 
or other document for the breach, as may be evidenced by any receipt, judgment or 
transcript of judgment; and 
) 
) 
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(b). The amount of any expense reasonably incurred by the issuer in defending any 
action commenced by any person entitled to recover on the bill or other document for 
the breach. 
. 
UNIFORM COMMENT 
(This is section 7-302 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-302. 
Changes: To conform to current terminology and for style. 
Purposes: 
1. This section continues the rules from former Section 7-302 without substantive 
change. The term "performing carrier" is substituted for the term "connecting carrier" to 
conform the terminology of this section with terminology used in recent UNCITRAL and 
OAS proposals concerning transportation and through bills of lading. This change in 
terminology is not substantive. This section is compatible with liability on carriers under 
federal law. See 49 U.S.C. §§ 11706, 14706 and 15906. 
The purpose of this section is to subject the initial carrier under a through bill to suit 
for breach of the contract of carriage by any performing carrier and to make it clear that 
any such performing carrier holds the goods on terms which are defined by the document 
of title even though such performing carrier did not issue the document. Since the 
performing carrier does hold the goods on the terms of the document, it must honor a 
proper demand for delivery or a diversion order just as the original bailee would have to. 
Similarly it has the benefits of the excuses for non-delivery and limitations of liability 
provided for the original bailee who issued the bill. Unlike the original bailee-issuer, the 
performing carrier's responsibility is limited to the period while the goods are in its 
possession. The section does not impose any obligation to issue through bills. 
2. The reference to documents other than through bills looks to the possibility that 
multi-purpose documents may come into use, e.g., combination warehouse receipts and 
bills of lading. 
As electronic documents of title come into common usage, storage 
documents (e.g. warehouse receipts) and transportation documents (e.g. bills of lading) 
may merge seamlessly into one electronic document that can serve both the storage and 
transportation segments ofthe movement of goods. 
3. Under subsection (a) the issuer of a through bill of lading may become liable for 
the fault of another person. Subsection (c) gives the issuer appropriate rights of recourse. 
4. 
Despite the broad language of subsection (a), Section 7-302 is subject to 
preemption by federal laws and treaties. Section 7-103. The precise scope of federal 
preemption in the transportation sector is a question determined under federal law. 
Cross reference: Section 7-103 
Definitional Cross References: 
"Agreement". Section 1-201. 
"Bailee". Section 7-102. 
"Bill oflading". Section 1-201. 
"Delivery". Section 1-201. 
"Document of title". Section 1-201. 
"Goods". Section 7-102. 
"Issuer". Section 7-102. 
"Party". Section 1-201. 
"Person". Section 1-201. 
§7-1303. Diversion; reconsignment; change of instructions 
(1). Unless the bill of lading otherwise provides, a carrier may deliver the goods to a 
person or destination other than that stated in the bill or may otherwise dispose of the 
goods, without liability for misdelivery, on instructions from: 
(a). The holder of a negotiable bill; 
(b). The consignor on a nonnegotiable bill, even if the consignee has given contrary 
instructions; 
(c). The consignee on a nonnegotiable bill in the absence of contrary instructions 
from the consignor, if the goods have arrived at the billed destination or if the 
consignee is in possession of the tangible bill or in control of the electronic bill; or 
(d). The consignee on a nonnegotiable bill, if the consignee is entitled as against the 
consignor to dispose of the goods. 
(2). Unless instructions described in subsection (1) are included in a negotiable bill 
of lading, a person to which the bill is duly negotiated may hold the bailee according to 
the original terms. 
UNIFORM COMMENT 
(This is section 7-303 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-303. 
Changes: To accommodate electronic documents and for style. 
Purposes: 
1. Diversion is a very common commercial practice which defeats delivery to the 
consignee originally named in a bill of lading. This section continues former Section 7-
303's safe harbor rules for carriers in situations involving diversion and adapts those rules 
to electronic documents of title. This section works compatibly with Section 2-705. 
Carriers may as a business matter be willing to accept instructions from consignees in 
which case the carrier will be liable for misdelivery if the consignee was not the owner or 
otherwise empowered to dispose of the goods under subsection (a)(4). The section 
imposes no duty on carriers to undertake diversion. The carrier is of course subject to the 
provisions of mandatory filed tariffs as provided in Section 7-103. 
) 
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2. It should be noted that the section provides only an immunity for carriers against 
liability for "misdelivery." It does not, for example, defeat the title to the goods which 
the consignee-buyer may have acquired from the consignor-seller upon delivery of the 
goods to the carrier under a non- negotiable bill of lading. Thus if the carrier, upon 
instructions from the consignor, returns the goods to the consignor, the consignee may 
recover the goods from the consignor or the consignor's insolvent estate. However, under 
certain circumstances, the consignee's title may be defeated by diversion of the goods in 
transit to a different consignee. The rights that arise between the consignor-seller and the 
consignee-buyer out of a contract for the sale of goods are governed by Article 2. 
Cross References: 
Point 1: Sections 2-705 and 7-103. 
Point 2: Article 2, Sections 7-403 and 7-504(3). 
Definitional Cross References: 
"Bailee". Section 7-102. 
"Bill oflading". Section 1-201. 
"Carrier". Section 7-102 
"Consignee". Section 7-102. 
"Consignor". Section 7-102. 
"Delivery". Section 1-201. 
"Goods". Section 7-102. 
"Holder". Section 1-201. 
"Notice". Section 1-202. 
"Person". Section 1-201. 
"Purchaser". Section 1-201. 
"Term". Section 1-201. 
§7-1304. Tangible bills of lading in a set 
(1). Except as customary in international transportation, a tangible bill of lading may 
not be issued in a set of parts. The issuer is liable for damages caused by violation of this 
subsection. 
(2). If a tangible bill of lading is lawfully issued in a set of parts, each of which 
contains an identification code and is expressed to be valid only if the goods have not 
been delivered against any other part, the whole of the parts constitutes one bill. 
(3). If a tangible negotiable bill of lading is lawfully issued in a set of parts and 
different parts are negotiated to different persons, the title of the holder to which the first 
due negotiation is made prevails as to both the document of title and the goods even if 
any later holder may have received the goods from the carrier in good faith and 
discharged the carrier's obligation by surrendering its part. 
(4). A person that negotiates or transfers a single part of a tangible bill of lading 
issued in a set is liable to holders of that part as if it were the whole set. 
(5). The bailee shall deliver in accordance with Part 4 against the first presented part 
of a tangible bill of lading lawfully issued in a set. Delivery in this manner discharges the 
bailee's obligation on the whole bill. 
UNIFORM COMMENT 
(This is section 7-304 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Fonner Section 7-304. 
Changes: To limit bills in a set to tangible bills of lading and to use terminology 
more consistent with modem usage. 
Purposes: 
1. Tangible bills of lading in a set are still used in some nations in international trade. 
Consequently, a tangible bill of lading part of a set could be at issue in a lawsuit that 
might come within Article 7. The statement of the legal effect of a lawfully issued set is 
in accord with existing commercial law relating to maritime and other international 
tangible bills of lading. 
This law has been codified in the Hague and Warsaw 
Conventions and in the Carriage of Goods by Sea Act, the provisions of which would 
ordinarily govern in situations where bills in a set are recognized by this Article. 
Tangible bills of lading in a set are prohibited in domestic trade. 
2. Electronic bills of lading in domestic or international trade will not be issued in a 
set given the requirements of control necessary to deliver the bill to another person. An 
electronic bill of lading will be a single, authoritative copy. Section 7-106. Hence, this 
section differentiates between electronic bills of lading and tangible bills of lading. This 
section does not prohibit electronic data messages about goods in transit because these 
electronic data messages are not the issued bill of lading. Electronic data messages 
contain information for the carrier's management and handling of the cargo but this 
information for the carrier's use is not the issued bill of lading. 
Cross Reference: Section 7-103,7-303 and 7-106. 
Definitional Cross References: 
"Bailee". Section 7-102. 
"Bill oflading". Section 1-201. 
"Delivery". Section 1-201. 
"Document of title". Section 1-201. 
"Duly negotiate". Section 7-501. 
"Good faith". Section 1-201. [7-102]. 
"Goods". Section 7-102. 
"Holder". Section 1-201. 
"Issuer". Section 7-102. 
"Person". Section 1-201. 
"Receipt of goods". Section 2-103. 
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§7-130S. Destination bills 
(1). Instead of issuing a bill of lading to the consignor at the place of shipment, a 
carrier, at the request of the consignor, may procure the bill to be issued at destination or 
at any other place designated in the request. 
(2). Upon request of any person entitled as against a carrier to control the goods 
while in transit and on surrender of possession or control of any outstanding bill of lading 
or other receipt covering the goods, the issuer, subject to section 7-1105, may procure a 
substitute bill to be issued at any place designated in the request. 
UNIFORM COMMENT 
(TIus is section 7-305 of the Uniform COiThllercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-305. 
Changes: To accommodate electronic bills of lading and for style. 
Purposes: 
1. Subsection (a) continues the rules of former Section 7-305(1) without substantive 
change. This proposal is designed to facilitate the use of order bills in connection with 
fast shipments. Use of order bills on high speed shipments is impeded by the fact that the 
goods may arrive at destination before the documents, so that no one is ready to take 
delivery from the carrier. This is especially inconvenient for carriers by truck and air, 
who do not have tenninal facilities where shipments can be held to await the consignee's 
appearance. Order bills would be useful to take advantage of barik collection. This may 
be preferable to C.O.D. shipment in which the carrier, e.g. a truck driver, is the collecting 
and remitting agent. 
Financing of shipments under this plan would be handled as 
follows: seller at San Francisco delivers the goods to an airline with instructions to issue 
a bill in New York to a named bank. 
Seller receives a receipt embodying this 
undertaldng to issue a destination bill. Airline wires its New York freight agent to issue 
the bill as instructed by the seller. Seller wires the New York bank a draft on buyer. New 
York bank indorses the bill to buyer when the buyer honors the draft. Normally seller 
would act through its own bank in San Francisco, which would extend credit in reliance 
on the airline's contract to deliver a bill to the order of its New York correspondent. This 
section is entirely pennissive; 
it imposes no duty to issue such bills. 
Whether a 
performing carrier will act as issuing agent is left to agreement between carriers. 
2. 
Subsection (b) continues the rule from former Section 7-305(2) with 
accommodation for electronic bills of lading. If the substitute bill changes from an 
electronic to a tangible medium or vice versa, the issuance of the substitute bill must 
comply with Section 7-105 to give the substitute bill validity and effect. 
Cross Reference: Section 7-105. 
Definitional Cross References: 
"Bill oflading". Section 1-201. 
"Consignor". Section 7-102. 
"Goods". Section 7-102. 
"Issuer". Section 7-102. 
"Receipt of goods". Section 2-103. 
§7-1306. Altered bills of lading 
An unauthorized alteration or filling in of a blank in a bill of lading leaves the bill 
enforceable according to its original tenor. 
UNIFORM COMMENT 
(This is section 7-306 of the Unifonn Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Fonner Section 7-306. 
Changes: None 
Purposes: 
An unauthorized alteration or filling in of a blank, whether made with or without 
fraudulent intent, does not relieve the issuer of its liability on the document as originally 
executed. This section applies to both tangible and electronic bills of lading, applying the 
same· rule to both types of bills of lading. The control concept of Section 7-106 requires 
that any changes to the electronic document of title be readily identifiable as authorized 
or unauthorized. Section 7-306 should be compared to Section 7-208 where a different 
rule applies to the unauthorized filling in of a blank for tangible warehouse receipts. 
Cross Reference: Sections 7-106 and 7-208. 
Definitional Cross References: 
"Bill oflading". Section 1-201. 
"Issuer". Section 7-102. 
§7-1307. Lien of carrier 
(1). A carrier has a lien on the goods covered by a bill of lading or on the proceeds 
thereof in its possession for charges after the date of the carrier's receipt of the goods for 
storage.· or transportation,. including demurrage and terminal charges, and for expenses 
necessary for preservation of the goods incident to their transportation or reasonably 
incurred in their sale pursuant to law. However, against a purchaser for value of a 
negotiable bill of lading, a carrier's lien is limited to charges stated in the bill or the 
applicable tariffs or, ifno charges are stated, a reasonable charge. 
(2). A lien for charges and expenses under subsection (l)on goods that the carrier 
was required by law to receive for transportation is effective against the consignor or any 
person entitled to the goods unless the carrier had notice that the consignor lacked 
authority to subject the goods to those charges and expenses. Any other lien under 
subsection (I) is effective against the consignor and any person that permitted the bailor 
to have control or possession of the goods unless the carrier had notice that the bailor 
lacked authority. 
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(3). A carrier loses its lien on any goods that it voluntarily delivers or unjustifiably 
refuses to deliver. 
UNIFORM COMMENT 
(This is section 7-307 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-307. 
Changes: Expanded to cover proceeds of the goods transported. 
Purposes: 
1. The section is intended to give carriers a specific statutory lien for charges and 
expenses similar to that given to warehouses by the first sentence of Section 7-209(a) and 
extends that lien to the proceeds of the goods as long as the carrier has possession of the 
proceeds. But because carriers do not commonly claim a lien for charges in relation to 
other goods or lend money on the security of goods in their hands, provisions for a 
general lien or a security interest similar to those in Section 7-209(a) and (b) are omitted. 
Carriers may utilize Article 9 to obtain a security interest and become a secured party or a 
carrier may agree to limit its lien rights in a transportation agreement with the shipper. 
As the lien given by this section is specific, and the storage or transportation often 
preserves or increases the value of the goods, subsection (b) validates the lien against 
anyone who permitted the bailor to have possession of the goods. Where the carrier is 
required to receive the goods for transportation, the owner's interest may be subjected to 
charges and expenses arising out of deposit of his goods by a thief. The crucial mental 
element is the carrier's knowledge or reason to know of the bailor's lack of authority. If 
the carrier does not know or have reason to know of the bailor's lack of authority, the 
carrier has a lien under this section against any person so long as the conditions of 
subsection (b) are satisfied. In light of the crucial mental element, Sections 7-307 and 9-
combine to give priority to a carrier's lien over security interests in the goods. In this 
regard, the judicial decision in In re Sharon Steel Corp., 25 U.C.C. Rep.2d 503, 176 B.R. 
(W.D. Pa. 1995) is correct and is the controlling precedent. 
2. The reference to charges in this section means charges relating to the bailment 
relationship for transportation. Charges does not mean that the bill of lading must state a 
specific rate or a specific amount. However, failure to state a specific rate or a specific 
amount has legal consequences under the second sentence of subsection (a). 
3. The carrier's specific lien under this section is a possessory lien. See subsection 
(c). Part 3 of Article 7 does not require any particular form for a bill of lading. The 
carrier's lien arises when the carrier has issued a bill of lading. 
Cross References: 
Point 1: Sections 7-209,9-109 and 9-333. 
Point 3. Section 7-202 and 7-209. 
Definitional Cross References: 
"Bill of lading". Section 1-201. 
"Carrier". Section 7-102. 
"Consignor". Section 7-102. 
"Delivery". Section 1-201. 
"Goods". Section 7-102. 
"Person". Section 1-201. 
"Purchaser". Section 1-201. 
"Value". Section 1-204. 
§7-1308. Enforcement of carrier's lien 
(1). A carrier's lien on goods may be enforced by public or private sale of the goods, 
in bulk or in packages, at any time or place and on any terms that are commercially 
reasonable, after notifying all persons known to claim an interest in the goods. The 
notification must include a statement of the amount due, the nature of the proposed sale 
and the time and place of any public sale. The fact that a better price could have been 
obtained by a sale at a different time or in a method different from that selected by the 
carrier is not of itself sufficient to establish that the sale was not made in a commercially 
reasonable manner. The carrier sells goods in a commercially reasonable manner if the 
carrier sells the goods in the usual manner in any recognized market therefor, sells at the 
price current in that. market at the time of the sale or otherwise sells in conformity with 
commercially reasonable practices among dealers in the type of goods sold. A sale of 
more goods than apparently necessary to be offered to ensure satisfaction of the 
obligation is not commercially reasonable, except in cases covered by the preceding 
sentence. 
