§ 26-1-7-504 — Rights acquired in the absence of due negotiation; effect of diversion; seller's stoppage of delivery

(a) A transferee of a document of title,
whether negotiable or nonnegotiable, to which the document has been
delivered but not duly negotiated, acquires the title and rights that the
transferor had or had actual authority to convey.
(b) In the case of a transfer of a nonnegotiable document of title,
until but not after the bailee receives notice of the transfer, the rights
of the transferee may be defeated:
(1) by those creditors of the transferor that could treat the transfer
as void under IC 26-1-2-402 or IC 26-1-2.1-308;
(2) 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 the buyer's rights;
(3) by a lessee from the transferor in ordinary course of business
if the bailee has delivered the goods to the lessee or received
notification of the lessee's rights; or
(4) as against the bailee by good faith dealings of the bailee with
the transferor.
(c) A diversion or other change of shipping instructions by the
consignor in a nonnegotiable bill of lading which causes the bailee not
to deliver the goods to the consignee defeats the consignee's title to the
goods if the goods have been delivered to a buyer in ordinary course of
business or a lessee in ordinary course of business, and, in any event,
defeats the consignee's rights against the bailee.
(d) Delivery of the goods pursuant to a nonnegotiable document of
title may be stopped by a seller under IC 26-1-2-705 or a lessor under
IC 26-1-2.1-526 and subject to the requirements of due notification
provided in those sections. A bailee that honors the seller's or lessor's
instructions is entitled to be indemnified by the seller or the lessor
against any resulting loss or expense.
Formerly: Acts 1963, c.317, s.7-504. As amended by
P.L.152-1986, SEC.259; P.L.143-2007, SEC.55.