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General Laws

[ Text of section effective until July 1, 2013. For text effective July 1, 2013, see below.]

  Section 7-502. (1) Subject to the following section and to the provisions of section 7-205 on fungible goods, a holder to whom a negotiable document of title has been duly negotiated acquires thereby:

  (a) title to the document;

  (b) title to the goods;

  (c) all rights accruing under the law of agency or estoppel, including rights to goods delivered to the bailee after the document was issued; and

  (d) 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 him except those arising under the terms of the document or under this Article. In the case of a delivery order the bailee's obligation accrues only upon acceptance and the obligation acquired by the holder is that the issuer and any indorser will procure the acceptance of the bailee.

  (2) Subject to the following section, title and rights so acquired are not defeated by any stoppage of the goods represented by the document or by surrender of such goods by the bailee, and are not impaired even though the negotiation or any prior negotiation constituted a breach of duty or even though any person has been deprived of possession of the document by misrepresentation, fraud, accident, mistake, duress, loss, theft or conversion, or even though a previous sale or other transfer of the goods or document has been made to a third person.

Chapter 106: Section 7-502. Rights Acquired By Due Negotiation

[ Text of section as recodified by 2013, 30, Sec. 45 effective July 1, 2013 applicable as provided by 2013, 30, Sec. 116. For text effective until July 1, 2013, see above.]

  Section 7-502. (a) Subject to sections 7-205 and 7-503, a holder to which a negotiable document of title has been duly negotiated acquires thereby:

  (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 article, 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 section 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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