(2). Before any sale pursuant to this section, any person claiming a right in the goods 
may pay the amount necessary to satisfy the lien and the reasonable expenses incurred in 
complying with this section. In that event, the goods may not be sold but must be 
retained by the carrier, subject to the terms of the bill oflading and this Article. 
(3). A carrier may buy at any public sale pursuant to this section. 
(4). A purchaser in good faith of goods sold to enforce a carrier's lien takes the goods 
free· of any rights of persons against which the lien was valid, despite the carrier's 
noncompliance with this section. 
(5). A carrier may satisfy its lien from the proceeds of any sale pursuant to this 
section but shall hold the balance, if any, for delivery on demand to any person to which 
the carrier would have been bound to deliver the goods. 
(6). The rights provided by this section are in addition to all other rights allowed by 
law to a creditor against a debtor. 
(7). 
A carrier's lien may be enforced pursuant to either subsection 0) or the 
procedure set forth in section 7-1210, subsection (2). 
(8). A carrier is liable for damages caused by failure to comply with the requirements 
for sale under this section and, in case of willful violation, is liable for conversion. 
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UNIFORM COMMENT 
(This is section 7--308 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-308. 
Changes: To conform language to modern usage and for style. 
Purposes: 
This section is intended to give the carrier an enforcement procedure of its lien 
coextensive with that given the warehouse in cases other than those covering 
noncommercial storage by the warehouse. See Section 7-210 and comments. 
Cross Reference: Section 7-210. 
Definitional Cross References: 
"Bill oflading". Section 1-201. 
"Carrier". Section 7-102. 
"Creditor". Section 1-201. 
"Delivery". Section 1-201. 
"Good faith". Section 1-201. [7-102] 
"Goods". Section 7-102. 
"Notification". Section 1-202. 
"Notifies". Section 1-202. 
"Person". Section 1-201. 
"Purchaser". Section 1-201. 
"Rights". Section 1-201. 
"Term". Section 1-201. 
§7-1309. Duty of care; contractual limitation of carrier's liability 
(1). A carrier that issues a bill of lading, whether negotiable or nonnegotiable, shall 
exercise the degree of care in relation to the goods that a reasonably careful person would 
exercise undei' similar circumstances. 
This subsection does not affect any statute, 
regulation or rule of law that imposes liability upon a common carrier for damages not 
caused by its negligence. 
(2). Damages may be limited by a term in the bill of lading or in a transportation 
agreement that the carrier's liability may not exceed a value stated in the bill or 
transportation agreement if the carrier's rates are dependent upon value and the consignor 
is afforded an opportunity to declare a higher value and the consignor is advised of the 
opportunity. However, such a limitation is not effective with respect to the carrier's 
liability for conversion to its own use. 
(3). Reasonable provisions as to the time and manner of presenting claims and 
commencing actions based on the shipment may be included in a bill of lading or a 
transportation agreement. 
UNIFORM COMMENT 
(This is section 7-309 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-309. 
Changes: References to tariffs eliminated because of deregulation, adding reference 
to transportation agreements, and for style. 
Purposes: 
1. A bill of lading may also serve as the contract between the carrier and the bailor. 
Parties in their contract should be· able to limit the amount of damages for breach of that 
contract including breach of the duty to take reasonable care of the goods. The parties 
cannot disclaim by contract the carrier's obligation of care. Section 1-302. 
Federal statutes and treaties for air, maritime and rail transport may alter the standard 
of care. These federal statutes and treaties preempt this section when applicable. Section 
7-103. Subsection (a) d~es not impair any rule of law imposing the liability of an insurer 
on a common carrier in intrastate commerce. Subsection (b), however, applies to the 
common carrier's lia,bility as an insurer as well as to liability based on negligence. 
Subsection (b) allows the term limiting damages to appear either in the bill of lading or in 
the parties' transportation agreement. 
Compare 7-204(b). 
Subsection (c) allows the 
parties to agree to provisions regarding time and manner of presenting claims or 
commencing actions if the provisions are either in the bill of lading or the transportation 
agreement. 
Compare 7-204(c). 
Transportation agreements are commonly used to 
establish agreed terms between carriers and shippers that have an on-going relationship. 
2. References to public tariffs in former Section 7-309(2) and (3) have been deleted 
in light of the modem era of deregulation. See Comment 2 to Section 7-103. If a tariff is 
required under state pr federal law, pursuant to Section 7-103(a), the tariff would control 
over the rule of this section. As governed by contract law, parties may incorporate by 
reference the limits on the amount of damages or the reasonable provisions as to the time 
and manner of presenting claims set forth in applicable tariffs, e.g. a maximum unit value 
beyond which goods are not taken or a disclaimer of responsibility for undeclared articles 
of extraordinary value. 
3. As under former Section 7-309(2), subsection (b) provides that a limitation of 
damages is ineffective if the carrier has converted the goods to its own use. A mere 
failure to redeliver the goods is not conversion to the carrier's own use. "Conversion to 
its own use" is narrower than the idea of conversion generally. Art Masters Associates, 
Ltd. v. United Parcel Service, 77 N.Y.2d 200,567 N.E.2d 226 (1990); See, Kemper Ins. 
Co. v. Fed. Ex. Corp., 252 F.3d 509 (1stCir), cert. denied 534 U.S. 1020 (2001) (opinion 
interpreting federal law). 
4. As used in this section, damages may include damages arising from delay in 
delivery. Delivery dates and times are often specified in the parties' contract. 
See 
Section 7-403. 
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Cross Reference: Sections 1-302, 7-103, 7-204, 7-403. 
Definitional Cross References: 
"Action". Section 1-201. 
"Bill oflading". Section 1-201. 
"Carrier". Section 7-102. 
"Consignor". Section 7-102. 
"Document of Title". Section 1-102. 
"Goods". Section 7-102. 
"Value". Section 1-204. 
PART 4 
WAREHOUSE RECEIPTS AND BILLS OF LADING: GENERAL 
OBLIGATIONS 
§7-1401. Irregularities in issue of receipt or bill or conduct of issuer 
The obligations imposed by this Article on an issuer apply to a document of title even 
if: 
(1). The document does not comply with the requirements of this Article or of any 
other statute, rule or regulation regarding its issuance, form or content; 
(2). The issuer violated laws regulating the conduct of its business; 
(3). The goods covered by the document were owned by the bailee when the 
document was issued; or 
(4). The person issuing the document is not a warehouse but the document purports 
to be a warehouse receipt. 
UNIFORM COMMENT 
(This is section 7-401 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-401. 
Changes: Changes for style only. 
Purposes: 
The bailee's liability on its document despite non-receipt or misdescription of the 
goods is affirmed in Sections 7-203 and 7-301. The purpose of this section is to make it 
clear that regardless of irregularities a document which falls within the definition of 
document of title imposes on the issuer the obligations stated in this Article. 
For 
example, a bailee will not be permitted to avoid its obligation to deliver the goods 
(Section 7-403) or its obligation of due care with respect to them (Sections 7-204 and 7-
309) by taking the position that no valid "document" was issued because it failed to file a 
statutory bond or did not pay stamp taxes or did not disclose the place of storage in the 
document. Tate v. Action Moving & Storage, Inc., 383 S.E.2d 229 (N.C. App. 1989), 
rev. denied 389 S.E.2d 104 (N.C. 1990). Sanctions against violations of statutory or 
administrative duties with respect to documents should be limited to revocation of license 
or other measures prescribed by the regulation imposing the duty. See Section 7-103. 
Cross References: Sections 7-103, 7-203, 7-204, 7-301, 7-309. 
Definitional Cross References: 
"Bailee". Section 7-102. 
"Document of title". Section 1-201. 
"Goods". Section 7-102. 
"Issuer". Section 7-102. 
"Person". Section 1-201. 
"Warehouse receipt". Section 1-201. 
"Warehouse". Section 7-102. 
§7-1402. Duplicate document of title; overissue 
A duplicate or any other document of title purporting to cover goods already 
represented by an outstanding document of the same issuer does not confer any right in 
the goods, except as provided in the case of tangible bills of lading in a set of parts, 
overissue of documents for fungible goods, substitutes for lost, stolen or destroyed 
documents or substitute documents issued pursuant to section 7-1105. The issuer is liable 
for damages caused by its overissue or failure to identify a duplicate document by a 
conspicuous notation. 
UNIFORM COMMENT 
(This is section 7-402 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-402. 
Changes: Changes to accommodate electronic documents. 
Purposes: 
1. This section treats a duplicate which is not properly identified as a duplicate like 
any other overissue of documents: a purchaser of such a document acquires no title but 
only a cause of action for damages against the person that made the deception possible, 
except in the cases noted in the section. But parts of a tangible bill lawfully issued in a 
. 42 
set of parts are not "overissue" (Section 7-304). Of course, if the issuer has clearly 
indicated that a document is a duplicate so that no one can be deceived by it, and in fact 
the duplicate is a correct copy of the original, the issuer is not liable for preparing and 
delivering such a duplicate copy. 
) 
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Section 7-105 allows documents of title to be reissued in another medium. Re-
issuance of a document in an alternative medium under Section 7-105 requires that the 
original document be surrendered to the issuer in order to make the substitute document 
the effective document. If the substitute document is not issued in compliance with 
section 7-105, then the document should be treated as a duplicate under this section. 
2. The section applies to nonnegotiable documents to the extent of providing an 
action for damages for one who acquires an unmarked duplicate from a transferor who 
knew the facts and would therefore have had no cause of action against the issuer of the 
duplicate. Ordinarily the transferee of a nonnegotiable document acquires only the rights 
of its transferor. 
3. Ovedssue is defined so as to exclude the common situation where two valid 
documents of different issuers are outstanding for the same goods at the same time. Thus 
freight forwarders commonly issue bills of lading to their customers for small shipments 
to be combined into carload shipments for which the railroad will issue a bill of lading to 
the forwarder. So also a warehouse receipt may be outstanding against goods, and the 
holder of the receipt may issue delivery orders against the same goods. In these cases 
dealings with the subsequently issued documents may be effective to transfer title; e.g. 
negotiation of a delivery order will effectively transfer title in the ordinary case where no 
dishonesty has occurred and the goods are available to satisfy the orders. Section 7-503 
provides for cases of conflict between documents of different issuers. 
Cross References: 
Point 1: Sections 7-105,7-207, 7-304, and 7-601. 
Point 3:· Section 7-503. 
Definitional Cross References: 
"Bill oflading". Section 1-201. 
"Conspicuous". Section 1-201. 
"Document of title". Section 1-201. 
"Fungible goods." Section 1-201. 
"Goods". Section 7-102. 
"Issuer". Section 7-102. 
"Right". Section 1-201. 
§7-1403. Obligation of bailee to deliver; excuse 
(1). A bailee shall deliver the goods to a person entitled under a document of title if 
the person complies with subsections (2) and (3), unless and to the extent that the bailee 
establishes any of the following: 
(a). Delivery of the goods to a person whose receipt was rightful as against the 
claimant; 
(b). Damage to or delay, loss or destruction of the goods for which the bailee is not 
liable; 
ec). Previous sale or other disposition of the goods in lawful enforcement of a lien or 
on a warehouse's lawful termination of storage; 
Cd). The exercise by a seller of its right to stop delivery pursuant to section 2-705 or 
by a lessor of its right to stop delivery pursuant to section 2-1526; 
Ce). A diversion, reconsignment or other disposition pursuant to section 7-1303; 
CO. Release, satisfaction or any other personal defense against the claimant; or 
eg). Any other lawful excuse. 
(2). A person claiming goods covered by a document of title shall satisfy the bailee's 
lien if the bailee so requests or if the bailee is prohibited by law from delivering the goods 
until the charges are paid. 
(3). Unless a person claiming the goods is a person against which the document of 
title does not confer a right under section 7-1503, subsection (1): 
Cal. The person claiming under a document shall surrender possession or control of 
any outstanding negotiable document covering the goods for cancellation or 
indication of partial deliveries; and 
(b). The bailee shall cancel the document or conspicuously indicate in the document 
the partial delivery or the bailee is liable to any person to which the document is duly 
negotiated. 
UNIFORM COMMENT 
(This is section 7-403 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-403. 
Changes: Definition in former Section 7-403(4) moved to Section 7-102; bracketed 
language in former Section 7-403(1)(b) deleted; added cross reference to Section 2A-526; 
changes for style. 
: .. 
Purposes: 
1. The present section, following former Section 7-403, is constructed on the basis of 
stating what previous deliveries or other circumstances operate to excuse the bailee's 
normal obligation on the document. Accordingly, 'Justified" deliveries under the pre-
Code uniform acts now fmd their place as "excuse" under subsection (a). 
2. The principal case covered by subsection (a)(1) is delivery to a person whose title 
is paramount to the rights represented by the document. For example, if a thief deposits 
stolen goods in a warehouse facility and takes a negotiable receipt, the warehouse is not 
liable on the receipt if it has surrendered the goods to the true owner, even though the 
receipt is held by a good faith purchaser. See Section 7-503(a). However, if the owner 
entrusted the goods to a person with power of disposition, and that person deposited the 
goods and took a negotiable document, the owner receiving delivery would not be 
rightful as against a holder to whom the negotiable document was duly negotiated, and 
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delivery to the owner would not give the bailee a defense against such a holder. See 
Sections 7-502(a)(2), 7-503(a)(1). 
3. Subsection (a)(2) amounts to a cross reference to all the tort law that determines 
the varying responsibilities and standards of care applicable to commercial bailees. A 
restatement of this tort law would be beyond the scope of this Act. 
Much of the 
applicable law as to responsibility of bailees for the preservation of the goods and 
limitation of liability in case of loss has been codified for particular classes of bailees in 
interstate and foreign commerce by federal legislation and treaty and for intrastate 
carriers and other bailees by the regulatory state laws preserved by Section 7-103. In the 
absence of governing legislation the common law will prevail subject to the minimum 
standard of reasonable care prescribed by Sections 7-204 and 7-309 of this Article. 
The bracketed language found in former Section 7-403(1)(b) has been deleted thereby 
leaving the allocations of the burden of going forward with the evidence and the burden 
of proofto the procedural law of the various states. 
Subsection (a)( 4) contains a cross reference to both the seller's and the lessor's rights 
to stop delivery under Article 2 and Article 2A respectively. 
4. As under former Section 7-403, there is no requirement that a request for delivery 
must be accompanied by a formal tender of the amount of the charges due. Rather, the 
bailee must request payment of the amount of its lien when asked to deliver, and only in 
case this request is refused is it justified in declining to deliver because of nonpayment of 
charges. Where delivery without payment is forbidden by law, the request is treated as 
implicit. Such a prohibition reflects a policy of uniformity to prevent discrimination by . 
failure to request payment in particular cases. Subsection (b) must be read in conjunction 
with the priorities given to the warehouse lien and the carrier lien under Section 7-209 
and 7-307, respectively. If the parties are in dispute about whether the request for 
payment of the lien is legally proper, the bailee may have recourse to interpleader. See 
Section 7-603. 
5. Subsection (c) states the obvious duty of a bailee to take up a negotiable document 
or note partial deliveries conspicuously thereon, and the result of failure in that duty. It is 
subject to only one exception, that stated in subsection (a)(l) of this section and in 
Section 7-503(a). Subsection (c) is limited to cases of delivery to a claimant; it has no 
application, for example, where goods held under a negotiable document are lawfully 
sold to enforce the bailee's lien. 
6. When courts are considering subsection (a)(7), "any other lawful excuse," among 
others, refers to compliance with court orders under Sections 7-601, 7-602 and 7-603. 
