Colorado Code
Part 5 - Warehouse Receipts and Bills of Lading - Negotiation and Transfer
§ 4-7-504. Rights Acquired in Absence of Due Negotiation - Effect of Diversion - Stoppage of Delivery

Source: L. 2006: Entire article R&RE, p. 487, § 2, effective September 1. L. 2007: IP(b), (b)(1), (c), and (d) amended, p. 372, § 21, effective August 3.
Editor's note: This section is similar to former § 4-7-504 as it existed prior to 2006.
Prior Uniform Statutory Provision: Former Section 7-504.
Changes: To include cross-references to Article 2A and for style.
Purposes:

A necessary part of the price for the protection of regular dealings with negotiable documents of title is an insistence that no dealing which is in any way irregular shall be recognized as a good faith purchase of the document or of any rights pertaining to it. So, where the transfer of a negotiable document fails as a negotiation because a requisite indorsement is forged or otherwise missing, the purchaser in good faith and for value may be in the anomalous position of having less rights, in part, than if the purchaser had purchased the goods themselves. True, the purchaser's rights are not subject to defeat by attachment of the goods or surrender of them to the purchaser's transferor (contrast subsection (b)); but on the other hand, the purchaser cannot acquire enforceable rights to control or receive the goods over the bailee's objection merely by giving notice to the bailee. Similarly, a consignee who makes payment to its consignor against a straight bill of lading can thereby acquire the position of a good faith purchaser of goods under provisions of the Article of this Act on Sales (Section 2-403), whereas the same payment made in good faith against an unendorsed order bill would not have such effect. The appropriate remedy of a purchaser in such a situation is to regularize its status by compelling indorsement of the document (see Section 7-506).
Subsection (b)(2) & (3) require delivery of the goods. Delivery of the goods means the voluntary transfer of physical possession of the goods. See amended 2-103.
Cross References:
Point 1: Sections 2-403 and 7-506.
Point 2: Sections 2-403 and 2A-304.
Point 3: Sections 7-303, 7-403(a)(5) and 7-404.
Point 4: Sections 2-705 and 7-403(a)(4).
Point 5: Section 1-202.
Definitional Cross References:
"Bailee". Section 7-102.
"Bill of lading". Section 1-201.
"Buyer in ordinary course of business". Section 1-201.
"Consignee". Section 7-102.
"Consignor". Section 7-102.
"Creditor". Section 1-201.
"Delivery". Section 1-201.
"Document of Title". Section 1-201.
"Duly negotiate". Section 7-501.
"Good faith". Section 1-201. [7-102].
"Goods". Section 7-102.
"Honor". Section 1-201.
"Lessee in ordinary course". Section 2A-103.
"Notification". Section 1-202.
"Purchaser". Section 1-201.
"Rights". Section 1-201.