2023 Laws of Puerto Rico › TITLE NINETEEN - Negotiable Instruments (§§ 1-24 — 2409) › Subtitle 2 - Commercial Transactions (§§ 401 — 2409) › Chapter 51 - Warehouse Receipts, Bills of Lading and Other Documents of Title (§§ 1401 — 1653) › Subchapter V - Warehouse Receipts And Bills of Lading: Negotiation and Transfer (§§ 1601 — 1609) › § 1604 - Rights acquired in the absence of due negotiation; effect of diversion; seller’s stoppage of delivery

(1) A transferee of a document, whether negotiable or non-negotiable, to whom the document has been delivered but not duly negotiated, acquires the title and rights which his transferor had or had actual authority to convey.
(2) In the case of a non-negotiable document, until but not after the bailee receives notification of the transfer, the rights of the transferee may be defeated:
(a) By those creditors of the transferor who could treat the sale as void under applicable law; or
(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 his rights, or
(c) 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 non-negotiable bill of lading which causes the bailee not to deliver to the consignee defeats the consignee’s title to the goods if they have been delivered to a buyer in ordinary course of business and in any event defeats the consignee’s rights against the bailee.
(4) Delivery pursuant to a non-negotiable document may be stopped by a seller under subsections (5), (6) and (7) of this section, below, and subject to the requirement of due notification there provided. A bailee honoring the seller’s instructions is entitled to be indemnified by the seller against any resulting loss or expense.
(5) The seller may stop delivery of goods in the possession of a carrier or other bailee when he discovers the buyer to be insolvent and may stop delivery of carload, truckload, planeload or larger shipments of express or freight when the buyer repudiates or fails to make a payment due before delivery or if for any other reason the seller has a right to withhold or reclaim the goods.
(6) As against such buyer the seller may stop delivery until:
(a) Receipt of the goods by the buyer; or
(b) acknowledgment to the buyer by any bailee of the goods except a carrier that the bailee holds the goods for the buyer; or
(c) such acknowledgment to the buyer by a carrier by reshipment or as warehouseman, or
(d) negotiation to the buyer of any negotiable document of title covering the goods.
(7)
(a) To stop delivery the seller must so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.
(b) After such notification the bailee must hold and deliver the goods according to the directions of the seller but the seller is liable to the bailee for any ensuing charges or damages.
(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 the document.
(d) A carrier who has issued a non-negotiable bill of lading is not obliged to obey a notification to stop received from a person other than the consignor.
History —Aug. 17, 1995, No. 208, added as § 7-504 on Sept. 19, 1996, No. 241, § 11.