84-7-501. Form of negotiation and requirements of due negotiation. (a) The following rules apply to a negotiable tangible document of title:
(1) If the document's original terms run to the order of a named person, the document is negotiated by the named person's indorsement and delivery. After the named person's indorsement in blank or to bearer, any person may negotiate the document by delivery alone.
(2) If the document's original terms run to bearer, it is negotiated by delivery alone.
(3) If the document's original terms run to the order of a named person and it is delivered to the named person, the effect is the same as if the document had been negotiated.
(4) Negotiation of the document after it has been indorsed to a named person requires indorsement by the named person and delivery.
(5) A document is duly negotiated if it is negotiated in the manner stated in this subsection to a holder that purchases it in good faith, without notice of any defense against or claim to it on the part of any person, and for value, unless it is established that the negotiation is not in the regular course of business or financing or involves receiving the document in settlement or payment of a monetary obligation.
(b) The following rules apply to a negotiable electronic document of title:
(1) If the document's original terms run to the order of a named person or to bearer, the document is negotiated by delivery of the document to another person. Indorsement by the named person is not required to negotiate the document.
(2) If the document's original terms run to the order of a named person and the named person has control of the document, the effect is the same as if the document had been negotiated.
(3) A document is duly negotiated if it is negotiated in the manner stated in this subsection to a holder that purchases it in good faith, without notice of any defense against or claim to it on the part of any person, and for value, unless it is established that the negotiation is not in the regular course of business or financing or involves taking delivery of the document in settlement or payment of a monetary obligation.
(c) Indorsement of a nonnegotiable document of title neither makes it negotiable nor adds to the transferee's rights.
(d) The naming in a negotiable bill of lading of a person to be notified of the arrival of the goods does not limit the negotiability of the bill or constitute notice to a purchaser of the bill of any interest of that person in the goods.
History: L. 2007, ch. 90, § 30; July 1, 2008.
KANSAS COMMENT, 1996
This section is a consolidation of former K.S.A. 82-137 through 82-140 and 82-147. Subsections (1), (2) and (3) prescribe the requirements of negotiation in terms parallel to those stated for negotiation of a negotiable instrument under 84-3-201. See also K.S.A. 34-278 and 34-280. Paragraph (2)(b) extends the effect of negotiation to the person originally named in the document, whether he be depositor, buyer, or financing bank.
Under K.S.A. 34-277, the holder of a negotiable warehouse receipt may convert a blank indorsement into a special indorsement. This rule corresponds with the rules in 84-3-205(c) for negotiable instruments and 84-8-304(a) for investment securities, and the same procedure would presumably be available for any negotiable document of title.
Subsection (4) establishes the requirements for a "due negotiation." A purchaser of a negotiable document receives the full protection given in the Code only if he takes by "due negotiation" rather than by mere negotiation. The term "duly negotiated" was used in former K.S.A. 82-141 and in present K.S.A. 34-281 without being explicitly defined. The requirements for taking by "due negotiation" are similar to those for becoming a holder in due course under 84-3-302. The requirement that the negotiation be "in the regular course of business or financing" is new, however, as is the prohibition on satisfaction of antecedent debt which is not in the regular course of financing, discussed at the end of Official Comment 1.
Subsection (5) emphasizes that only a negotiable document of title may be negotiated. While a nonnegotiable document may in fact be indorsed, indorsement is merely a form of assignment and adds nothing to the rights of the transferee. See also K.S.A. 34-279.
Subsection (6) makes clear that the naming of a "notify party" in a negotiable bill of lading does not affect negotiability. A carrier who delivers to such a party will be liable for misdelivery, and the purchaser by due negotiation is protected. See 84-7-403.
Revisor's Note:
Former section 84-7-501 repealed by L. 2007, ch. 90, § 78 and the number reassigned to the current text.
|