A bailee that in good faith has received goods and delivered or otherwise disposed of the goods according to the terms of a document of title or pursuant to this article is not liable for the goods even if:

(1) The person from which the bailee received the goods did not have authority to procure the document or to dispose of the goods; or

(2) The person to which the bailee delivered the goods did not have authority to receive the goods.

(Dec. 30, 1963, 77 Stat. 728, Pub. L. 88-243, § 1; Apr. 27, 2013, D.C. Law 19-299, § 9, 60 DCR 2634.)

1981 Ed., § 28:7-404.

1973 Ed., § 28:7-404.

Prior Uniform Statutory Provision: Section 10, Uniform Warehouse Receipts Act; Section 13, Uniform Bills of Lading Act.

Changes: Consolidated and rewritten.

Purposes of Changes: The generalized test of good faith and observance of reasonable commercial standards is substituted for the attempts to particularize what constitutes good faith in the cited sections of the old uniform acts. The section states explicitly what is perhaps an implication from the old acts that the common law rule of “innocent conversion” by unauthorized “intermeddling” with another’s property is inapplicable to the operations of commercial carriers and warehousemen, who in good faith and with reasonable observance of commercial standards perform obligations which they have assumed and which generally they are under a legal compulsion to assume. The section applies to delivery to a fraudulent holder of a valid document as well as to delivery to the holder of an invalid document.

Definitional Cross References: “Bailee”. Section 7-102.

“Delivery”. Section 1-201.

“Document of title”. Section 1-201.

“Good faith”. Section 1-201.

“Goods”. Section 7-102.

“Person”. Section 1-201.

“Receipt of goods”. Section 2-103.

“Term”. Section 1-201.

Prior Uniform Statutory Provision: Former Section 7-404.

Changes: Changes reflect the definition of good faith in Section 1-201 [7-102] and for style.

Purposes: This section uses the test of good faith, as defined in Section 1-201 [7-102], to continue the policy of former Section 7-404. Good faith now means “honesty in fact and the observance of reasonable commercial standards of fair dealing.” The section states explicitly that the common law rule of “innocent conversion” by unauthorized “intermeddling” with another’s property is inapplicable to the operations of commercial carriers and warehousemen that in good faith perform obligations that they have assumed and that generally they are under a legal compulsion to assume. The section applies to delivery to a fraudulent holder of a valid document as well as to delivery to the holder of an invalid document. Of course, in appropriate circumstances, a bailee may use interpleader or other dispute resolution process. See Section 7-603.

Cross Reference:Section 7-603.

Definitional Cross References: “Bailee”. Section 7-102.

“Delivery”. Section 1-201.

“Document of title”. Section 1-201.

“Good faith”. Section 1-201 [7-102].

“Goods”. Section 7-102.

“Person”. Section 1-201.

“Receipt of goods”. Section 2-103.

“Term”. Section 1-201.

Part 5.

Warehouse Receipts and Bills of Lading: Negotiation and Transfer.