Code of Virginia

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Code of Virginia
Title 8.7. Commercial Code -- Warehouse Receipts, Bills of Lading and Other Documents of Title
Part 5. Warehouse Receipts and Bills of Lading: Negotiation and Transfer.
Part .
12/3/2020

Part 5. Warehouse Receipts and Bills of Lading: Negotiation and Transfer..

§ 8.7-501. Form of negotiation and requirements of "due negotiation".

(1) The following rules apply to a negotiable tangible document:

(a) If the document's original terms run to the order of a named person, the document is negotiated by his endorsement and delivery. After his endorsement in blank or to bearer any person can negotiate the document by delivery alone.

(b) If the document's original terms run to bearer, it is negotiated by delivery alone.

(c) If a document's original terms run to the order of a named person and it is delivered to him, the effect is the same as if the document had been negotiated.

(d) Negotiation of the document after it has been endorsed to a named person requires endorsement by the named person as well as delivery.

(e) A document is "duly negotiated" when it is negotiated in the manner stated in this subsection to a holder who 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 money obligation.

(2) The following rules apply to a negotiable electronic document:

(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. Endorsement by the named person is not required to negotiate the document.

(b) 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.

(c) 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 taking delivery of the document in settlement or payment of a monetary obligation.

(3) Endorsement of a nonnegotiable document neither makes it negotiable nor adds to the transferee's rights.

(4) The naming in a negotiable bill of a person to be notified of the arrival of the goods does not limit the negotiability of the bill nor constitute notice to a purchaser thereof of any interest of such person in the goods.

Code 1950, §§ 61-40 to 61-43, 61-50; 1964, c. 219; 2004, c. 200.

§ 8.7-502. Rights acquired by due negotiation.

(1) Subject to §§ 8.7-205 and 8.7-503, a holder to whom a negotiable document has been duly 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 terms of the document free of any defense or claim by him except those arising under the terms of the document or under this title. In the case of a delivery order the bailee's obligation accrues only upon acceptance and the obligation acquired by the holder is that the issuer and any endorser will procure the acceptance of the bailee.

(2) Subject to § 8.7-503, title and rights so acquired are not defeated by any stoppage of the goods represented by the document or by surrender of such goods by the bailee, and are not impaired even though (a) the negotiation or any prior 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 third person.

Code 1950, §§ 61-44, 61-50 to 61-52; 1964, c. 219; 2004, c. 200.

§ 8.7-503. Document to goods defeated in certain cases.

(1) A document confers no right in goods against a person who before issuance of the document had a legal interest or a perfected security interest in them and who neither:

(a) delivered or entrusted them or any document covering them to the bailor or his nominee with (i) actual or apparent authority to ship, store or sell, (ii) power to obtain delivery under § 8.7-403, or (iii) power of disposition under §§ 8.2-403, 8.2A-304(2), 8.2A-305(2), 8.9A-320, or § 8.9A-321(c) or other statute or rule of law; nor

(b) acquiesced in the procurement by the bailor or his nominee of any document.

(2) Title to goods based upon an unaccepted delivery order is subject to the rights of anyone to whom a negotiable warehouse receipt or bill of lading covering the goods has been duly negotiated. Such a title may be defeated under § 8.7-504 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 anyone to whom a bill issued by the freight forwarder is duly negotiated. However, delivery by the carrier in accordance with Part 4 of this title pursuant to its own bill of lading discharges the carrier's obligation to deliver.

Code 1950, § 61-44; 1964, c. 219; 2000, c. 1007; 2004, c. 200.

§ 8.7-504. 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 nonnegotiable, to whom the document has been delivered but not duly negotiated, acquires the title and rights that his transferor had or had actual authority to convey.

(2) In the case of a nonnegotiable 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 § 8.2-402 or § 8.2A-308; 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) by a 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

(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 to the consignee defeats the consignee's title to the goods if they have been delivered to a buyer or lessee in ordinary course of business and, in any event, defeats the consignee's rights against the bailee.

(4) Delivery pursuant to a nonnegotiable document may be stopped by a seller under § 8.2-705 or a lessor under § 8.2A-526, subject to the requirement of due notification there provided. A bailee honoring the seller's or lessor's instructions is entitled to be indemnified by the seller or lessor against any resulting loss or expense.

Code 1950, §§ 61-44, 61-45; 1964, c. 219; 2004, c. 200.

§ 8.7-505. Endorser not a guarantor for other parties.

The endorsement of a tangible document issued by a bailee does not make the endorser liable for any default by the bailee or by previous endorsers.

Code 1950, § 61-48; 1964, c. 219; 2004, c. 200.

§ 8.7-506. Delivery without endorsement; right to compel endorsement.

The transferee of a negotiable document has a specifically enforceable right to have his transferor supply any necessary endorsement but the transfer becomes a negotiation only as of the time the endorsement is supplied.

Code 1950, § 61-46; 1964, c. 219; 2004, c. 200.

§ 8.7-507. Warranties on negotiation or delivery of receipt or bill.

Where a person negotiates or delivers a document for value otherwise than as a mere intermediary under § 8.7-508, then, unless otherwise agreed, he warrants to his immediate purchaser, in addition to any warranty made in selling or leasing the goods, that:

(a) the document is genuine; and

(b) he has no knowledge of any fact that would impair the document's validity or worth; and

(c) his negotiation or delivery is rightful and fully effective with respect to the title to the document and the goods it represents.

Code 1950, § 61-47; 1964, c. 219; 2004, c. 200.

§ 8.7-508. Warranties of collecting bank as to documents.

A collecting bank or other intermediary known to be entrusted with documents on behalf of another or with collection of a draft or other claim against delivery of documents warrants by such delivery of the documents only its own good faith and authority. This rule applies even though the intermediary has purchased or made advances against the claim or draft to be collected.

1964, c. 219.

§ 8.7-509. Receipt or bill; when adequate compliance with commercial contract.

Whether a document is adequate to fulfill the obligations of a contract for sale, a contract for lease, or the conditions of a letter of credit is governed by the titles on sales (Title 8.2), leases (Title 8.2A), or letters of credit (Title 8.5A).

1964, c. 219; 2004, c. 200.