Rights Acquired by Due Negotiation

1. Law
2. Georgia Code
3. Commercial Code
4. Warehouse Receipts, Bills of Lading, and Other Documents of Title
5. Warehouse Receipts and Bills of Lading: Negotiation and Transfer
6. Rights Acquired by Due Negotiation

1. Subject to Code Sections 11-7-205 and 11-7-503, a holder to which a negotiable document of title has been duly negotiated acquires thereby:
   1. Title to the document;
   2. Title to the goods;
   3. All rights accruing under the law of agency or estoppel, including rights to goods delivered to the bailee after the document was issued; and
   4. The direct obligation of the issuer to hold or deliver the goods according to the terms 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 Code Section 11-7-503, title and rights so 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:
   1. The due negotiation or any prior due negotiation constituted a breach of duty;
   2. 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
   3. A previous sale or other transfer of the goods or document has been made to a third person.

(Code 1933, § 109A-7 - 502, enacted by Ga. L. 1962, p. 156, § 1; Ga. L. 2010, p. 481, § 1-1/HB 451.)

The 2010 amendment, effective May 27, 2010, redesignated subsections (1) and (2) as present subsections (a) and (b), respectively; substituted "Sections 11-7-205 and 11-7-503, a holder to which" for "Section 11-7-503 and to the provisions of Code Section 11-7-205 on fungible goods, a holder to whom" in the introductory paragraph; redesignated former paragraphs (1)(a) through (1)(d) as present paragraphs (a)(1) through (a)(4), respectively; in present paragraph (a)(4), substituted "the issuer" for "him", substituted "article, but in the" for "article. In the", inserted a comma, inserted "the baliee's", and inserted "of the delivery order"; in the introductory paragraph of present subsection (b), inserted "by due negotiation", inserted "of title", substituted "the goods" for "such goods", deleted a comma following "bailee", and substituted "if:" for "though the" at the end; added the paragraph designations in present subsection (b); in present paragraph (b)(1), added "The due" at the beginning and substituted a semicolon for "or even though any;"; in present paragraph (b)(2), added "Any" at the beginning, substituted "a negotiable tangible document or control of a negotiable electronic document" for "the document" in the middle, and substituted a semicolon for a comma; and substituted "A previous" for "even though a previous" at the beginning of present paragraph (b)(3). See the Editor's notes for applicability.

Editor's notes.

- Ga. L. 2010, p. 481, § 3-1, not codified by the General Assembly, provides that: "This Act applies to a document of title that is issued or a bailment that arises on or after the effective date of this Act. This Act does not apply to a document of title that is issued or a bailment that arises before the effective date of this Act even if the document of title or bailment would be subject to this Act if the document of title had been issued or bailment had arisen on or after the effective date of this Act. This Act does not apply to a right of action that has accrued before the effective date of this Act." This Act became effective May 27, 2010.

Ga. L. 2010, p. 481, § 3-2, not codified by the General Assembly, provides that: "A document of title issued or a bailment that arises before the effective date of this Act and the rights, documents, and interests flowing from that document or bailment are governed by any statute or other rule amended or repealed by this Act as if such amendment or repeal had not occurred and may be terminated, completed, consummated, or enforced under that statute or other rule." This Act became effective May 27, 2010.

JUDICIAL DECISIONS

Cited in Citizens Bank & Trust Co. v. SLT Whse. Co., 368 F. Supp. 1042 (M.D. Ga. 1974); Alpert v. Wickes Cos., 182 Ga. App. 51, 354 S.E.2d 674 (1987).

RESEARCH REFERENCES

Am. Jur. 2d.

- 15A Am. Jur. 2d, Commercial Code, § 61 et seq. 68A Am. Jur. 2d, Secured Transactions, § 109. 78 Am. Jur. 2d, Warehouses, §§ 68, 69, 72, 74, 80.

C.J.S.

- 13 C.J.S., Carriers, §§ 398-401. 80 C.J.S., Shipping, § 259. 93 C.J.S., Warehousemen and Safe Depositaries, § 36 et seq.

U.L.A.

- Uniform Commercial Code (U.L.A.) § 7-502.

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