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A document of title is a document used in the ordinary course of business in

the sale or transfer of goods as proof of possession/control of the goods or
authorizing/purporting to authorize the holder of the document to transfer the
goods represented by the document or receive them by either by declivity or
indorsement. A document of title is negotiable if it states that the goods indicated
on it will be delivered to the bearer or the order of the person named in the
document. It's non-negotiable if deliverable to a specific person.

Negotiating a negotiable document of title may be done by the indorsement of

the person to whose order the goods are deliverable by the document's terms.
The indorsement may be in blank, to bearer or a specified person. If it's indorsed
to a specific person, he can negotiate it further also in blank, to bearer or a specific
person. This is true even if the document is marked "non-negotiable."

Functions:

1.) A contract
2.) Evidence of receipt of goods
3.) Represents the goods/control over the goods

Common Documents of Title

1.) Bill of Lading

A contract and receipt for the transport and delivery of goods to the bearer of
order of the person indicated on it. It is issued by a common carrier and is
essentially a contract of carriage even if it isn't normally signed by the parties.

2.) Quedan

A warehouse receipt that covers sugar.

3.) Warehouse Receipt

A contract and receipt for goods deposited with a warehouseman to be delivered

to the bearer or to the order of a person indicated on it. It is issued by a
warehouseman engaged in the business of storing goods for a fee.

4.) Dock Warrant

An instrument a dock owner issues to an importer of goods as evidence of his

title to the goods warehoused on the dock upon the faith of the bills of lading.
If the owner of a negotiable document of title loses a case, the winner can't have
the goods attached or levied by ordinary legal process upon if the goods are in
the possession of a bailee (warehouseman, etc.) The bailee is obliged to retain
possession of the goods for the original owner of the document or to the holder
if the document was negotiated. The remedy is to either surrender the document
or have the court enjoin the negotiation. If the document was negotiated to
another person in good faith, the negotiation is valid and an injunction won't
affect it.

If a seller learns that his buyer is insolvent, he can only invoke his right to
stoppage in transitu if the document of title wasn't negotiated to a purchaser in
good faith and for value. The innocent buyer's right to receive the goods is
considered superior to the unpaid seller's rights to stoppage in transitu or
exercising a lien over the goods.

1. Negotiable Instruments – written contracts for the payment of money; by its form,
intended as a substitute for money and intended to pass from hand to hand, to give the holder
in due course the right to hold the same and collect the sum due.

2. Characteristics of Negotiable Instruments:

a. negotiability – right of transferee to hold the instrument and collect the sum due
b. accumulation of secondary contracts – instrument is negotiated from person to person

3. Difference between Negotiable Instruments from Non-Negotiable Instruments:

Negotiable Instruments Non-negotiable Instruments

Contains all the requisites of Sec. 1 of the does not contain all the requisites of Sec.
NIL 1 of the NIL

Transferred by negotiation transferred by assignment

Holder in due course may have better transferee acquires rights only of his
rights than transferor transferor

prior parties merely warrant legality of

Prior parties warrant payment title

Transferee has right of recourse against

intermediate parties transferee has no right of recourse

4. Difference between Negotiable Instruments and Negotiable Documents of Title

Negotiable Instruments Negotiable Documents of Title

Have requisites of Sec. 1 of the NIL does not contain requisites of Sec. 1 of NIL
Have right of recourse against intermediate no secondary liability of intermediate
parties who are secondarily liable parties

Holder in due course may have rights better transferee merely steps into the shoes of
than transferor the transferor

Subject is money subject is goods

instrument is merely evidence of title; thing

of value are the goods mentioned in the
Instrument itself is property of value document