Cross References: 
Point 2: Sections 7-502 and 7-503. 
Point 3: Sections 2-705, 2A-526, 7-103, 7-204, and 7-309 and 10-103. 
Point 4: Sections 7-209, 7-307 and 7-603. 
Point 5: Section 7-503(1). 
Point 6: Sections 7-601, 7-602, and 7-603. 
Definitional Cross References: 
"Bailee". Section 7-102. 
"Conspicuous". Section 1-201. 
"Delivery". Section 1-201. 
"Document of title". Section 1-201. 
"Duly negotiate". Section 7-501. 
"Goods". Section 7-102. 
"Lessor". Section 2A-I03. 
"Person". Section 1-201. 
"Receipt of goods". Section 2-103. 
"Right". Section 1-201. 
"Terms". Section 1-201. 
"Warehouse". Section 7-102. 
§7-1404. No liability for good faith delivery pursuant to document of title 
A bailee that in good faith has received goods and delivered or otherwise disposed of 
the goods according to the terms of a document of title or pursuant to this Article is not 
liable for the goods even if: 
(1). The person from which the bailee received the goods did not have authority to 
procure the document or to dispose ofthe goods; or 
(2). The person to which the bailee delivered the goods did not have authority to 
receive the goods. 
UNIFORM COMMENT 
(This is section 7-404 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-404. 
Changes: Changes reflect the defInition of good faith in Section 1-201 [7-102] and 
for style. 
Purposes: 
This section uses the test of good faith, as defmed in Section 1-201 [7-102], to 
continue the policy of former Section 7-404. Good faith now means "honesty in fact and 
the observance of reasonable commercial standards of fair dealing." The section states 
explicitly that the common law rule of "innocent conversion" by unauthorized 
"intermeddling" with another's property is inapplicable to the operations of commercial 
carriers and warehousemen that in good faith perform obligations that they have assumed 
and that generally they are under a legal compulsion to assume. The section applies to 
delivery to a fraudulent holder of a valid document as well as to delivery to the holder of 
an invalid document. 
Of course, in appropriate circumstances, a bailee may use 
interpleader or other dispute resolution process. See Section 7-603. 
Cross R.eference: Section 7-603. 
Definitional Cross References: 
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"Bailee". Section 7-102. 
"Delivery". Section 1-201. 
"Document of title". Section 1-201. 
"Good faith". Section 1-201. [7-102]. 
"Goods". Section 7-102. 
"Person". Section 1-201. 
"Receipt of goods". Section 2-103. 
"Term". Section 1-201. 
PART 5 
WAREHOUSE RECEIPTS AND BILLS OF LADING: NEGOTIATION 
AND TRANSFER 
§7-1501. Form of negotiation and requirements of due negotiation 
(1). The following rules apply to a negotiable tangible document of title. 
(a). If the document's original terms run to the order of a named person, the 
document is negotiated by the named person's indorsement and delivery. After the 
named person's indorsement in blank or to bearer, any person may negotiate the 
document by delivery alone. 
(b). If the document's original terms run to bearer, it is negotiated by delivery alone. 
(c). If the document's original terms run to the order of a named person and it is 
delivered to the named person, the effect is the same as if the document had been 
negotiated. 
Cd). 
Negotiation of the document after it has been indorsed to a named person 
requires indorsement by the named person and delivery. 
(e). A document is duly negotiated if it is negotiated in the manner stated in this 
subsection to a holder that purchases it in good faith, without notice of any defense 
against or claim to it on the part of any person, and for value, unless it is established 
that the negotiation is not in the regular course of business or financing or involves 
receiving the document in settlement or payment of a monetary obligation. 
(2). The following rules apply to a negotiable electronic document of title. 
(a). If the document's original terms run to the order of a named person or to bearer, 
the document is negotiated by delivery of the document to another person. 
Indorsement by the named person is not required to negotiate the document. 
Cb). If the document's original terms run to the order of a named person and the 
named person has control of the document, the effect is the same as if the document 
had been negotiated. 
Cc). A document is duly negotiated if it is negotiated in the manner stated in this 
subsection to a holder that purchases it in good faith, without notice of any defense 
against or claim to it on the part of any person, and for value, unless it is established 
that the negotiation is not in the regular course of business or fmancing or involves 
taking delivery of the document in settlement or payment of a monetary obligation. 
(3). Indorsement of a nonnegotiable document of title neither makes it negotiable nor 
adds to the transferee's rights. 
(4). The naming in a negotiable bill of lading of a person to be notified of the arrival 
of the goods does not limit the negotiability of the bill or constitute notice to a purchaser 
of the bill of any interest of that person in the goods. 
UNIFORM COMMENT 
(This is section 7-501 of the UnifOIm Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-501. 
Changes: To accommodate negotiable electronic documents of title. 
Purpose: 
L Subsection (a) has been limited to tangible negotiable documents of title but 
otherwise remains unchanged in substance from the rules in former Section 7-501. 
Subsection (b) is new and applies to negotiable electronic documents of title. Delivery of 
a negotiable electronic document is through voluntary transfer of control. Section 1-201 
defmition of "delivery." 
The control concept as applied to negotiable electronic 
documents of title is the substitute for both possession and indorsement as applied to 
negotiable tangible documents of title. Section 7-106. 
Article 7 does not separately define the term "duly negotiated." 
However, the 
elements of "duly negotiated" are set forth in subsection (a)(5) for tangible documents 
and (b)(3) for electronic documents. As under former Section 7-501, in order to effect a 
"due negotiation" the negotiation must be in the "regular course of business or fmancing" 
in order to transfer greater rights than those held by the person negotiating. 
The 
foundation ofthe mercantile doctrine of good faith purchase for value has always been, as 
shown by the case situations, the furtherance and protection of the regular course of trade. 
The reason for allowing a person, in bad faith or in error, to convey away rights which are 
not its own has from the beginning been to make· possible the speedy handling of that 
great run of commercial transactions which are patently usual and normal. 
There are two aspects to the usual and normal course of mercantile dealings, namely, 
the person making the transfer and the nature of the transaction itself. The first question 
which arises is: Is the transferor a person with whom it is reasonable to deal as having 
full powers? In regard to documents of title the only holder whose possession or control 
appears, commercially, to be in order is almost invariably a person in the trade. No 
commercial purpose is served by allowing a tramp or a professor to "duly negotiate" an 
order bill of lading for hides or cotton not their own, and since such a transfer is 
obviously not in the regular course of business, it is excluded from the scope of the 
protection of subsections (a)(5) or (b)(3). 
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' 
The second question posed by the "regular course" qualification is: Is the transaction 
one which is normally proper to pass full rights without inquiry, even though the 
transferor itself may not have such rights to pass, and even though the transferor may be 
acting in breach of duty? In raising this question the "regular course" criterion has the 
further advantage of limiting, the effective wrongful disposition to transactions whose 
protection will really further trade. Obviously, the snapping up of goods for quick resale 
at a price suspiciously below the market deserves no protection as a matter of policy: it is 
also clearly outside the range of regular course. 
Any notice on the document sufficient to put a merchant on inquiry as to the "regular 
course" quality of the transaction will frustrate a "due negotiation". Thus irregularity of 
the document or unexplained staleness of a bill of lading may appropriately be recognized 
as negating a negotiation in "regular" course. 
A pre-existing claim constitutes value, and "due negotiation" does not require "new 
value." A usual and ordinary transaction in which documents are received as security for 
credit previously extended may be in "regular" course, even though there is a demand for 
additional collateral because the creditor "deems himself insecure.'" But the matter has 
moved out of the regular course of financing if the debtor is thought to be insolvent, the 
credit previously extended is in effect cancelled, and the creditor snatches a plank in the 
shipwreck under the guise of a demand for additional collateral. Where a money debt is 
"paid" in commodity paper, any question of "regular" course disappears, as the case is 
explicitly excepted from "due negotiation". 
2. Negotiation under tbis section may be made by any holder no matter how the 
holder acquired possession or control of the document. 
3. Subsections (a)(3) and (b)(2) make explicit a matter upon which the intent of the 
pre-Code law was clear but the language somewhat obscure: a negotiation results from a 
delivery to a banker or buyer to whose order the document has been taken by the person 
making the bailment. There is no presumption of irregularity in such a negotiation; it 
may very well be in "regular course." 
4. This Article does not contain any provlSlon creating a presumption of due 
negotiation to, and full rights in, a holder of a document of title akin to that created by 
Uniform Commercial Code Article 3. But the reason of the provisions of this Act 
(Section 1-307) on the prima facie authenticity and accuracy of third party documents, 
joins with the reason of the present section to work such a presumption in favor of any 
person who has power to make a due negotiation. It would not make sense for this Act to 
authorize a purchaser to indulge the presumption of regularity if the courts were not also 
called upon to do so. Allocations of the burden of going forward with the evidence and 
the burden of proof are left to the procedural law of the various states. 
5. Subsections (c) and (d) are unchanged from prior law and apply to both tangible 
and electronic documents of title. 
Cross References: Sections 1-307, 7-502 and 7-503. 
Definitional Cross References: 
"Bearer". Section 1-201. 
"Control". Section 7-106. 
"Delivery". Section 1-201. 
"Document of title". Section 1-201. 
"Good faith". Section 1-201 [7-102]. 
"Holder". Section 1-201. 
"Notice". Section 1-202. 
"Person". Section 1-201. 
"Purchase". Section 1-201. 
"Rights". Section 1-201. 
"Tenn". Section 1-201. 
"Value". Section 1-204. 
§7-1502. Rights acquired by due negotiation 
0). Subject to sections 7-1205 and 7-1503, a holder to which a negotiable document 
of title has been du1y negotiated acquires thereby: 
(a). Title to the document; 
(b). Title to the goods; 
(c). All rights accruing under the law of agency or estoppel, including rights to goods 
delivered to the bailee after the document was issued; and 
(d). The direct obligation of the issuer to hold or deliver the goods according to the 
tenns of the document free of any defense or claim by the issuer except those arising 
under the terms of the document or under this Article, but in the case of a delivery 
order, the bailee's obligation accrues only upon the bailee's acceptance of the delivery 
order and the obligation acquired by the holder is that the issuer and any indorser will 
procure the acceptance of the bailee. 
(2). Subject to section 7-1503, title and rights acquired by due negotiation are not 
defeated by any stoppage of the goods represented by the document of title or by 
surrender of the goods by the bailee and are not impaired even if: 
(a). The due negotiation or any prior due negotiation constituted a breach of duty; 
(b). Any person has been deprived of possession of a negotiable tangible document 
or control of a negotiable electronic document by misrepresentation, fraud, accident, 
mistake, duress, loss, theft or conversion; or 
(c). A previous sale or other transfer of the goods or document has been made to a 
3rdperson. 
. 
UNIFORM COMMENT 
(This is section 7-502 of the Unifonn Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Fonner Section 7-502. 
) 
) 
) 
(\: 
Changes: To accommodate electronic documents of title and for style. 
Purpose: 
1. This section applies to both tangible and electronic documents of title. 
The 
elements of duly negotiated, which constitutes a due negotiation, are set forth in Section 
7-501. The several necessary qualifications of the broad principle that the holder of a 
document acquired in a due negotiation is the owner of the document and the goods have 
been brought together in the next section (Section 7-503). 
2. Subsection (a)(3) covers the case of "feeding" of a duly negotiated document by 
subsequent delivery to the bailee of such goods as the document falsely purported to 
cover; the bailee in such case is estopped as against the holder of the document. 
3. The explicit statement in subsection (a)( 4) of the bailee's direct obligation to the 
holder precludes the defense that the document in question was "spent" after the carrier 
had delivered the goods to a previous holder. But the holder is subj ect to such defenses 
as non-negligent destruction even though not apparent on the document. 
The sentence 
on delivery orders applies only to delivery orders in negotiable form which have been 
duly negotiated. On delivery orders, see also Section 7-503(b) and Comment. 
4. Subsection (b) continues the law which gave full effect to the issuance or due 
negotiation of a negotiable document. The subsection adds nothing to the effect of the 
rules stated in subsection (a), but it has been included since such explicit reference was 
provided under former Section 7-502 to preserve the right of a purchaser by due 
negotiation. The listing is not exhaustive. The language"any stoppage" is included lest 
an inference be drawn that a stoppage of the goods before or after transit might cut off or 
otherwise impair the purchaser's rights. 
Cross References: Sections 7-103, 7-205, 7-403, 7-501, and 7-503. 
Definitional Cross References: 
"Bailee". Section 7-102. 
"Control". Section 7-106. 
"Delivery". Section 1-201. 
"Delivery order". Section 7-102. 
"Document oftitle". Section 1-201. 
"Duly negotiate". Section 7-501. 
"Fungible". Section 1-201. 
"Goods". Section 7-102. 
"Holder". Section 1-201. 
"Issuer". Section 7-102. 
"Person". Section 1-201. 
"Rights". Section 1-201. 
"Term". Section 1-201. 
"Warehouse receipt". Section 1-201. 
§7-1S03. Document of title to goods defeated in certain cases 
(1). A document of title confers no right in goods against a person that before 
issuance of the document had a legal interest or a perfected security interest in the goods 
and that did not: 
Cal. Deliver or entrust the· goods or any document of title covering the goods to the 
bailor or the bailor's nominee with: 
(0 Actual or apparent authority to ship, store or sell; 
(ii) Power to obtain delivery under section 7-1403; or 
(iii) Power of disposition under section 2-403; section 2-1304, subsection (2); 
section 2-1305, subsection (2); section 9-1320; or section 9-1321, subsection (3) 
or other statute or rule of law; or 
(b). Acquiesce in the procurement by the bailor or its nominee of any document. 
(2). Title to goods based upon an unaccepted delivery order is subject to the rights of 
any person to which a negotiable warehouse receipt or bill of lading covering the goods 
has been duly negotiated. That title may be defeated under section 7-1504 to the same 
extent as the rights of the issuer or a transferee from the issuer. 
(3). Title to goods based upon a bill of lading issued to a freight forwarder is subject 
to the rights of any person to which a bill issued by the freight forwarder is duly 
negotiated. However, delivery by the carrier in accordance with Part 4 pursuant to its 
. own bill of lading discharges the carrier's obligation to deliver. 
UNIFORM COMMENT 
(This is section 7-503 of the Unifonn Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Fonner Section 7-503. 
Changes: Changes to cross-reference to Article 2A and for style. 
Purposes: 
1. In general it may be said that the title of a purchaser by due negotiation prevails 
over almost any interest in the goods which existed prior to the procurement of the 
document of title if the possession of the goods by the person obtaining the document 
derived from any action by the prior claimant which introduced the goods into the stream 
of commerce or carried them along that stream. A thief of the goods cannot indeed by 
shipping or storing them to the thiefs own order acquire power to transfer them to a good 
faith purchaser. 
Nor can a tenant or mortgagor defeat any rights of a landlord or 
mortgagee which have been perfected under the local law merely by wrongfully shipping 
or storing a portion of the crop or other goods. However, "acquiescence" by the landlord 
or mortgagee does not require active consent under subsection (a)(2) and lmowledge of 
the likelihood of storage or shipment with no objection or effort to control it is sufficient 
to defeat the landlord's or the mortgagee's rights as against one who takes by due 
negotiation of a negotiable document. In re Sharon Steel, 176 B.R. 384 (Bankr. W.D. Pa. 
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1995); In re R.V. Segars Co, 54 B.R. 170 (Bankr. S.C. 1985); In re Jamestown Elevators, 
Inc., 49 B.R. 661 (Bankr. N.D. 1985). 
