§ 26-1-7-502 — Rights acquired by due negotiation

(a) Subject to sections 205 and 503 of this
chapter, a holder to which a negotiable document of title has been duly
negotiated acquires thereby:
(1) title to the document;
(2) title to the goods;
(3) all rights accruing under the law of agency or estoppel,
including rights to goods delivered to the bailee after the
document was issued; and
(4) the direct obligation of the issuer to hold or deliver the goods
according to the terms of the document free of any defense or
claim by the issuer except those arising under the terms of the
document or under this chapter. In the case of a delivery order,
the bailee's obligation accrues only upon the bailee's acceptance
of the delivery order, and the obligation acquired by the holder is
that the issuer and any endorser will procure the acceptance of the
bailee.
(b) Subject to section 503 of this chapter, title and rights acquired
by due negotiation are not defeated by any stoppage of the goods
represented by the document of title or by surrender of the goods by the
bailee and are not impaired even if:
(1) the due negotiation or any prior due negotiation constituted a
breach of duty;
(2) any person has been deprived of possession of a negotiable
tangible document or control of a negotiable electronic document
by misrepresentation, fraud, accident, mistake, duress, loss, theft,
or conversion; or
(3) a previous sale or other transfer of the goods or document has
been made to a third person.
Formerly: Acts 1963, c.317, s.7-502. As amended by
P.L.152-1986, SEC.257; P.L.143-2007, SEC.53.