Duty of care; contractual limitation of warehouse's

liability. (a) A warehouse is liable for damages for loss of or injury to the goods caused by its failure to exercise care with regard to the goods that a reasonably careful person would exercise under similar circumstances. Unless otherwise agreed, the warehouse is not liable for damages that could not have been avoided by the exercise of that care. (b) Damages may be limited by a term in the warehouse receipt or storage agreement limiting the amount of liability in case of loss or damage beyond which the warehouse is not liable. Such a limitation is not effective with respect to the warehouse's liability for conversion to its own use. On request of the bailor in a record at the time of signing the storage agreement or within a reasonable time after receipt of the warehouse receipt, the warehouse's liability may be increased on part or all of the goods covered by the storage agreement or the warehouse receipt. In this event, increased rates may be charged based on an increased valuation of the goods. (c) Reasonable provisions as to the time and manner of presenting claims and commencing actions based on the bailment may be included in the warehouse receipt or storage agreement. History: 1953 Comp., § 50A-7-204, enacted by Laws 1961, ch. 96, § 7-204; 2005, ch. 144, § 60. OFFICIAL COMMENTS UCC Official Comments © by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved. Prior Uniform Statutory Provision. — Former Section 7-204 [55-7-204 NMSA 1978]. Changes. — Updated to reflect modern, standard commercial practices. 1. Subsection (a) continues the rule without change from former Section 7-204 [55- 7-204 NMSA 1978] on the warehouse’s obligation to exercise reasonable care. 2. Former Section 7-204(2) [55-7-204 NMSA 1978] required that the term limiting damages do so by setting forth a specific liability per article or item or of a value per unit of weight. This requirement has been deleted as out of step with modern industry practice. Under subsection (b) a warehouse may limit its liability for damages for loss of or damage to the goods by a term in the warehouse receipt or storage agreement without the term constituting an impermissible disclaimer of the obligation of reasonable care. The parties cannot disclaim by contract the warehouse’s obligation of care. Section 1-302 [55-1-302 NMSA 1978]. For example, limitations based upon per unit of weight, per package, per occurrence, or per receipt as well as limitations based upon a multiple of the storage rate may be commercially appropriate. As subsection (d) makes clear, the states or the federal government may supplement this section with more rigid standards of responsibility for some or all bailees. 3. Former Section 7-204(2) [55-7-204 NMSA 1978] also provided that an increased rate can not be charged if contrary to a tariff. That language has been deleted. If a tariff is required under state or federal law, pursuant to Section 7-103(a) [55-7-103 NMSA 1978], the tariff would control over the rule of this section allowing an increased rate. The provisions of a non-mandatory tariff may be incorporated by reference in the parties’ agreement. See Comment 2 to Section 7-103. Subsection (c) deletes the reference to tariffs for the same reason that the reference has been omitted in subsection (b). 4. As under former Section 7-204(2) [55-7-204 NMSA 1978], subsection (b) provides that a limitation of damages is ineffective if the warehouse has converted the goods to its own use. A mere failure to redeliver the goods is not conversion to the warehouse’s own use. See Adams v. Ryan & Christie Storage, Inc., 563 F. Supp. 409 (E.D. Pa. 1983) aff’d 725 F.2d 666 (3rd Cir. 1983). Cases such as I.C.C. Metals Inc. v. Municipal Warehouse Co., 409 N.E. 2d 849 (N.Y. Ct. App. 1980) holding that mere failure to redeliver results in a presumption of conversion to the warehouse’s own use are disapproved. "Conversion to its own use" is narrower than the idea of conversion generally. Cases such as Lipman v. Peterson, 575 P.2d 19 (Kan. 1978) holding to the contrary are disapproved. 5. Storage agreements commonly establish the contractual relationship between warehouses and depositors who have an on-going relationship. The storage agreement may allow for the movement of goods into and out of a warehouse without the necessity of issuing or amending a warehouse receipt upon each entry or exit of goods from the warehouse. Cross References. — Sections 1-302 [55-1-302 NMSA 1978], 7-103 [55-7-103 NMSA 1978], 7-309 [55-7-309 NMSA 1978] and 7-403 [55-7-403 NMSA 1978]. "Goods". Section 7-102 [55-7-102 NMSA 1978]. "Reasonable time". Section 1-204 [55-1-204 NMSA 1978]. "Sign". Section 7-102. "Term". Section 1-201 [55-1-201 NMSA 1978]. "Value". Section 1-204. "Warehouse receipt". Section 1-201. "Warehouse". Section 7-102.