On the other hand, where goods are delivered to a factor for sale, even though the 
factor has made no advances and is limited in its duty to sell for cash, the goods are 
"entrusted" to the factor "with actual ... authority ... to sell" under subsection (a)(1), and 
if the factor procures a negotiable document of title it can transfer the owner's interest to a 
purchaser by due negotiation. Further, where the factor is in the business of selling, 
goods entrusted to it simply for safekeeping or storage may be entrusted under 
circumstances which give the factor "apparent authority to ship, store or sell" under 
subsection (a)(1), or power of disposition under Section 2-403, 2A-304(2), 2A-305(2), 7-
205, 9-320, or 9-321 ( c) or under a statute such as the earlier Factors Acts, or under a rule 
oflaw giving effect to apparent ownership. See Section 1-103. 
Persons having an interest in goods also frequently deliver or entrust them to agents 
or servants other than factors for the purpose of shipping or warehousing or under 
circumstances reasonably contemplating such action. This Act is clear that such persons 
assume full risk that the agent to whom the goods are so delivered may ship or store in 
breach of duty, take a document to the agent's own order and then proceed to 
misappropriate the negotiable document of title that embodies the goods. This Act makes 
no distinction between possession or mere custody in such situations and finds no 
exception in the case of larceny by a bailee or the like. The safeguard in such situations 
lies in the requirement that a due negotiation can occur only "in the regular course of 
business or financing" and that the purchase be in good faith and without notice. See 
Section 7-501. 
Documents of title have no market among the commercially 
inexperienced and the commercially experienced do not take them without inquiry from 
persons known to be truck drivers or petty clerks even though such persons purport to be 
operating in their own names. 
Again, where the seller allows a buyer to receive goods under a contract for sale, 
though as a "conditional delivery" or under "cash sale" tenns and on explicit agreement 
for immediate payment, the buyer thereby acquires power to defeat the seller's interest by 
transfer of the goods to certain good faith purchasers. See Section 2-403. Both in policy 
and under the language of subsection (a)(1) that same power must be extended to 
accomplish the same result if the buyer procures a negotiable document of title to the 
goods and duly negotiates it. 
This comment 1 should be considered in interpreting delivery, entrustment or 
acquiescence in application of Section 7 -209( c). 
2. Under subsection (a) a delivery order issued by a person having no right in or 
power over the goods is ineffective unless the owner acts as provided in subsection (a)(1) 
or (2). Thus the rights of a transferee of a non-negotiable warehouse receipt can be 
defeated by a delivery order subsequently issued by the transferor only if the transferee 
"delivers or entrusts" to the "person procuring" the delivery order or "acquiesces" in that 
person's procurement. Similarly, a second delivery order issued by the same issuer for 
the same goods will ordinarily be subject to the first, both under this section and under 
Section 7-402. After a delivery order is validly issued but before it is accepted, it may 
nevertheless be defeated under subsection (b) in much the same way that the rights of a 
transferee may be defeated under Section 7-504. For example, a buyer in ordinary course 
from the issuer may defeat the rights of the holder of a prior delivery order if the bailee 
receives notification of the buyer's rights before notification of the holder's rights. 
Section 7-504(b)(2). But an accepted delivery order has the same effect as a document 
issued by the bailee. 
3. Under subsection ( c) a bill of lading issued to a freight forwarder is subordinated to 
the freight forwarder's document of title, since the bill on its face gives notice of the fact 
that a freight forwarder is in the picture and the freight forwarder has in all probability 
issued a document of title .. But the carrier is protected in following the terms of its own 
bill of lading. 
Cross References: 
Point 1: Sections 1-103,2-403, 2A-304(2), 2A-305(2), 7-205, 7-209, 7-501, 9-320, 
9-321(c), and 9-331. 
Point 2: Sections 7-402 and 7-504. 
Point 3: Sections 7-402, 7-403 and 7-404. 
Definitional Cross References: 
"Bill oflading". Section 1-201. 
"Contract for sale". Section 2-106. 
"Delivery". Section 1-201. 
"Delivery order". Section 7-102. 
"Document of title". Section 1-201. 
"Duly negotiate". Section 7-501. 
"Goods". Section 7-102. 
"Person". Section 1-201. 
"Right". Section 1-201. 
"Warehouse receipt". Section 1-201. 
§7-1504. Rights acquired in absence of due negotiation; effect of diversion; stoppage 
of delivery 
(1). A transferee of a document of title, whether negotiable or nonnegotiable, to 
which the document has been delivered but not duly negotiated, acquires the title and 
rights that its transferor had or had actual authority to convey. 
(2). In the case of a transfer of a nonnegotiable document of title, until but not after 
the bailee receives notice of the transfer, the rights of the transferee may be defeated: 
Cal. By those creditors of the transferor that could treat the transfer as void under 
section 2-402 or 2-1308; 
(b). By a buyer from the transferor in ordinary course of business if the bailee has 
delivered the goods to the buyer or received notification of the buyer's rights; 
(c). Bya lessee from the transferor in ordinary course of business if the bailee has 
delivered the goods to the lessee or received notification of the lessee's rights; or 
) 
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(d). As against the bailee, by good faith dealings of the bailee with the transferor. 
(3). A diversion or other change of shipping instructions by the consignor in a 
nonnegotiable bill of lading that causes the bailee not to deliver the goods to the 
consignee defeats the consignee's title to the goods if the goods have been delivered to a 
buyer in ordinary course of business or a lessee in ordinary course of business and, in any 
event, defeats the consignee's rights against the bailee. 
(4). Delivery of the goods pursuant to a nonnegotiable document of title may be 
stopped by a seller under section 2-705 or a lessor under section 2-1526, subject to the 
requirements of due notification in those sections. A bailee that honors the seller's or 
lessor's instructions is entitled to be indemnified by the seller or lessor against any 
resulting loss or expense. 
UNIFORM COMMENT 
(This is section 7-504 of the Unifonn Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Fonner Section 7-504. 
Changes: To include cross-references to Article 2A and for style. 
Purposes: 
1. Under the general principles controlling negotiable documents, it is clear that in the 
absence of due negotiation a transferor cannot convey greater rights than the transferor 
has, even when the negotiation is fonnally perfect. This section recognizes the transferor's 
power to transfer rights which the transferor has or has "actual authority to convey." 
Thus,. where a negotiable document of title is being transferred the operation of the 
principle of estoppel is not recognized, as contrasted with situations involving the transfer 
of the goods themselves. (Compare Section 2-403 on good faith purchase of goods.) 
This section applies to both tangible and electronic documents of title. 
A necessary part of the price for the protection of regular dealings with negotiable 
documents of title is.an insistence that no dealing which is in any way irregular shall be 
recognized as a good faith purchase of the document or of any rights pertaining to it. So, 
where the transfer of a negotiable document fails as a negotiation because a requisite 
indorsement is forged or otherwise missing, the purchaser in good faith and for value may 
be in the anomalous position of having less rights, in part, than if the purchaser had 
purchased the goods themselves. True, the purchaser's rights are not subject to defeat by 
attachment of the goods or surrender of them to the purchaser's transferor (contrast 
subsection (b»; but on the other hand, the purchaser cannot acquire enforceable rights to 
control or receive the goods over the bailee's objection merely by giving notice to the 
bailee. Similarly, a consignee who makes payment to its consignor against a straight bill 
of lading can thereby acquire the position of a good faith purchaser of goods under 
provisions of the Article of this Act on Sales (Section 2-403), whereas the same payment 
made in good faith against an unendorsed order bill would not have such effect. The 
appropriate remedy of a purchaser in such a situation is to regularize its status by 
compelling indorsement of the document (see Section 7-506). 
2. As in the case of transfer--as opposed to "due negotiation"--of negotiable 
documents, subsection (a) empowers the transferor of a nonnegotiable document to 
transfer only such rights as the transferor has or has "actual authority" to convey. In 
contrast to situations involving the goods themselves the operation of estoppel or agency 
principles is not here recognized to enable the transferor to convey greater rights than the 
transferor actually has. Subsection (b) makes it clear, however, that the transferee of a 
nonnegotiable document may acquire rights greater in some respects than those of his 
transferor by giving notice of the transfer to the bailee. New subsection (b)(3) provides 
for the rights of a lessee in the ordinary course. 
Subsection (b)(2)&(3) require delivery of the goods. Delivery of the goods means 
the voluntary transfer of physical possession of the goods. See amended 2-103. 
3. Subsection (c) is in part a reiteration of the carrier's immunity from liability if it 
honors instructions of the consignor to divert, but there is added a provision protecting 
the title of the substituted consignee if the latter is a buyer in ordinary course of business. 
A typical situation would be where a manufacturer, having shipped a lot of standardized 
goods to A on nonnegotiable bill of lading, diverts the goods to customer B who pays for 
them. Under pre-Code passage-of-title-by-appropriation doctrine A might reclaim the 
goods from B. 
However, no consideration of commercial policy supports this 
involvement of an innocent third party in the default of the manufacturer on his contract 
to A; and the common commercial practice of diverting goods in transit suggests a trade 
understanding in accordance with this subsection. The same result should obtain if the 
substituted consignee is a lessee in ordinary course. The extent of the lessee's interest in 
the goods is less than a buyer's interest in the goods. However, as against the fIrst 
consignee and the lessee in ordinary course as the substituted consignee, the lessee's 
rights in the goods as granted under the lease are superior to the fIrst consignee's rights. 
4. Subsection (d) gives the carrier an express right to indemnity where the carrier 
honors a seller's request to stop delivery. 
5. Section 1-202 gives the bailee protection, if due diligence is exercised where the 
bailee's organization has not had time to act on a notifIcation. 
Cross References: 
Point 1: Sections 2-403 and 7-506. 
Point 2: Sections 2-403 and 2A-304. 
Point 3: Sections 7-303, 7-403(a)(5) and 7-404. 
Point 4: Sections 2-705 and 7-403(a)(4). 
Point 5: Section 1-202. 
Definitional Cross References: 
"Bailee". Section 7-102. 
"Bill oflading". Section 1-201. 
"Buyer in ordinary course of business". Section 1-201. 
"Consignee". Section 7-102. 
"Consignor". Section 7-102. 
"Creditor". Section 1-201. 
"Delivery". Section 1-201. 
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"Document of Title". Section 1-201. 
"Duly negotiate". Section 7-501. 
"Good faith". Section 1-201. [7-102]. 
"Goods". Section 7-102. 
"Honor". Section 1-201. 
"Lessee in ordinary course". Section 2A-103. 
"Notification" Section 1-202. 
"Purchaser". Section 1-201. 
"Rights". Section 1-201. 
§7-1S0S. Indorser not guarantor for other parties 
The indorsement of a tangible document of title issued by a bailee does not make the 
indorser liable for any default by the bailee or previous indorsers. 
UNIFORM COMMENT 
(This is section 7-505 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-505. 
Changes: Limited to tangible documents of title. 
Purposes: 
This section is limited to tangible documents of title as the concept of indorsement is 
irrelevant to electronic documents of title. 
Electronic documents of title will be 
transferred by delivery of control. 
Section 7-106. 
The indorsement of a tangible 
document of title is generally understood to be directed towards perfecting the transferee's 
rights rather than towards assuming additional obligations. The language of the present 
section, however, does not preclude the one case in which an indorsement given for value 
guarantees future action, namely, that in which the bailee has not yet become liable upon 
the document at the time of the indorsement. Under such circumstances the indorser, of 
course, engages that appropriate honor of the document by the bailee will occur. See 
Section 7-502(a)(4) as to negotiable delivery orders. However, even in such a case, once 
the bailee attorns to the transferee, the indorser's obligation has been fulfilled and the 
policy of this section excludes any continuing obligation on the part of the indorser for 
the bailee's ultimate actual performance. 
Cross Reference: Sections 7-106 and 7-502. 
Definitional Cross References: 
"Bailee". Section 7-102. 
"Document oftitle". Section 1-201. 
"Party". Section 1-201. 
§7-1506. Delivery without indorsement; right to compel indorsement 
The transferee of a negotiable tangible document of title has a specifically 
enforceable right to have its transferor supply any necessary indorsement, but the transfer 
becomes a negotiation only as of the time the indorsement is supplied. 
UNIFORM COMMENT 
(This is section 7-506 of the Unifonn Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Fonner Section 7-506. 
Changes: Limited to tangible documents of title. 
Purposes: 
1. This section is limited to tangible documents of title as the concept of indorsement 
is irrelevant to electronic documents of title. 
Electronic documents of title will be 
transferred by delivery of control. Section 7-106. From a commercial point of view the 
intention to transfer a tangible negotiable document of title which requires an 
indorsement for its transfer, is incompatible with an intention to withhold such 
indorsement and so defeat the. effective use of the document. Further, the preceding 
section and the Comment thereto make it clear that an indorsement generally imposes no 
responsibility on the indorser. 
2. Although this section provides that delivery of a tangible document of title without 
the necessary indorsement is effective as a transfer, the transferee, of course, has not 
regularized its 
position until such indorsement is supplied. . Until this is done the 
transferee cannot claim rights under due negotiation within the requirements of this 
Article (Section 7-501(a)(5)) on "due negotiation". Similarly, despite the transfer to the 
transferee of the transferor's title, the transferee cannot demand the goods from the bailee 
until the negotiation has been completed and the document is in proper fonn for 
surrender. See Section 7-403(c). 
. 
Cross References: 
Point 1: Sections 7-106 and 7-505. 
Point 2: Sections 7-501(a)(5) and 7-403(c). 
Definitional Cross References: 
"Document of title". Section 1-201. 
"Rights". Section 1-201. 
§7-1507. Warranties on negotiation or delivery of document of title 
If a person negotiates or delivers a document of title for value, otherwise than as a 
mere intennediary under section 7-1508, unless otherwise agreed,· the transferor, in 
addition to any warranty made in selling or leasing the goods, warrants to its immediate 
purchaser only that: 
) 
') 
) 
(1 
(1). The document is genuine; 
(2). The transferor does not have knowledge of any fact that would impair the 
document's validity or worth; and 
(3). The negotiation or delivery is rightful and fully effective with respect to the title 
to the document and the goods it represents. 
UNIFORM COMMENT 
(This is section 7-507 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-507. 
Changes: Substitution of the word "deliver'}" for the word "transfer," reference 
leasing transactions and style. 
Purposes: 
1. 
Delivery of goods by use of a document of title does not limit or displace the 
ordinary obligations of a seller or lessor as to any warranties regarding the goods that 
arises under other law. If the transfer of documents attends or follows the making of a 
contract for the sale or lease of goods, the general obligations on warranties as to the 
goods (Sections 2-312 through 2-318 and Sections 2A-210 through 2A-316) are brought 
to bear as well as the special warranties under this section. 
2. The limited warranties of a delivering or collecting intermediary, including a 
collecting bank, are stated in Section 7-508. 
Cross References: 
Point 1: Sections 2-312 through 2-318 and 2A-310-through 2A-316. 
Point 2: Section 7-508. 
Definitional Cross References: 
"Delivery". Section 1-20l. 
"Document of title". Section 1-20l. 
"Genuine". Section 1-20l. 
"Goods". Section 7-102. 
"Person". Section 1-20l. 
"Purchaser". Section 1-20l. 
"Value". Section 1-204. 
§7-150S. Warranties of collecting bank as to documents of title 
A collecting bank or other intermediary known to be entrusted with documents of 
title on behalf of another or with collection of a draft or other claim against delivery of 
documents warrants by the delivery of the documents only its own good faith and 
authority even if the collecting bank or other intermediary has purchased or made 
advances against the claim or draft to be collected. 
UNIFORM COMMENT 
(This is section 7-508 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-508. 
Changes: Changes for style only. 
Purposes: 
1. To state the limited warranties given with respect to the documents accompanying 
a documentary draft. 
2. In warranting its authority a collecting bank or other intermediary only warrants 
its authority from its transferor. See Section 4-203. It does not warrant the genuineness 
or effectiveness of the document. Compare Section 7-507. 
3. Other duties and rights of banks handling documentary drafts for collection are 
stated in Article 4, Part 5. On the meaning of draft, see Section 4-104 and Section 5-102, 
comment 11. 
