(a) Subject to §§ 47-7-205 and 47-7-503, a holder to which a negotiable document of title has been duly negotiated acquires thereby:

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Terms Used In Tennessee Code 47-7-502

  • Bailee: means a person that by a warehouse receipt, bill of lading, or other document of title acknowledges possession of goods and contracts to deliver them. See Tennessee Code 47-7-102
  • Delivery order: means a record that contains an order to deliver goods directed to a warehouse, carrier, or other person that in the ordinary course of business issues warehouse receipts or bills of lading. See Tennessee Code 47-7-102
  • Fraud: Intentional deception resulting in injury to another.
  • Goods: means all things that are treated as movable for the purposes of a contract for storage or transportation. See Tennessee Code 47-7-102
  • Issuer: means a bailee that issues a document of title or, in the case of an unaccepted delivery order, the person that orders the possessor of goods to deliver. See Tennessee Code 47-7-102
  • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
  • Person: includes a corporation, firm, company or association. See Tennessee Code 1-3-105
(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; and
(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 chapter, 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 § 47-7-503, 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.
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