TITLE 5: UNIFORM COMMERCIAL CODE
DIVISION 7: WAREHOUSE RECEIPTS, ETC.
§ 7504. 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 non-negotiable, to whom the document has been delivered but not duly negotiated, acquires the title and rights which his transferor had or had actual authority to convey. (2) In the case of a non-negotiable 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 5 CMC § 2402; 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) 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 non-negotiable bill of lading which 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 in ordinary course of business and in any event defeats the consignee’s rights against the bailee. (4) Delivery pursuant to a non-negotiable document may be stopped by a seller under 5 CMC § 2705, and subject to the requirement of due notification there provided. A bailee honoring the seller’s instructions is entitled to be indemnified by the seller against any resulting loss or expense. Source: PL 3-56, § 1 (§ 7504).