Cross References: 
Sections 4-104, 4-203, 4-501 through 4-504,5-102, and 7-507. 
Definitional Cross References: 
"Collecting bank". Section 4-105. 
"Delivery". Section 1-20l. 
"Document of title". Section 1-102. 
"Documentary draft". Section 4-104. 
"Intermediary bank". Section 4-105. 
"Good faith". Section 1-201 [7-102.] 
§7-1509. Adequate compliance with commercial contract 
Whether a document of title is adequate to fulfill the obligations of a contract for sale, 
a contract for lease or the conditions of a letter of credit is determined by Article 2, 2-A 
or 5. 
UNIFORM COMMENT 
(This is section 7-509 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-509. 
Changes: To reference Article 2A. 
Purposes: 
To cross-refer to the Articles of this Act which deal with the substantive issues of the 
type of document oftitle required under the contract entered into by the parties. 
Cross References: Articles 2, 2A and 5. 
. 
Definitional Cross References: 
"Contract for sale". Section 2-106. 
"Document oftitle". Section 1-20l. 
"Lease". Section 2A-103. 
) 
) 
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, 
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(c 
PART 6 
WAREHOUSE RECEIPTS AND BILLS OF LADING: 
MISCELLANEOUS PROVISIONS 
§7-1601. Lost, stolen or destroyed documents of title 
(1). If a document of title is lost, stolen or destroyed, a court may order delivery of 
the goods or issuance of a substitute document and the bailee may without liability to any 
person comply with the order. If the document was negotiable, a court may not order 
delivery of the goods or issuance of a substitute document without the claimant's posting 
security unless it fInds that any person that may suffer loss as a result of nonsurrender of 
possession or control of the document is adequately protected against the loss. If the 
document was nonnegotiable, the court may require security. The court may also order 
payment of the bailee's reasonable costs and attorney's fees in any action under this 
subsection. 
. 
(2). A bailee that, without a court order, delivers goods to a person claiming under a 
missing negotiable document of title is liable to any person injured thereby. If the 
delivery is not in good faith, the bailee is liable for conversion. Delivery in good faith is 
not conversion if the claimant posts security with the bailee in an amount at least double 
the value of the goods at the time of posting to indemnify any person injured by the 
delivery that fIles a notice of claim within one year after the delivery. 
UNIFORM COMMENT 
(This is section 7-601 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provision: Former Section 7-601. 
Changes: To accommodate electronic documents; to provide flexibility to courts 
similar to the flexibility in Section 3-309; to update to the modem era of deregulation; 
and for style. 
Purposes: 
1. Subsection (a) authorizes courts to order compulsory delivery of the goods or 
compulsory issuance of a substitute document. Compare Section 7-402. Using language 
similar to that found in Section 3-309, courts are given discretion as to what is adequate 
protection when the lost, stolen or destroyed document was negotiable or whether 
.36 
security should be required when the lost, stolen or destroyed document was 
nonnegotiable. In detennining whether a party is adequately protected against loss in the 
case of a negotiable document, the court should consider the likelihood that the party will 
suffer a loss. The court is also given discretion as to the bailee's costs and attorney fees. 
The rights and obligations of a bailee under this section depend upon whether the 
document of title is lost, stolen or destroyed and is in addition to the ability of the bailee 
to bring an action for interpleader. See Section 7-603. 
9. 
2. Courts have the authority under this section to order a substitute document for 
either tangible or electronic documents. If the substitute document will be in a different 
medium than the original document, the .court should fashion its order in light of the 
requirements of Section 7-105. 
3. Subsection (b) follows prior Section 7-601 in recognizing the legality of the well 
established commercial practice of bailees making delivery in good faith when they are 
satisfied that the claimant is the person entitled under a missing (i.e. lost , stolen, or 
destroyed) negotiable document. Acting without a court order, the bailee remains liable 
on the original negotiable document and, to avoid conversion liability, the bailee may 
insist that the claimant provide an indemnity bond. Cf. Section 7-403. 
4. Claimants on non-negotiable instruments are permitted to avail themselves of the 
subsection (a) procedure because straight (non-negotiable) bills of lading sometimes 
contain provisions that the goods shall not be delivered except upon production of the 
bill. If the carrier should choose to insist upon production of the bill, the consignee 
should have some means of compelling delivery on satisfactory proof of entitlement 
Without a court order, a bailee may deliver, subject to Section 7-403, to a person 
claiming goods under a non-negotiable document that the same person claims is lost, 
stolen, or destroyed. 
5. 
The bailee's lien should be protected when a court orders delivery of the goods 
pursuant to this section. 
Cross References: 
Point 1: Sections 3-309, 7-402 and 7-603. 
Point 2: Section 7-105. 
Point 3: Section 7-403. 
Point 4: Section 7-403. 
Point 5: Sections 7-209 and 7-307. 
Definitional Cross References: 
"Bailee". Section 7-102. 
"Delivery". Section 1-201. 
"Document of title". Section 1-201. 
"Good faith". Section 1-201 [7-102]. 
"Goods". Section 7-102. 
"Person". Section 1-201. 
§7-1602 . .Judicial process against goods covered by negotiable document of title 
Unless a document of title was originally issued upon delivery of the goods by a 
person that did not have power to dispose of them, a lien does not attach by virtue of any 
judicial process to goods in the possession of a bailee for which a negotiable document of 
title is outstanding unless possession or control of the document is first surrendered to the 
bailee cir the document's negotiation is enjoined. The bailee may not be compelled to 
deliver the goods pursuant to process until possession or control of the document is 
) 
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surrendered to the bailee or to the court. A purchaser of the document for value without 
notice of the process or injunction takes free of the lien imposed by judicial process. 
UNIFORM COMMENT 
(Tbis is section 7-602 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provisions: Former Section 7-602. 
Changes: Changes to acconunodate electronic documents of title and for style. 
Purposes: 
1. The purpose of the section is to protect the bailee from conflicting claims of the 
document of title holder and the judgment creditors of the person who deposited the 
goods. 
The rights of the former prevail unless, in effect, the judgment creditors 
immobilize the negotiable document of title through the surrender of possession of a 
tangible document or control of an electronic document. However, if the document of 
title was issued upon deposit of the goods by a person who had no power to dispose of the 
goods so that the document is ineffective to pass title, judgment liens are valid to the 
extent of the debtor's interest in the goods. 
2. The last sentence covers the possibility that the holder of a document who has been 
enjoined from negotiating it will violate the injunction by negotiating to an innocent 
purchaser for value. In such case the lien will be defeated. 
Cross Reference: 
Sections 7-106 and 7-501 through 7-503. 
Definitional Cross References: 
"Bailee". Section 7-102. 
"Delivery". Section 1-201. 
"Document oftitle". Section 1-201. 
"Goods". Section 7-102. 
"Notice". Section 1-202. 
"Person". Section 1-201. 
"Purchase". Section 1-201. 
"Value". Section 1-204. 
§7-1603. Conflicting claims; interpleader 
If more than one person claims title to or possession of the goods, the bailee is 
excused from delivery until the bailee has a reasonable time to ascertain the validity of 
the adverse claims or to commence an action for interpleader. The bailee may assert an 
interpleader either in defending an action for nondelivery of the goods or by original 
action. 
UNIFORM COMMENT 
(Tbis is section 7-603 of the Uniform Commercial Code - Article 7 (2004).) 
Prior Uniform Statutory Provisions: Former Section 7-603. 
Changes: Changes for style only. 
Purposes: 
1. The section enables a bailee faced with conflicting claims to the goods to compel 
the claimants to litigate their claims with each other rather than with the bailee. The 
bailee is protected from legal liability when the bailee complies with court orders from 
the interpleader. See e.g. Northwestern National Sales, Inc. v. Commercial Cold Storage, 
Inc., 162 Ga. App. 741, 293 S.E.2d. 30 (1982). 
2. This section allows the bailee to bring an interpleader action but does not provide 
an exclusive basis for allowing interpleader. If either state or federal procedural rules 
allow an interpleader in other situations, the bailee may commence an interpleader under 
those rules. Even in an interpleader to which this section applies, the state or federal 
process of interpleader applies to the bailee's action for interpleader. For example, state 
or federal interpleader statutes or rules may permit a bailee to protect its lien or to seek 
attorney's fees and costs in the interpleader action. 
Cross reference: 
Point 1: Section 7-403. 
Definitional Cross References: 
"Action". Section 1-201. 
"Bailee". Section 7-102. 
"Delivery". Section 1-201. 
"Goods". Section 7-102. 
"Person". Section 1-201. 
"Reasonable time". Section 1-205. 
PART 7 
MISCELLANEOUS PROVISIONS 
§7-1701. Effective date 
This Article takes effect January 1, 2010. 
§7-1702. Applicability 
This Article applies to a document of title that is issued or a bailment that arises on or 
after the effective date of this Article. This Article does not apply to a document of title 
that is issued or a bailment that arises before the effective date of this Article even if the 
document of title or bailment would be subject to this Article if the document of title had 
been issued or bailment had arisen on or after the effective date of this Article. This 
Article does not apply to a right of action that has accrued before the effective date of this 
Article. 
UNIFORM COMMENT 
(This is section 7-703 of the Uniform Commercial Code - Article 7 (2004).) 
This Act will apply prospectively only to documents of title issued or bailments that 
arise after the effective date of the Act. 
.) 
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§7-1703. Savings clause 
A document of title issued or a bailment that arises before January 1, 2010 and the 
rights, obligations and interests flowing from that document or bailment are governed by 
any statute or other rule amended or repealed by this Act as if amendment or repeal had 
not occurred and may be terminated, completed, consummated or enforced under that 
statute or other rule. 
UNIFORM COMMENT 
(This is section 7-704 of the Uniform Commercial Code - Article 7 (2004).) 
This Act will apply prospectively only to documents of title issued or bailments that 
arise after the effective date of the Act. To the extent that issues ruise based upon 
documents of title or rights or obligations that arise prior to the effective date of this Act, 
prior law will apply to resolve those issues. 
Sec. A-3. Legislative intent. This Act is the Maine enactment of the Uniform 
Commercial Code, Article 7 as revised by the National Conference of Commissioners on 
Uniform State Laws. The text of the uniform act has been changed to conform to Maine 
statutory conventions, and the article is enacted as Article 7-A. The changes are technical 
in nature and it is the intent of the Legislature that this Act be interpreted as substantively 
the same as the revised Article 7 of the uniform act. 
Sec. A-4. Effective date. This Part takes effect January 1, 2010. 
PARTB 
Sec. B-1. 10 MRSA §9416, sub-§I, -rrA, as enacted by PL 1999, c. 762, §2, is 
amended to read: 
A. Would be a note under Title 11, Article 3-A or a document under Title 11, Article 
=I- 7-A if the electronic record were in writing; and 
Sec. B-2. 10 MRSA §9416, sub-§4, as enacted by PL 1999, c. 762, §2, is 
amended to read: 
4. Holders. Except as otherwise agreed, a person having control of a transferable 
record is the holder, as defIned in Title 11, section 1-201, subsection (20), of the 
transferable record and has the same rights and defenses as a holder of an equivalent 
record or writing under the Uniform Commercial Code, including, if the applicable 
statutory requirements under Title 11, section 3-1302, subsection (1); Title 11, section 
+-W-l- 7-1501; or Title 11, section 9-308 are satisfIed, the rights and defenses of a holder 
in due course, a holder to which a negotiable document of title has been duly negotiated 
or a purchaser, respectively. Delivery, possession and indorsement are not required to 
obtain or exercise any of the rights under this subsection. 
Sec. B-3. 11 MRSA §2-103, sub-§(3), as amended by PL 1999, c. 699, Pt. B, §5 
and affected by §28, is further amended to read: 
(3). The following defInitions in other Articles apply to this Article: 
"Check." 
"Consignee." 
"Consignor. " 
"Consumer goods." 
"Dishonor. " 
"Draft." 
Section 3-104. 
Section ~ 
7-1102. 
Section ~ 
7-1102. 
Section 9-1102. 
Section 3-1502. 
Section 3-104. 
Sec.8-4. 11 MRSA §2-103, sub-§(3-A) is enacted to read: 
(3-A). 
"Control" as provided in section 7-1106 and the following defInitions in 
other Articles apply to this Article: 
"Check." 
"Consignee. " 
"Consignor. " 
"Consumer goods. " 
"Dishonor." 
"Draft." 
Section 3-104. 
Section 7-1102. 
Section 7-1102. 
Section 9-1102. 
Section 3-502. 
Section 3-104. 
UNIFORM COMMENT 
**** 
2. "Receipt" must be distinguished from delivery particularly in regard to the 
problems arising out of shipment of goods, whether or not the contract calls for making 
delivery by way of documents of title, since the seller may frequently fulfIll his 
obligations to "deliver" even though the buyer may never "receive" the goods. Delivery 
with respect to documents of title is defined in Article 1 and requires transfer of physical 
delivery of a tangible document of title and transfer of control of an electronic document 
of title. Otherwise the many divergent incidents of delivery are handled incident by 
incident. 
Sec. B-5. 11 MRSA §2-104, sub-§(2) is amended to read: 
(2). 
Financing agency. "Financing agency" means a bank, fmance company or 
other person who in the ordinary course of business makes advances against goods or 
documents of title or who by arrangement with either the seller or the buyer intervenes in 
ordinary course to make or collect payment due or claimed under the contract for sale, as 
by purchasing or paying the seller's draft or making advances against it or by merely 
taking it for collection whether or not documents of title accompany or are associated 
with the draft. "Financing agency" includes also a bank or other person who similarly 
intervenes between persons who are in the position of seller and buyer in respect to the 
goods (section 2-707). 
Sec. B-6. 11 MRSA §2-310, sub-§(3) is repealed and the following enacted in its 
place: 
) 
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) 
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v 
(3). 
If delivery is authorized and made by way of documents of title otherwise than 
by subsection (2), then payment is due regardless of where the goods are to be received: 
Cal. At the time and place at which the buyer is to receive delivery of the tangible 
documents; or 
(b). At the time the buyer is to receive delivery of the electronic documents and at 
the seller's place of business or if none the seller's residence; and 
UNIFORM COMMENT 
**** 
2. Paragraph (b) while providing for inspection by the buyer before he pays, protects 
the seller. He is not required to give up possession of the goods until he has received 
payment, where no credit has been contempiated by the parties. The seller may collect 
through a bank by a sight draft against an order bill of lading "hold until arrival; 
inspection allowed." The obligations of the bank under such a provision are set forth in 
Part 5 of Article 4. Under subsection Cc), in the absence of a credit term, the seller is 
permitted to ship under reservation and if he does payment is then due where and when 
the buyer is to receive delivery of the tangible documents of title. In the case of an 
electronic document of title, payment is due when the buyer is to receive delivery of the 
electronic document ahd at the seller's place of business, or if none, the seller's residence. 
Delivery as to documents of title is stated in Article 1, Section 1-201. 
3. Unless otherwise agreed, the place for the fe6eit* delivery of the documents and 
payment is the buyer's city but the time for payment is only after arrival of the goods, 
since under paragraph (b), and Sections 2-512 and 2-513 the buyer is under no duty to 
pay prior to inspection. Tender of a document of title requires that the seller be ready, 
willing and able to transfer possession of a tangible document of title or control of an 
electronic document oftitle to the buyer. 
. 
Sec. B-7. 11 MRSA §2-323, suh-§(2) is amended to read: 
(2). Where in a case within subsection (1) a tangible bill oflading has been issued in 
a set of parts, unless otherwise agreed if the documents are not to be sent from abroad the 
buyer may demand tender of the full set; otherwise only one part of the bill of lading need 
be tendered. Even if the agreement expressly requires a full set 
(a). Due tender of a single part is acceptable within the provisions of this Article on 
cure of improper delivery (section 2-508, subsection (1»; and 
(b). Even though the full set is demanded, if the documents are sent from abroad the 
person tendering an incomplete set may nevertheless require payments upon 
furnishing an indemnity which the buyer in good faith deems adequate. 
