The Warehouse Receipts Law governs receipts issued by a warehouseman for goods stored in a warehouse. A warehouse receipt is a document of title: it represents the goods described in it, so that dealing with the receipt is, in effect, dealing with the goods themselves, without having to physically move them. This allows stored goods to be sold, transferred, or pledged as security for a loan simply by transferring the receipt. A warehouse receipt may be negotiable or non-negotiable. A negotiable warehouse receipt is one that states the goods will be delivered to the bearer or to the order of a named person; it can be negotiated by delivery (if to bearer) or by indorsement and delivery (if to order), and a holder who takes it in good faith and for value acquires title to the goods and the direct obligation of the warehouseman to hold them. A non-negotiable (or straight) receipt names a specific person to whom the goods are deliverable and is transferred by assignment, with the transferee acquiring the rights of the transferor. The warehouseman has obligations, including to deliver the goods to the person entitled upon surrender of the receipt and payment of charges, and is liable for misdelivery or loss due to negligence; the warehouseman also has a lien on the goods for storage charges. Because the receipt embodies title, its proper negotiation protects buyers and lenders. So a warehouse receipt turns stored goods into a transferable, financeable asset represented by a piece of paper.
A Document of Title
A warehouse receipt is a document of title representing goods stored in a warehouse — dealing with the receipt is dealing with the goods, so they can be sold or pledged without moving them.
Negotiable vs. Non-Negotiable
- Negotiable — deliverable to bearer or order; negotiated by delivery or indorsement; a good-faith holder for value gets title and the warehouseman's direct obligation; and
- Non-negotiable (straight) — names a specific person; transferred by assignment.
The Warehouseman's Duties
The warehouseman must deliver the goods to the person entitled upon surrender of the receipt and payment of charges, is liable for misdelivery or negligent loss, and has a lien for storage charges.
Practical Takeaways
- A warehouse receipt makes stored goods a transferable, financeable asset;
- Negotiable receipts pass title to a good-faith holder for value;
- The warehouseman must deliver on surrender and is liable for negligence.
Frequently Asked Questions
What is a warehouse receipt? A document of title issued by a warehouseman for goods stored in a warehouse. It represents the goods, so the goods can be sold, transferred, or pledged by transferring the receipt without moving them.
What is the difference between a negotiable and non-negotiable warehouse receipt? A negotiable receipt states the goods are deliverable to bearer or to order and passes title by negotiation to a good-faith holder for value. A non-negotiable receipt names a specific person and is transferred by assignment.
What are the warehouseman's obligations? To deliver the goods to the person entitled upon surrender of the receipt and payment of charges. The warehouseman is liable for misdelivery or loss due to negligence and has a lien for storage charges.
Can stored goods be used as loan security? Yes. Because a warehouse receipt is a document of title, the goods can be pledged as security for a loan by transferring or indorsing the receipt, without physically delivering the goods.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
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