§ 7-502 — Rights Acquired by Due Negotiation

Section 7--502. Rights Acquired by Due Negotiation.\n (a) Subject to Sections 7--205 and 7--503, a holder to which a\nnegotiable document of title has been duly negotiated acquires thereby:\n (1) title to the document;\n (2) title to the goods;\n (3) all rights accruing under the law of agency or estoppel, including\nrights to goods delivered to the bailee after the document was issued;\nand\n (4) the direct obligation of the issuer to hold or deliver the goods\naccording to the terms of the document free of any defense or claim by\nthe issuer except those arising under the terms of the document or under\nthis article, but in the case of a delivery order, the bailee's\nobligation accrues only upon the bailee's acceptance of the delivery\norder and the obligation acquired by the holder is that the issuer and\nany indorser will procure the acceptance of the bailee.\n (b) Subject to Section 7--503, title and rights acquired by due\nnegotiation are not defeated by any stoppage of the goods represented by\nthe document of title or by surrender of the goods by the bailee and are\nnot impaired even if:\n (1) the due negotiation or any prior due negotiation constituted a\nbreach of duty;\n (2) any person has been deprived of possession of a negotiable\ntangible document or control of a negotiable electronic document by\nmisrepresentation, fraud, accident, mistake, duress, loss, theft, or\nconversion; or\n (3) a previous sale or other transfer of the goods or document has\nbeen made to a third person.\n