UNIFORM COMMENT 
~ 
**** 
2. Subsection (2) deals with the problem of bills of lading covering deep water 
shipments, issued not as a single bill of lading but in a set of parts, each part referring to 
the other parts and the entire set constituting in commercial practice and at law a single 
bill of lading. Commercial practice in international commerce is to accept and pay 
against presentation of the fIrst part of a set if the part is sent from overseas even though 
the contract of the buyer requires presentation of a full set of bills of lading provided 
adequate indemnity for the missing parts is forthcoming. In accord with the amendment 
to Section 7-304, bills oflading in a set are limited to tangible bills. 
Sec. :8-8. 11 MRSA §2-401, sub-§(3) is amended to read: 
(3). Unless otherwise explicitly agreed where delivery is to be made without moving 
the goods 
(a). If the seller is to deliver a tangible document of title, title passes at the time when 
and the place where he the seller delivers such documents and if the seller is to 
deliver an electronic document of title, title passes when the seller delivers the 
document; or 
(b). If the goods are at the time of contracting already identifIed and no documents of 
title are to be delivered, title passes at the time and place of contracting. 
UNIFORM COMMENT 
**** 
4. The factual situations in subsections (2) and (3) upon which passage of title turn 
actually base the test upon the time when the seller has fmally committed himself in 
regard to specifIc goods. Thus in a "shipment" contract he commits himself by the act of 
making the shipment. If shipment is not contemplated subsection (3) turns on the seller's 
fmal commitment, i.e. the delivery of documents or the making of the contract. As to 
delivery of an electronic document of title, see defmition of delivery in Article 1, Section 
1-201. This Article does not state a rule as to the place of title passage as to goods 
covered by an electronic document of title. 
Sec. B-9. 11 MRSA §2-403, sub-§(4), as amended by PL 1991, c. 636, §2, is 
further amended to read: 
(4). 
The rights of other purchasers of goods and of lien creditors are governed by 
the Articles on secured transactions (Article -9 9-A) and documents of title (Article =I-
7-A). 
UNIFORM COMMENT 
* * * * 
2. The many particular situations in which a buyer in ordinary course of business 
from a dealer has been protected against reservation of property or other hidden interest 
are gathered by subsections (2)-(4) into a single principle protecting persons who buy in 
ordinary course out of inventory. Consignors have no reason to complain, nor have 
lenders who hold a security interest in the inventory, since the very purpose of goods in 
inventory is to be turned into cash by sale. 
) 
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The principle is extended in subsection (3) to fit with the abolition of the old law of 
"cash sale" by subsection (l)(c). It is also freed from any technicalities depending on the 
extended law of larceny; such extension of the concept of theft to include trick, particular 
types of fraud, and the like is for the purpose of helping conviction of the offender; it has 
no proper application to the long-standing policy of civil protection of buyers from 
persons guilty of such trick or fraud. Finally, the policy is extended, in the interest of 
simplicity and sense, to any entrusting by a bailor; this is in consonance with the explicit 
provisions of Section 7-205 on the powers of a warehouseffiaH:-who is also in the business 
of buying and selling fungible goods of the kind he 'vvarehouses stores. As to entrusting 
by a secured party, subsection (2) is limited by the more specific provisions of Section 9-
320, which deny protection to a person buying farm products from a person engaged in 
farming operations. 
Sec. B-IO. 11 MRSA §2-S03, suh-§(4), -rr(b) is amended to read: 
(b). Tender to the buyer of a nonnegotiable document of title or of a written direction 
te record directing the bailee to deliver is sufficient tender unless the buyer 
seasonably objects, and except as otherwise provided in Article 9-A receipt by the 
bailee of notification of the buyer's rights fixes those rights as against the bailee and 
all third persons; but risk of loss of the goods and of any failure by the bailee to honor 
the nonnegotiable document of title or to obey the direction remains on the seller 
until the buyer has had a reasonable time to present the document or direction, and a 
refusal by the bailee to honor the document or to obey the direction defeats the 
tender. 
Sec. B-11. 11 MRSA §2-S03, sub-§(S) is amended to read: 
(5). Where the contract requires the seller to deliver documents, 
(a). He The seller must tender all such documents in correct form, except as provided 
in this Article with respect to bills of lading in a set (section 2-323, subsection (2»; 
and 
(b). Tender through customary banking channels is sufficient and dishonor of a draft 
accompanying or associated with the documents constitutes nonacceptance or 
rejection. 
UNIFORM COMMENT 
1. The maj or general rules governing the manner of proper or due tender of delivery 
are gathered in this section. The term "tender" is used in this Article in two different 
senses. In one sense it refers to "due tender" which contemplates an offer coupled with a 
present ability to fulfill all the conditions resting on the tendering party and must be 
followed by actual performance if the other party shows himself ready to proceed. 
Unless the context unmistakably indicates otherwise this is the meaning of "tender" in 
this Article and the occasional addition of the word "due" is only for clarity and 
emphasis. At other times it is used to refer to an offer of goods or documents under a 
contract as if in fulfillment of its conditions even though there is a defect when measured 
against the contract obligation. Used in either sense, however, "tender" connotes such 
performance by the tendering party as puts the other party in default if he fails to proceed 
in some manner. These concepts of tender would apply to tender of either tangible or 
electronic documents of title. 
**** 
7. Under subsection (5) documents are never "required" except where there is an 
express contract term or it is plainly implicit in the peculiar circumstances of the case or 
in a usage of trade. Documents may, of course, be "authorized" although not required, 
but such cases are not within the scope of this subsection. When documents are required, 
there are three main requirements of this subsection: (1) "All": each required document 
is essential to a proper tender; (2) "Such": the documents must be the ones actually 
required by the contract in terms of source and substance; 
(3) "Correct form": All 
documents must be in correct form. 
These requirements apply to both tangible and 
electronic documents of title. When tender is made through customary banldng channels, 
a draft may accompany or be associated with a document of title. The language has been 
broadened to allow for drafts to be associated with an electronic document of title. 
Compare Section 2-104(2) defmition of fmancing agency. 
When a prescribed document cannot be procured, a question of fact arises under the 
provision of this Article on substituted performance as to whether the agreed manner of 
delivery is actually commercially impracticable and whether the substitute is 
commercially-reasonable. 
Sec. 8-12. 11 MRSA §2-S0S, sub-§(l), '(b) is amended to read: 
(b). A nonnegotiable bill of lading to himself the seller or ffis the seller's nominee 
reserves possession of the goods as security, but except in a case of conditional 
delivery under section 2-507, subsection (2) a nonnegotiable bill of lading naming the 
buyer as consignee reserves _ no security interest even though the seller retains 
possession or control of the bill of lading. 
Sec.8-13. 11 MRSA §2-50S, sub-§(2) is amended to read: 
(2). 
When shipment by the seller with reservation of a security interest is in 
violation of the contract for sale, it constitutes an improper contract for transportation 
within section 2-504 but impairs neither the rights given to the buyer by shipment and 
identification of the goods to the contract nor the seller's powers as a holder of a 
negotiable document of title. 
UNIFORM COMMENT 
* * * * 
5. Under subsection (2) an improper reservation by the seller which would constitute 
a breach in no way impairs such of the buyer's rights as result from identification of the 
goods. The security title reserved by the seller under subsection (1) does not protect his 
holding retaining possession or control of the document or the goods for the purpose of 
exacting more than is due him under the contract. 
) 
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Sec. B-14. 11 MRSA §2-506, sub-§(2) is amended to read: 
(2). The right to reimbursement of a fmancing agency which has in good faith 
honored or purchased the draft under commitment to or authority from the buyer is not 
impaired by subsequent discovery of defects with reference to any relevant document 
which was apparently regular on its face. 
UNIFORM COMMENT 
* * * * 
5. The deletion of the language "on its face" from subsection (2) is designed to 
accommodate electronic documents of title without changing the requirement of 
regularity of the document. 
Sec. B-15. 11 MRSA §2-509, sub-§(2), fjf(a) is amended to read: 
(a). On his the buyer's receipt of possession or control of a negotiable document of 
title covering the goods; or 
Sec. B-16. 11 MRSA §2-509, sub-§(2), fjf(c) is amended to read: 
(c). 
After his the buyer's receipt of possession or control of a nonnegotiable 
document of title or other written direction to deliver in a record, as provided in 
section 2-503, subsection (4), paragraph (b). 
UNIFORM COMMENT 
*~** 
4. Where the agreement provides for delivery of the goods as between the buyer and 
seller without removal from the physical possession of a bailee, the provisions on manner 
of tender of delivery apply on the point of transfer of risk. Due delivery of a negotiable 
document of title covering the goods or acknowledgment by the bailee that he holds for 
the buyer completes the "delivery" and passes the risk. See defInition of delivery in 
Article 1, Section 1-201 and the defmition of control in Article 7, Section 7-106. 
Sec. B-17. 11 MRSA §2-605, sub-§(2) is amended to read: 
(2). 
Payment against documents made without reservation of rights precludes 
recovery ofthe payment for defects apparent on the face of in the documents. 
UNIFORM COMMENT 
**** 
4. Subsection (2) applies to the particular case of documents the same principle which 
the section on effects of acceptance applies to the case of goods. The matter is dealt with 
in this section in terms of "waiver" of obj ections rather than of right to revoke acceptance, 
partly to avoid any confusion with the problems of acceptance of goods and partly 
because defects in documents which are not taken as grounds for rejection are generally 
minor ones. The only defects concerned in the present subsection are defects in the 
documents which are apparent. on their face. This rule applies to both tangible and 
electronic documents of title. Where payment is required against the documents they 
must be inspected before payment, and the payment then constitutes acceptance of the 
documents. 
Under the section dealing with this problem, such acceptance of the 
documents does not constitute an acceptance of the goods or impair any options or 
remedies of the buyer for their improper delivery. Where the documents are delivered 
without requiring such contemporary action as payment from the buyer, the reason of the 
next section on what constitutes acceptance of goods, applies. Their acceptance by non-
objection is therefore postponed until after a reasonable time for their inspection. In 
either situation, however, the buyer "waives" only what is the defects apparent on the face 
efin the documents. 
Sec. B-18. 11 MRSA §2-705, sub-§(3), Cff(c) is amended to read: 
(c). If a negotiable document of title has been issued for goods the bailee is not 
obliged to obey a notification to stop until surrender of possession or control of the 
document. 
UNIFORM COMMENT 
**** 
3. A diversion of a shipment is not a "reshipment" under subsection (2)( c) when it is 
merely an incident to the original contract of transportation. Nor is the procurement of 
"exchange bills" of lading which change only the name of the consignee to that of the 
buyer's local agent but do not alter the destination of a reshipment. 
Acknowledgment by the carrier as a "warehouseman" within the meaning of this 
Article requires a contract of a truly different character from the original shipment, a 
contract not in extension of transit but as a warehouseman. 
4. Subsection (3)( c) makes the bailee's obedience of a notification to stop conditional 
upon the surrender of possession or control of any outstanding negotiable document. 
Sec. B-19. 11 MRSA §2-1103, sub-§(l), Cff(a), as enacted by PL 1991, c. 805, 
§4, is amended to read: 
(a). "Buyer in ordinary course of business" means a person who, in good faith and 
without knowledge that the sale to that person is in violation of the ownership rights 
or security interest or leasehold interest of a third party in the goods, buys in ordinary 
course from a person in the business of selling goods of that kind but does not include 
a pawnbroker. Buying may be for cash or by exchange of other property or on 
secured or unsecured credit and includes receiving acquiring goods or documents of 
title under a preexisting contract for sale but does not include a transfer in bulk or as 
security for or in total or partial satisfaction of a money debt. 
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Sec. B-20. 11 MRSA §2-1103, sub-§(l), ~(o), as enacted by PL 1991, c. 805, 
§4, is amended to read: 
(0). "Lessee in ordinary course of business" means a person who, in good faith and 
without lmowledge that the lease to that person is in violation of the ownership rights 
or security interest or leasehold interest of a third party in the goods, leases in 
ordinary course from a person in the business of selling or leasing goods of that kind 
but does not include a pawnbroker. "Leasing" may be for cash or by exchange of 
other property or on secured or unsecured credit and includes receiving acquiring 
goods or documents of title under a preexisting lease contract but does not include a 
transfer in bulk or as security for or in total or partial satisfaction of a money debt. 
Sec. B-21. 11 MRSA §2-1514, suh-§(2), as enacted by PL 1991, c. 805, §4, is 
amended to read: 
(2). A lessee's failure to reserve rights when paying rent or other consideration 
against documents precludes recovery of the payment for defects apparent on the face of 
in the documents. 
Sec. B-22. 11 MRSA §2-1526, sub-§(2), .,-r(c), as enacted by PL 1991, c. 805, 
§4, is amended to read: 
(c). 
Such an aclmowledgment to the lessee by a carrier via reshipment or as £! 
warehouse operator. 
Sec. B-23. 11 MRSA §4-104, sub-§(3), as amended by PL 2003, c. 594, §9, is 
further amended to read: 
(3). +he "Control" as provided in section 7-1106 and the following defInitions in 
other Articles apply to this Article: 
"Acceptance. " 
"Alteration. " 
"Cashier's check." 
"Certificate of deposit." 
"Certified Check." 
"Check." 
"Demand draft." 
"Draft." 
"Good faith." 
"Holder in due course." 
"Instrument. " 
"NotiCe of dishonor." 
"Order." 
"Ordinary care." 
"Person entitled to enforce." 
"Presentment. " 
"Promise." 
"Prove." 
"Teller's check." 
"Unauthorized signature." 
Section 3-1409. 
Section 3-1407. 
Section 3-1104. 
Section 3-1104. 
Section 3-1409. 
Section 3-1104. 
Section 3-1104. 
Section 3-1104. 
Section 3-1103. 
Section 3-1102. 
Section 3-1104. 
Section 3-1503. 
Section 3-1103. 
Section 3-1103. 
Section 3-1301. 
Section 3-1501. 
Section 3-1103. 
Section 3-1103. 
Section 3-1104. 
Section 3-1403. 
UNIFORM COMMENT 
**** 
5. Paragraph (a)(6): "Documentary draft" applies even though the documents do not 
accompany the draft but are to be received by the drawee or other payor before 
acceptance or payment of the draft. Documents may be either in electronic or tangible 
fonn. See Article 5, Section 5-102, Comment 2 and Article 1, Section 1-201 (definition 
of "document of title"). 
Sec. B-24. 11 MRSA §4-208, sub-§(3), as amended by PL 1999, c. 699, Pt. B, 
§ 17 and affected by §28, is further amended to read: 
(3). Receipt by a collecting bank of a final settlement for an item is a realization on 
its security interest in the item, accompanying documents and proceeds. So long as the 
bank does not receive final settlement for the item or give up possession of the item or 
possession or control of the accompanying documents for purposes other than collection, 
the security interest continues to that extent and is subject to Article 9- 9-A, but: 
(a). No security agreement is necessary to make the security interest enforceable 
(section 9-1203, subsection (2), paragraph (c), subparagraph (i)); aBEl 
(b). No filing is required to perfect the security interest; and 
(c). The security interest has priority over conflicting perfected security interests in 
the item, accompanying documents or proceeds. 
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Sec. B-25. 11 MRSA §5-1110, suh-§(2), as enacted by PL 1997, c. 429, Pt. A, 
§2 and affected by §4, is amended to read: 
(2). 
The warranties in subsection (1) are in addition to warranties arising under 
Articles 3-A, 4, ::;. 7-A and 8-A because of the presentation or transfer of documents 
covered by any of those Articles. 
