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84-7-404. No liability for good faith delivery pursuant to document of title. A bailee that in good faith has received goods and delivered or otherwise disposed of the goods according to the terms of a document of title or pursuant to this article is not liable for the goods even if:

(1) The person from which the bailee received the goods did not have authority to procure the document or to dispose of the goods; or

(2) the person to which the bailee delivered the goods did not have authority to receive the goods.

History: L. 2007, ch. 90, § 29; July 1, 2008.


This section frees the bailee of conversion for innocently disposing of the goods of another pursuant to the terms of a document of title. It imposes the general Code requirement of good faith and the additional requirement of observance of reasonable commercial standards on the bailee in delivering or disposing of goods under a document of title. "Good faith" is defined in 84-1-201(19), 84-5-102(a)(7), 84-7-102(4) for the other provisions of Article 7, 84-8-102(a)(6) and 84-9-105(4) generally for Article 9. The definition includes the additional requirement of reasonable commercial standards in 84-2-103(1)(b), 84-3-103(a)(4), 84-4-104(c), 84-4a-105(a)(6), 84-7-404 and 84-9-105(3) for the purposes of holder in due course for Article 9. The Code confers immunity on the bailee under this section even though the depositor was a thief, as long as the bailee follows the terms of the document in good faith, including observance of any reasonable commercial standards. The last sentence of the Official UCC Comment, extending the bailee's immunity to situations involving invalid documents, has no direct authority in the text of the section and its validity is questionable. Validating invalid documents is not consistent with the general rule of 84-7-402.

Revisor's Note:

Former section 84-7-404 repealed by L. 2007, ch. 90, § 78 and the number reassigned to the current text.

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