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This entry was published on 2014-12-26
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Rights Acquired by Due Negotiation
Uniform Commercial Code (UCC) CHAPTER 38, ARTICLE 7, PART 5
Section 7--502. Rights Acquired by Due Negotiation.

(a) Subject to Sections 7--205 and 7--503, 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;

(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 article, but 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 indorser will procure the acceptance of the bailee.

(b) Subject to Section 7--503, 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.