Sec. B-26. 11 MRSA §8-1103, suh-§(7) is enacted to read: 
(7). A document of title is not a fmancial asset unless section 8-1102, subsection (1 ), 
paragraph 0), subparagraph (iii) applies. 
UNIFORM COMMENT 
* * * * 
8. Subsection (g) allows a document of title to be a fmancial asset and thus subject to 
the indirect holding system rules of Part 5 only to the extent that the intermediary and the 
person entitled under the document agree to do so. This is to prevent the inadvertent 
application of the Part 5 rules to intermediaries who may hold either electronic or tangible 
documents of title. 
Sec. B-27. 11 MRSA §9-1102, suh-§(30), as enacted by PL 1999, c. 699, Pt. A, 
§2 and affected by §4, is amended to read: 
(30). "Document" means a document of title or a receipt of the type described in 
section~ 7-1201, subsection (2). 
Sec. 28. 11MRSA §9-1102, sub-§(80), lJl(d), as enacted by PL 1999, c. 699, Pt. 
A, §2 and affected by §4, is amended to read: 
(d). Transmitting or producing and transmitting electricity, steam, gas or water. 
+he "Control" as provided in section 7-1106 and the following definitions in other 
Articles apply to this Article: 
"Applicant" 
Section 5-1102. 
"Beneficiary" 
Section 5-1102. 
) 
"Broker" 
Section 8-1102. 
"Certificated security" 
Section 8-1102. 
"Check" 
Section 3-1104. 
"Clearing corporation" 
Section 8-1102. 
"Contract for sale" 
Section 2-106. 
"Customer" 
Section 4-104. 
"Entitlement holder" 
Section 8-1102. 
"Financial asset" 
Section 8-1102. 
"Holder in due course" 
Section 3-1302. 
"Issuer" (with respect to a letter of 
Section 5-1102. 
credit or letter-of-credit right) 
"Issuer" (with respect to a security) 
Section 8-1201. 
"Issuer" (with respect to documents of 
Section 7-1102. 
title) 
"Lease" 
Section 2-1103. 
"Lease agreement" 
Section 2-1103. 
"Lease contract" 
Section 2-1103. 
"Leasehold interest" 
Section 2-1103. 
"Lessee in ordinary course of 
Section 2-1103. 
business" 
"Lessor" 
Section 2-1103. 
"Lessor's residual interest" 
Section 2-1103. 
"Letter of credit" 
Section 5-1102. 
) 
"Merchant" 
Section 2-104. 
"Negotiable instrument" 
Section 3-1104. 
"Nominated person" 
Section 5-1102. 
"Note" 
Section 3-1104. 
"Proceeds of a letter of credit" 
Section 5-114. 
"Prove" 
Section 3-1103. 
"Sale" 
Section 2-106. 
"Securities account" 
Section 8-1501. 
"Securities intermediary" 
Section 8-1102. 
"Security" 
Section 8-1102. 
"Security certificate" 
Section 8-1102. 
"Security entitlement" 
Section 8-1102. 
"Uncertificated security" 
Section 8-1102. 
UNIFORM COMMENT 
* * * * 
16. "Document." The definition of "document" is unohanged in substanoe from the 
oOFfesf3onding deHnitions in foHnef Seotion 9 19~. incorporates both tangible and 
electronic documents of title. See Section 1-201 (15)[1-20 l(b )16] and Comment 15 [lQl. 
Legislative Note: Former Article 1 defined document of title in section 1-201 (15) and 
accompanying comment 15. Revised Article 1 defines document of title in Section I-
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(b)(16) and accompanying comment 16. Cross references should be adapted' 
depending upon which version of Article 1 is inforce in the jurisdiction. 
Sec. B-29. 11 MRSA §9-1203, sub-§(2), ~(c), as enacted by PL 1999, c. 699, 
Pt. A, §2 and affected by §4, is ~ended to read: 
(c). One of the following conditions is met: 
(i) The debtor has authenticated a security agreement that provides a description 
of the collateral and, if the security interest covers timber to be cut, a description 
of the land concerned; 
(ii) The collateral is not a certificated security and is in the possession of the 
secured party under section 9-1313 pursuant to the debtor's security agreement; 
(iii) The collateral is a certificated security in registered form and the security 
certificate has been delivered to the secured party under section 8-1302 pursuant 
to the debtor's security agreement; or 
(iv) 
The collateral is deposit accounts, electronic chattel paper, investment 
property, ef letter-of-credit rights or electronic documents, and the secured party 
has control under sections 9-1104, 9-1105, 9-1106 or 9-1107 pursuant to the 
debtor's security agreement. 
UNIFORM COMMENT 
**** 
4. Possession, Delivery, or Control Pursuant to Security Agreement. The other 
alternatives in subsection (b )(3) dispense with the requirement of an authenticated 
security agreement and provicie alternative evidentiary tests. Under paragraph (3)(B), the 
secured party's possession substitutes for the debtor's authentication under paragraph 
(3)(A) if the secured party's possession is "pursuant to the debtor's security agreement." 
That phrase refers to the debtor's agreement to the secured party's possession for the 
purpose of creating a security interest. The phrase should not be confused with the phrase 
"debtor has authenticated a security agreement," used in paragraph (3)(A), which 
contemplates the debtor's authentication of a record. In the unlikely event that possession 
is obtained without the debtor's agreement, possession would not suffice as a substitute 
for an authenticated security agreement. However, once the security interest has become 
enforceable and has attached, it is not impaired by the fact that the secured party's 
possession is maintained without the agreement of a subsequent debtor (e.g., a 
transferee). Possession as contemplated by Section 9-313 is possession for purposes of 
subsection (b)(3)(B), even though it may not constitute possession "pursuant to the 
debtor's agreement" and consequently might not serve as a substitute for an authenticated 
security agreement under subsection (b)(3)(A). Subsection (b)(3)(C) provides that 
delivery of a certificated security to the secured party under Section 8-301 pursuant to the 
debtor's security agreement is sufficient as a substitute for an authenticated security 
agreement. Similarly, under subsection (b)(3)(D), control of investment property, a 
deposit account, electronic chattel paper, 6f a letter-of-credit right, or electronic 
documents satisfies the evidentiary test if control is pursuant to the debtor's security 
agreement. 
Sec. B-30. 11 MRSA §9-1207, sub-§(3), as enacted by PL 1999, c. 699, Pt. A, 
§2 and affected by §4, is amended to read: 
(3). 
Except as otherwise provided in subsection (4), a secured party having 
possession of collateral or control of collateral under section 7-1106, 9-1104, 9-1105, 
9-1106 or 9-1107: 
(a). May hold as additional security any proceeds, except money or funds, received 
from the collateral; 
(b). Shall apply money or funds received from the collateral to reduce the secured 
obligation, unless remitted to the debtor; and 
(c). May create a security interest in the collateral. 
Sec. B-31. 11 MRSA §9-1208, sub-§(2), '1f(d), as enacted by PL 1999, c. 699, 
Pt. A, §2 and affected by §4, is amended to read: 
(d). A secured party having control of investment property under section 8-1106, 
subsection (4), paragraph (b) or 9-1106, subsection (2) shall send to the securities 
intermediary or commodity intermediary with which the security entitlement or 
commodity contract is maintained an authenticated record that releases the securities 
intermediary or commodity intermediary from any further obligation to comply with 
entitlement orders or directions originated by the secured party; aREl 
Sec. B-32. 11 MRSA §9-1208, sub-§(2), '1f(e), as enacted by PL 1999, c. 699, 
Pt. A, §2 and affected by §4, is amended to read: 
(e). A secured party having control of a letter-of-credit right under section 9-1107 
shall send to each person having an unfulfilled obligation to payor deliver proceeds 
of the letter of credit to the secured party an authenticated release from any further 
obligation to payor deliver proceeds of the letter of credit to the secured party.,.; and 
Sec. B-33. 11 MRSA §9-1208, sub-§(2), '1f(f) is enacted to read: 
(fl. A secured party having control of an electronic document shall: 
(1) Give control of the electronic document to the debtor or its designated 
custodian; 
(2) If the debtor designates a custodian that is the designated custodian with 
which the authoritative copy of the electronic document is maintained for the 
secured party, communicate to the custodian an authenticated record releasing the 
designated custodian from any further obligation to comply with instructions 
originated by the secured party and instructing the custodian to comply with 
instructions originated by the debtor; and 
(3) Take appropriate action to enable the debtor or its designated custodian to 
make copies of or revisions to the authoritative copy that add or change an 
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identified assignee of the authoritative copy without the consent of the secured 
lli!!1Y. 
UNIFORM COMMENT 
**** 
2. Scope and Purpose. This section imposes duties on a secured party who has 
control of a deposit account, electronic chattel paper, investment property, eF a letter-of-
credit right, or electronic documents of title. The duty to terminate the secured party's 
control is analogous to the duty to file a termination statement, imposed by Section 9-
513. Under subsection (a), it applies only when there is no outstanding secured obligation 
and the secured party is not committed to give value. The requirements of this section can 
be varied by agreement under Section 1-102(3). For example, a debtor could by contract 
agree that the secured party may comply with subsection (b) by releasing control more 
than 10 days after demand. Also, duties under thjs section should not be read to conflict 
with the terms of the collateral itself. For example, if the collateral is a time deposit 
account, subsection (b )(2) should not require a secured party with control to make an 
early withdrawal of the funds (assuming that were possible) in order to pay them over to 
the debtor or put them in an account in the debtor's name. 
Sec. B-34. 11 MRSA §9-1301, sub-§(3), as enacted by PL 1999, c. 699, Pt. A, 
§2 and affected by §4, is amended to read: 
(3). 
Except as otherwise provided in subsection (4), while tangible negotiable 
documents, goods, instruments, money or tangible chattel paper is located in a 
jurisdiction, the local law of that jurisdiction governs: 
(a). Perfection of a security interest in the goods by filing a fixture filing; 
(b). Perfection of a security interest in timber to be cut; and 
(c). The effect of perfection or nonperfection and the priority of a nonpossessory 
security interest in the collateral. 
UNIFORM COMMENT 
**** 
5. Law Governing Perfection: Exceptions. The general rule is subject to several 
exceptions. It does not apply to goods covered by a certificate of title (see Section 9-303), 
deposit accounts (see Section 9-304), investment property (see Section 9-305), or letter-
of-credit rights (see Section 9-306). Nor does it apply to possessory security interests, i.e., 
security interests that the secured party has perfected by taking possession of the 
collateral (see paragraph (2)), security interests perfected by filing a fixture filing (see 
subparagraph (3)(A)), security interests in timber to be cut (subparagraph (3)(B)), or 
security interests in as-extracted collateral (see paragraph (4)). 
a. Possessory Security Interests. Paragraph (2) applies to possessory security 
interests and provides that perfection is governed by the local law of the jurisdiction in 
which the collateral is located. This is the rule of former Section 9-103(1)(b), except 
paragraph (2) eliminates the troublesome "last event" test of former law. 
The distinction between nonpossessory and possessory security interests creates the 
potential for the same jurisdiction to apply two different choice- of-law rules to determine 
perfection in the same collateral. For example, were a secured party in possession of an 
instrument or a tangible document to relinquish possession in reliance on temporary 
perfection, the applicable law immediately would change from that of the location of the 
collateral to that of the location of the debtor. The applicability of two different choice-
of-law rules for perfection is unlikely to lead to any material practical problems. The 
perfection rules of one Article 9 jurisdiction are likely to be identical to those of another. 
Moreover, under paragraph (3), the relative priority of competing security interests in 
tangible collateral is resolved by reference to the law of the jurisdiction in which the 
collateral is located, regardless of how the security interests are perfected. 
**** 
7. Law Governing Effect of Perfection and Priority: Goods, Documents, 
Instruments, Money, Negotiable Documents, and Tangible Chattel Paper. Under 
former Section 9-103, the law of a single jurisdiction governed both questions of 
perfection and those of priority. This Article generally adopts that approach. See 
paragraph (1). But the approach may create problems if the debtor and collateral are 
located in different jurisdictions. For example, assume a security interest in equipment 
located in Pennsylvania is perfected by filing in illinois, where the debtor is located. If 
the law of the jurisdiction in which the debtor IS located were to govern priority, then the 
priority of an execution lien on goods located in Pennsylvania would be governed by 
rules enacted by the illinois legislature. 
To address this problem, paragraph (3)(C) divorces questions of perfection from 
questions of "the effect of perfection or nonperfection and the priority of a security 
interest." Under paragraph (3)(C), the rights of competing claimants to tangible collateral 
are resolved by reference to the law of the jurisdiction in which the collateral is located. 
A similar bifurcation applied to security interests in investment property under former 
Section 9-103(6). See Section 9-305. 
Paragraph (3)(C) applies the law of the situs to determine priority only with respect to 
goods (including fixtures), instruments, money, tangible negotiable documents, and 
tangible chattel paper. Compare former Section 9-103(1), which applied the law of the 
location of the collateral to documents, instruments, and "ordinary" (as opposed to 
"mobile") goods. This Article does not distinguish among types of goods. The 
ordinary/mobile goods distinction appears to address concerns about where to file and 
search, rather than concerns about priority. There is no reason to preserve this distinction 
under the bifurcated approach. 
Particularly serious confusion may arise when the choice-of-Iaw rules of a given 
jurisdiction result in each of two competing security interests in the same collateral being 
governed by a different priority rule. The potential for this confusion existed under 
former Section 9-103(4) with respect to chattel paper: Perfection by possession was 
governed by the law of the location of the paper, whereas perfection by filing was 
governed by the law of the location of the debtor. Consider the mess that would have 
been created if the language or interpretation of former Section 9-308 were to differ in the 
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two relevant States, or if one of the relevant jurisdictions (e.g., a foreign country) had not 
adopted Article 9. The potential for confusion could have been exacerbated when a 
secured party perfected both by taking possession in the State where the collateral is 
located (State A) and by filing in the State where the debtor is located (State B)--a 
common practice for some chattel paper fmancers. By providing that the law of the 
jurisdiction in which the collateral is located governs priority, paragraph (3) substantially 
diminishes this problem. 
Sec. B-35. 11 MRSA §9-1310, sub-§(2), ~(e), as enacted by PL 1999, c. 699, 
Pt. A, §2 and affected by §4, is amended to read: 
(e). 
In certificated securities, documents, goods or instruments that is perfected 
without filing, control or possession under section 9-1312, subsection (5), (6) or (7); 
Sec. B-36. 11 MRSA §9-1310, suh-§(2), Gf[(h), as enacted by PL 1999, c. 699, 
Pt. A, §2 and affected by §4, is amended to read: 
(h). In deposit accounts, electronic chattel paper, electronic documents, investment 
property or letter-of-credit rights that is perfected by control under section 9-1314; 
Sec. B-37. 11 MRSA §9-1312, sub-§(5), as enacted by PL 1999, c. 699, Pt. A, 
§2 and affected by §4, is amended to read: 
(5). A security interest in certificated securities, negotiable documents or instruments 
is perfected without filing or the taking of possession or control for a period of 20 days 
from the time it attaches to the extent that it arises for new value given under an 
authenticated security agreement. 
UNIFORM COMMENTS 
**** 
3. Chattel Paper; Negotiable Documents. Subsection (a) further provides that filing 
is available as a method of perfection for security interests in chattel paper and negotiable 
documents. Tangible chattel paper is sometimes delivered to the assignee, and sometimes 
left in the hands of the assignor for collection. Subsection (a) allows the assignee to 
perfect its security interest by filing in the latter case. Alternatively, the assignee may 
perfect by taking possession. See Section 9-3 13 (a). An assignee of electronic chattel 
paper may perfect by taking control. See Sections 9-314(a), 9-105. The security interest 
of an assignee who takes possession or control may qualify for priority over a competing 
security interest perfected by filing. See Section 9-330. 
