(a) 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.

(b) 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:

Terms Used In California Commercial Code 7504

  • Bailee: means a person that by a warehouse receipt, bill of lading, or other document of title acknowledges possession of goods and contracts to deliver them. See California Commercial Code 7102
  • Bill of lading: means a document evidencing the receipt of goods for shipment issued by a person engaged in the business of transporting or forwarding goods. See California Commercial Code 1201
  • Buyer in ordinary course of business: means a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. See California Commercial Code 1201
  • Consignee: means a person named in a bill of lading to which or to whose order the bill promises delivery. See California Commercial Code 7102
  • Consignor: means a person named in a bill of lading as the person from which the goods have been received for shipment. See California Commercial Code 7102
  • Document of title: includes a bill of lading, dock warrant, dock receipt, warehouse receipt, or order for the delivery of goods, and also any other document which in the regular course of business or financing is treated as adequately evidencing that the person in possession of it is entitled to receive, hold, and dispose of the document and the goods it covers. See California Commercial Code 1201
  • Goods: means all things that are treated as movable for the purposes of a contract for storage or transportation. See California Commercial Code 7102

(1) by those creditors of the transferor which could treat the transfer as void under Section 2402 or 10308;

(2) 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;

(3) 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

(4) as against the bailee, by good-faith dealings of the bailee with the transferor.

(c) A diversion or other change of shipping instructions by the consignor in a nonnegotiable bill of lading which 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.

(d) Delivery of the goods pursuant to a nonnegotiable document of title may be stopped by a seller under Section 2705 or a lessor under Section 10526, 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.

(Repealed and added by Stats. 2006, Ch. 254, Sec. 49. Effective January 1, 2007.)

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