Colorado Code
Part 5 - Warehouse Receipts and Bills of Lading - Negotiation and Transfer
§ 4-7-503. Document of Title to Goods Defeated in Certain Cases

Source: L. 2006: Entire article R&RE, p. 486, § 2, effective September 1. L. 2007: (a)(1) amended, p. 372, § 20, effective August 3.
Editor's note: This section is similar to former § 4-7-503 as it existed prior to 2006.
Prior Uniform Statutory Provision: Former Section 7-503.
Changes: Changes to cross-reference to Article 2A and for style.
Purposes:

On the other hand, where goods are delivered to a factor for sale, even though the factor has made no advances and is limited in its duty to sell for cash, the goods are "entrusted" to the factor "with actual . . . authority . . . to sell" under subsection (a)(1), and if the factor procures a negotiable document of title it can transfer the owner's interest to a purchaser by due negotiation. Further, where the factor is in the business of selling, goods entrusted to it simply for safekeeping or storage may be entrusted under circumstances which give the factor "apparent authority to ship, store or sell" under subsection (a)(1), or power of disposition under Section 2-403, 2A-304(2), 2A-305(2), 7-205, 9-320 or 9-321 (c), or under a statute such as the earlier Factors Acts, or under a rule of law giving effect to apparent ownership. See Section 1-103.
Persons having an interest in goods also frequently deliver or entrust them to agents or servants other than factors for the purpose of shipping or warehousing or under circumstances reasonably contemplating such action. This Act is clear that such persons assume full risk that the agent to whom the goods are so delivered may ship or store in breach of duty, take a document to the agent's own order and then proceed to misappropriate the negotiable document of title that embodies the goods. This Act makes no distinction between possession or mere custody in such situations and finds no exception in the case of larceny by a bailee or the like. The safeguard in such situations lies in the requirement that a due negotiation can occur only "in the regular course of business or financing" and that the purchase be in good faith and without notice. See Section 7-501. Documents of title have no market among the commercially inexperienced and the commercially experienced do not take them without inquiry from persons known to be truck drivers or petty clerks even though such persons purport to be operating in their own names.
Again, where the seller allows a buyer to receive goods under a contract for sale, though as a "conditional delivery" or under "cash sale" terms and on explicit agreement for immediate payment, the buyer thereby acquires power to defeat the seller's interest by transfer of the goods to certain good faith purchasers. See Section 2-403. Both in policy and under the language of subsection (a)(1) that same power must be extended to accomplish the same result if the buyer procures a negotiable document of title to the goods and duly negotiates it.
This comment 1 should be considered in interpreting delivery, entrustment or acquiescence in application of Section 7-209 (c).
Cross References:
Point 1: Sections 1-103, 2-403, 2A-304(2), 2A-305(2), 7-205, 7-209, 7-501, 9-320, 9-321(c), and 9-331.
Point 2: Sections 7-402 and 7-504.
Point 3: Sections 7-402, 7-403 and 7-404.
Definitional Cross References:
"Bill of lading". Section 1-201.
"Contract for sale". Section 2-106.
"Delivery". Section 1-201.
"Delivery order". Section 7-102.
"Document of title". Section 1-201.
"Duly negotiate". Section 7-501.
"Goods". Section 7-102.
"Person". Section 1-201.
"Right". Section 1-201.
"Warehouse receipt". Section 1-201.