Negotiable documents may be, and usually are, delivered to the secured party. See 
Article 1, Section 1-201 Cdefmition of "delivery"). The secured party's taking possession 
of a tangible document or control of an electronic document will suffice as a perfection 
step. See Section~ 9-3 13 (a), 9-314 and 7-106. However, as is the case with chattel paper, 
a security interest in a negotiable document may be perfected by filing. 
**** 
7. Goods Covered by Document of Title. Subsection (c) applies to goods in the 
possession of a bailee who has issued a negotiable document covering the goods. 
Subsection (d) applies to goods in the possession of a bailee who has issued a 
nonnegotiable document of title, including.a document of title that is "non- negotiable" 
under Section 7-104. Section 9-313 governs perfection of a security interest in goods in 
the possession of a bailee who has not issued a document of title. 
Subsection (c) clarifies the perfection and priority rules in fonner Section 9-304(2). 
Consistently with the provisions of Article 7, subsection (c) takes the position that, as 
long as a negotiable document covering goods is outstanding, title to the goods is, so to 
say, locked up in the document. Accordingly, a security interest in goods covered by a 
negotiable document may be perfected by perfecting a security interest in the document. 
The security· interest also may be perfected by another method, e.g., by filing. The 
priority rule in subsection (c) governs only priority between (i) a security interest in 
goods which is perfected by perfecting in the document and (ii) a security interest in the 
goods which becomes perfected by another method while the goods are covered by the 
document. 
Example 1: While wheat is in a grain elevator and covered by a negotiable 
warehouse receipt, Debtor creates a security interest in the wheat in favor of SP-l and SP-
2. SP-l perfects by . filing a fmancing statement covering "wheat." Thereafter, SP-2 
perfects by filing a fmancing statement describing the warehouse receipt. Subsection 
(c)(I) provides that SP-2's security interest is perfected. Subsection (c)(2) provides that 
SP-2's security interest is senior to SP-l's. 
Example 2: The facts are as in Example 1, but SP-l's security interest attached and 
was perfected before the goods were delivered to the grain elevator. Subsection (c )(2) 
does not apply, because SP-l's security interest did not become perfected during the time 
that the wheat was in the possession of a bailee. Rather, the first-to-file-or-perfect priority 
rule applies. See Section§. 9-322 and 7-503. 
A secured party may become "a holder to whom a negotiable document of title has 
been duly negotiated" under Section 7-501. If so, the secured party acquires the rights 
specified by Article 7. Article 9 does not limit those rights, which may include the right to 
priority over an earlier-perfected security interest. See Section 9-331 (a). 
Subsection (d) takes a different approach to the problem of goods covered by a 
nonnegotiable document. Here, title to the goods is not looked on as being locked up in 
the document, and the secured party may perfect its security interest directly in the goods 
by filing as to them. The subsection provides two other methods of perfection: issuance 
of the document in the secured party's name (as consignee of a straight bill of lading or 
the person to whom delivery would be made under a non-negotiable warehouse receipt) 
and receipt of notification of the secured party's interest by the bailee. Perfection under 
subsection (d) occurs when the bailee receives notification of the secured party's interest 
in the goods, regardless of who sends the notification. Receipt of notification is effective 
to perfect, regardless of whether the bailee responds. Unlike fonner Section 9-304(3), 
from which it derives, subsection (d) does not apply to goods in the possession of a bailee 
who has not issued a document of title. Section 9-313(c) covers that case and provides 
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that perfection by possession as to goods not covered by a document requires the bailee's 
acknowledgment. 
8. Temporary Perfection Without Having First Otherwise Perfected. Subsection 
(e) follows former Section 9-304(4) in giving perfected status to security interests in 
certificated securities, instruments, and negotiable documents for a short period (reduced 
from 21 to 20 days, which is the time period generally applicable in this Article), 
although there has been no filing and the collateral is in the debtor's possession or control. 
The 20-day temporary perfection runs from the date of attachment. There is no limitation 
on the purpose for which the debtor is in possession, but the secured party must have 
given "new value" (defmed in Section 9-102) under an authenticated security agreement. 
9. Maintaining Perfection After Surrendering Possession. There are a variety of 
legitimate reasons--many of them are described in subsectio:ns Cf) and (g)--why certain 
types of collateral must be released temporarily to a debtor. No useful purpose would be 
served by cluttering the files with records of such exceedingly short term transactions. 
Subsection (f) affords the possibility of 20-day perfection in negotiable documents 
and goods in the possession of a bailee but not covered by a negotiable document. 
Subsection (g) provides for 20-day perfection in certificated securities and instruments. 
These subsections derive from former Section 9-305(5). However, the period of 
temporary perfection has been reduced from 21 to 20 days, which is the time period 
generally applicable in this Article, and "enforcement" has been added in subsection (g) 
as one of the special and limited purposes for which a secured party can release an 
instrument or certificated security to the debtor and still remain perfected. The period of 
temporary perfection runs from the date a secured party who already has a perfected 
security interest turns over the collateral to the debtor. There is no new value requirement, 
but the turnover must be for one or more of the purposes stated in subsection (f) or (g). 
The 20-day period may be extended by perfecting as to the collateral by another method 
before the period expires. However, if the security interest is not perfected by another 
method until after the 20-day period expires, there will be a gap during which the security 
interest is unperfected. 
Temporary perfection extends only to the negotiable document or goods under 
subsection (f) and only to the certificated security or instrument under subsection (g). It 
does not extend to proceeds.· If the collateral is sold, the security interest will continue in 
the proceeds for the period specified in Section 9-315. 
Subsections (f) and (g) deal only with perfection. Other sections of this Article 
govern the priority of a security interest in goods after surrender of possession or control 
of the document covering them. In the case of a purchase-money security interest in 
inventory, priority may be conditioned upon giving notification to a prior inventory 
financer. See Section 9-324. 
Sec. B-38. 11 MRSA §9-1313, suh-§(l), as enacted by PL 1999, c. 699, Pt. A, 
§2 and affected by §4, is amended to read: 
(1). 
Except as otherwise provided in subsection (2), a secured party may perfect a 
security interest in tangible negotiable documents, goods, instruments, money or tangible 
chattel paper by taking possession of the collateral. A secured party may perfect a 
security interest in certificated securities by taking delivery of the certificated securities 
under section 8-1301. 
UNIFORM COMMENT 
* * * * 
2. Perfection by Possession. As under the common law of pledge, no filing is 
required by this Article to perfect a security interest if the secured party takes possession 
of the collateral. See Section 9-310(b)(6). 
This section permits a security interest to be perfected by the taking of possession 
only when the collateral is goods, instruments, tangible negotiable documents, money, or 
tangible chattel paper. Accounts, commercial tort claims, deposit accounts, investment 
property, letter-of-credit rights, letters of credit, and oil, gas, or other minerals before 
extraction are excluded. (But see Comment 6, below, regarding certificated securities.) A 
security interest in accounts and payment intangibles--property not ordinarily represented 
by any writing whose delivery operates to transfer the right to payment--may under this 
Article be perfected only by filing. This rule would not be affected by the fact that a 
security agreement or other record described the assignment of such collateral as a 
"pledge." Section 9-309(2) exempts from filing certain assignments of accounts or 
payment intangibles which are out of the ordinary course of financing. These exempted 
assignments are perfected when they attach. Similarly, under Section 9-309(3), sales of 
payment intangibles are automatically perfected. 
Sec. B-39. 11 MRSA §9-1314, sub-§(l), as enacted by PL 1999, c. 699, Pt. A, 
§2 and affected by §4, is amended to read: 
(1). 
A security interest in investment property, deposit accounts, letter-of-credit 
rights eF~ electronic chattel paper or electronic documents may be perfected by control of 
the collateral under section 7-1106, 9-1104, 9-1105, 9-1106 or 9-1107. 
Sec. B-40. 11 MRSA §9-1314, sub-§(2), as enacted by PL 1999, c. 699,Pt. A, 
§2 and affected by §4, is amended to read: 
(2). 
A security interest in deposit accounts, electronic chattel paper, eF 1etter-of-
credit rights or electronic documents is perfected by control under section 7-1106, 
9-1104, 9-1105 or 9-1107 when the secured party obtains control and remains perfected 
by control only while the secured party retains control. 
UNIFORM COMMENT 
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2. Control. This section provides for perfection by control with respect to investment 
property, deposit accounts, letter-of-credit rights, aHd electronic chattel paper, and 
electronic documents. For explanations of how a secured party takes control of these 
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types of collateral, see Sections 9-104 through 9-107 and Section 7-106. Subsection (b) 
explains when a security interest is perfected by control and how long a security interest 
remains perfected by control. Like Section 9-313(d) and for the same reasons, subsection 
(b) makes no reference to the doctrine of "relation back." See Section 9-313, Comment 5. 
As to an electronic document that is reissued in a tangible medium, Section 7-105, a 
secured party that is perfected by control in the electronic document' should file as to the 
document before relinquishing control in order to maintain continuous perfection in the 
document. See Section 9-308. 
Sec. :8-41. 11 MRSA §9-1317, sub-§(2), as enacted by PL 1999, c. 699, Pt. A, 
§2 and affected by §4, is aniended to read: 
(2). Except as otherwise provided in subsection (5), a buyer, other than a secured 
party, of tangible chattel paper, tangible documents, goods, instruments or a security 
certificate takes free of a security interest or agricultural lien if the buyer gives value and 
receives delivery of the collateral without knowledge of the security interest or 
agricultural lien and before it is perfected. 
Sec. B-42. 11 MRSA §9-1317, sub-§(4), as enacted by PL 1999, c. 699, Pt. A, 
§2 and affected by §4, is amended to read: 
(4). A licensee of a general intangible or a buyer, other than a secured party, of 
accounts, electronic chattel paper, electronic documents, general intangibles or 
investment property other than a certificated security takes free of a security interest if the 
licensee or buyer gives value without knowledge of the security interest and before it is 
perfected. 
UNIFORM COMMENT 
**** 
6. Purchasers Other Than Secured Parties. Subsections (b), (c), and (d) afford 
priority over an unperfected security interest to certain purchasers (other than secured 
parties) of collateral. They derive from former Sections 9- 301(l)(c), 2A-307(2), and 9-
301(d). Former Section 9-30 1 (l)(c) and (l)(d) provided that unperfected security interests 
are "subordinate" to the rights of certain purchasers. But, as former Comment 9 
suggested, the practical effect of subordination in this context is that the purchaser takes 
free of the security interest. To avoid any possible misinterpretation, subsections (b) and 
(d) of this section use the phrase "takes free." 
Subsection (b) governs goods, as well as intangibles of the type whose transfer is 
effected by physical delivery of the representative piece of paper (tangible chattel paper, 
tangible documents, instruments, and security certificates). To obtain priority, a buyer 
must both give value and receive delivery of the collateral without knowledge of the 
existing security interest and before perfection. Even if the buyer gave value without 
knowledge and before perfection, the buyer would take subject to the security interest if 
perfection occurred before physical delivery of the collateral to the buyer. Subsection ( c) 
contains a similar rule with respect to lessees of goods. Note that a lessee of goods in 
ordinary course of business takes free of all security interests created by the lessor, even 
if perfected. See Section 9-321. 
Normally, there will be no question when a buyer of tangible chattel paper, tangible 
documents, instruments, or security certificates "receives delivery" of the property. See 
Section 1-201 (defining "delivery"). However, sometimes a buyer or lessee of goods, 
such as complex machinery, takes delivery of the goods in stages and completes assembly 
at its own location. Under those circumstances, the buyer or lessee "receives delivery" 
within the meaning of subsections (b) and (c) when, after an inspection of the portion of 
the goods remaining with the seller or lessor, it would be apparent to a potential lender to 
the seller or lessor that another person might have an interest in the goods. 
The rule of subsection (b) obviously is not appropriate where the collateral consists of 
intangibles and there is no representative piece of paper whose physical delivery is the 
only or the customary method of transfer. Therefore, with respect to such intangibles 
(accounts, electronic chattel paper, electronic documents, general intangibles, and 
investment property other than certificated securities), subsection (d) gives priority to any 
buyer who gives value without knowledge, and before perfection, of the security interest. 
A licensee of a general intangible takes free of an unperfected security interest in the 
general intangible under the same circumstances. Note that a licensee of a general 
intangible in ordinary course of business takes rights under a nonexclusive license free of 
security interests created by the licensor, even if perfected. See Section 9-321. 
Unless Section 9-109 excludes the transaction from this Article, a buyer of accounts, 
chattel paper, payment intangibles, or promissory notes is a "secured party" (defined in 
Section 9-102), and subsections (b) and (d) do not determine priority of the security, 
interest created by the sale. Rather, the priority rules generally applicable to competing 
security interests apply. See Section 9 .. 322. 
Sec. B-43. 11 MRSA §9-1338, sub-§(2), as enacted by PL 1999, c. 699, Pt. A, 
§2 and affected by §4, is amended to read: 
(2). A purchaser, other than a secured party, of the collateral takes free of the 
security interest or agricultural lien to the extent that, in reasonable reliance upon the 
incorrect information, the purchaser gives value and, in the case of tangible chattel paper, 
tangible documents, goods, instruments or a security certificate, receives delivery of the 
collateral. 
Sec. B-44. 11 MRSA §9-1601,sub-§(2), as enacted by PL 1999, c. 699, Pt. A, 
§2 and affected by §4, is amended to read: 
(2). A secured party in possession of collateral or control of collateral under section 
7-1106,9-1104,9-1105,9-1106 or 9-1107 has the rights and duties provided in section 
9-1207. 
Sec. B-45. 17 MRSA §1663 is amended to read: 
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§1663. Issue of duplicate bills not so marked 
Any officer, agent or servant of a carrier who, with intent to defraud, issues or aids in 
issuing a duplicate or additional negotiable bill for goods in violation of Title 11, section 
+-4W- 7-1402, knowing that a former negotiable bill for the same goods or any part of 
them is outstanding and uncanceled, shall be is guilty of a crime, and upon conviction 
5hall must be punished for each offense by a fine of not more than $5,000 or by 
imprisonment for not more than 5 years, or by both. 
Sec. B-46. 17 MRSA §1703 is amended to read: 
§1703. Issue of duplicate receipts not so marked 
A -Yv'arehoussman warehouse, or any officer's agent, or servant of a 'llareheuseman 
warehouse, who issues or aids in issuing a duplicate or additional negotiable receipt for 
goods knowing that a former negotiable receipt for the same goods or any part of them is 
outstanding and uncanceled, without plainly placing upon the face thereof the word 
"Duplicate", except in the case of a lost or destroyed receipt after proceedings as provided 
for in Title 11, section +-4W- 7-1402, shall be is guilty of a crime, and upon conviction 
shall must be punished for each offense by a fme of not more than $5,000 or by 
imprisonment for not more than 5 years, or by both. 
Sec. B-47. 17MRSA §1705 is amended to read: 
§1705. Delivery of goods without obtaining negotiable receipt 
A warehouseman warehouse, or any officer, agent or servant of a v/arehouseman 
warehouse who delivers goods out of the possession of such '.varehouseman warehouse, 
knowing that a negotiable receipt the negotiation of which would transfer the right to the 
possession of such goods is outstanding and uncanceled, without obtaining the possession 
of such receipt at or before the time of such delivery, shall; except in the cases provided 
for in Title 11, sectipns +-4W- 7-1402 and ~ 
7-1403, be found i§ guilty of a crime, 
and upon conviction 5hall must be punished for each offense by a fine of not more than 
$1,000 or by imprisonment for not more than 11 months, or by both .. 
Sec. B-48. Effective date. This Part takes effect January 1,2010. 
SUMMARY 
This bill replaces Article 7 of the Uniform Commercial Code with the 2003 version 
of the Article as approved by the National Conference of Commissioners on Uniform 
State Laws. Explanatory notes and Uniform Comments as prepared by the uniform law 
commissioners are included.