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Current through October 23, 2012
A buyer in the ordinary course of business of fungible goods sold and delivered by a warehouseman who is also in the business of buying and selling such goods takes free of any claim under a warehouse receipt even though it has been duly negotiated.
(Dec. 30, 1963, 77 Stat. 721, Pub. L. 88-243, § 1.)
HISTORICAL AND STATUTORY NOTES
UNIFORM COMMERCIAL CODE COMMENT
Prior Uniform Statutory Provision
None.Purposes
The typical case covered by this section is that of the warehouseman-dealer in grain, and the substantive question at issue is whether in case the warehouseman becomes insolvent the receipt holders shall be able to trace and recover grain shipped to farmers and other purchasers from the elevator. This was possible under the old acts, although courts were eager to find estoppels to prevent it. The practical difficulty of tracing fungible grain means that the preservation of this theoretical right adds little to the commercial acceptability of negotiable grain receipts, which really circulate on the credit of the warehouseman. Moreover, on default of the warehouseman, the receipt holders at least share in what grain remains, whereas retaking the grain from a good faith cash purchaser reduces him completely to the status of general creditor in a situation where there was very little he could do to guard against the loss. Compare 15 U.S.C. Section 714p, enacted in 1955.
Cross References
Sections 2-403 and 9-307.
Definitional Cross References
"Buyer in ordinary course of business". Section 1-201.
"Delivery". Section 1-201.
"Duly negotiate". Section 7-501.
"Fungible" goods. Section 1-201.
"Goods". Section 7-102.
"Value". Section 1-201.
"Warehouse receipt". Section 1-201.
"Warehouseman". Section 7-102.
Prior Codifications
1981 Ed., § 28:7-205.
1973 Ed., § 28:7-205.
