Draft Uniform Documents of Title Act 1995

1995 Quebec, QC

Draft Uniform Documents of Title Act

by Clark Dalton Alberta Justice

[See 1995 Proceedings page 44.]



TABLE OF CONTENTS

INTERPRETATION

PART 1 - WAREHOUSE RECEIPTS: SPECIAL PROVISIONS

PART 2 - BILLS OF LADING: SPECIAL PROVISIONS

PART 3 - WAREHOUSE RECEIPTS AND BILLS OF LADING: GENERAL OBLIGATIONS

PART 4 - WAREHOUSE RECEIPTS AND BILLS OF LADING: NEGOTIATION AND TRANSFER

PART 5 - WAREHOUSE RECEIPTS AND BILLS OF LADING: MISCELLANEOUS PROVISIONS

PART 6 - REPEAL


INTERPRETATION

Definitions

1(1)    In this Act:

(a)    "bailee " means the person who, by a warehouse receipt, bill of lading or other document of title, acknowledges possession of goods and contracts to deliver them.

(b)    "bill of lading" or "bill" means a document evidencing the receipt of goods for

shipment issued by a person engaged in the business of transporting or forwarding goods, and includes an air consignment note or air waybill.

(c)    "consigne e" means the person named in a bill to whom or to whose order the bill promises delivery.

(d)    "consigno r" means the person named in a bill as the person from whom the goods have been received for shipment.

(e)    "delivery order" means a written order to deliver goods directed to a warehouseman, carrier or other person who in the ordinary course of business issues warehouse receipts or bills of lading.

(f)    "document of title" or "document" means a writing

(i)     that purports to be issued by or addressed to a bailee,

(ii)     that purports to cover goods in the bailee's possession that are identified, or fungible portions of an identified mass, and

(iii)     that in the ordinary course of business is treated as establishing that the person in possession of the writing is entitled to receive, hold and dispose of it and the goods it covers.

(g)    "fungible goods" means goods of which any unit is, from its nature or by mercantile custom, treated as the equivalent of any other unit.

(h)    "goods " means all things which are treated as movable for the purposes of a contract of storage or transportation.

(i)    "holder " means a person who is in possession of a document of title drawn, issued or endorsed to that person or to that person's order or to bearer or in blank.

(j)    "issuer " means a bailee who issues a document except that in relation to an unaccepted delivery order it means the person who orders the possessor of goods to deliver.

(k)    "negotiable document of title" means a document of title in which it is stated that the goods therein specified will be delivered to bearer or to the order of a named person.

(l)    "non-nego tiable receipt" means a document of title other than a negotiable document of title.

(m)    "purchase " includes taking by sale, discount, negotiation, mortgage, pledge, lien, issue or re-issue, gift or any other voluntary transaction creating an interest in property.

(n)    "security interest" means an interest in personal property or fixtures which secures payment or performance of an obligation.

(o)    "warehouse receipt" means a receipt issued by a person engaged in the business of storing goods for hire.

(2)    For the purposes of subsection(1)(i) an "issuer" includes any person for whom an agent or employee purports to act in issuing a document if the agent or employee has real or apparent authority to issue documents, notwithstanding that the issuer received no goods or that the goods were misdescribed or that in any other respect the agent or employee violated that person's instructions.

(3)    A person gives value for rights if that person acquires them

(i)     in return for a binding commitment to extend credit or for the extension of immediately available credit whether or not drawn upon and whether or not a chargeback is provided for in the event of difficulties in collection;

(ii)     as security for or in total or partial satisfaction of a pre-existing claim;

(iii)     by accepting delivery pursuant to a pre-existing contract for purchase; or

(iv)     generally, in return for any consideration sufficient to support a simple contract.

Definition of document of title

Legislation
UCC 1-201(15); UPPSA, s.1(g); USGA, s.1(o).

Comment

1.    The term "document of title" is defined in both the Uniform Sale of Goods Act and the Uniform Personal Property Security Act. This formulation may be criticized on the basis that it seems to suggest that a non-negotiable document of title falls outside of the definition because possession of it by someone other than the named person is not treated as "establishing that the person in possession of the document of title is ... entitled to receive, hold and dispose of the goods it covers". For this reason, the Personal Property Security Act of Alberta and British Columbia provide a somewhat different formulation:

"document of title" means a writing issued by or addressed to a bailee

(i)    that covers goods in the bailee's possession that are identified or are fungible portions of an identified mass, and

(ii)    in which it is stated that the goods identified in it will be delivered to a named person, or to the transferee of the person, to bearer or to the order of a named person;"

2.    Although the Alberta and British Columbia provision is more clear, the clarity it produces does not outweigh the desirability of having a standardized definition in the Uniform Sale of Goods Act, the Uniform Personal Property Security Act and the Uniform Documents of Title Act. Therefore, it is recommended that the definition used in the other Uniform Act be retained. It should also be noted that Article 1-201(15) adopts a substantially similar formulation.

3.    The adoption of a single uniform definition of a document of title is not completely effected. A different formulation appears in the Bank Act, R.S.C. 1985, c.B-l in the definitions in section 2 of a "bill of Lading" and a "warehouse receipt". The Bank Act security provisions should be either repealed or modernized, however, this is not a necessary condition for the enactment of a Uniform Documents of Title Act. See Proceedings of the Uniform Law Conference of Canada, 1991, at page 381.

4.    The factors legislation of the various provinces also contain a different definition of a "document of title". This definition could be changed so as to bring it into conformity with the other legislation by substituting the definition of a negotiable document of title. This would produce a greater conceptual unity. The central idea is that where negotiable documents of title are involved the documents represent title to the underlying goods, but where non-negotiable documents of title are issued the parties essentially deal with the goods rather than with the documents.

Definition of negotiable and non-negotiable documents of title

Legislation
UCC 7-104, UWRA (Can.), ss. 1(e)(f).

Comment

The definitions of "negotiable document of title" represents a departure from the common law position. At common law, only bills of lading were considered to be negotiable in the sense that the transfer of the document operates as a transfer of constructive possession of the goods. This feature was not afforded to warehouse receipts by the common law, and was conferred on them only by statute (See Uniform Warehouse Receipts Act (Can.), Canada Grain Act, R.S.C. 1985, c.G-10, s.111). A document other than a bill of lading could obtain the status of a document of title upon proof of a custom to that effect in relation to that particular kind of document. See, for example, Merchant Banking Co. of London v. Phoenix Bessemer Steel Co. (1877), 5 Ch.D. 205. This approach is rejected in favour of the rule that any document of title will be regarded as negotiable if by its terms it indicates that the goods are to be delivered to bearer or to the order of a named person.

Definition of bill of lading

Legislation

UCC 1-201(6); USGA, s. 1(c).

Comment

The definition encompasses freight forwarders' bills and bills issued by contract carriers as well as those issued by common carriers. It also covers air waybills.

Definition of warehouse receipt

Legislation
UCC 1-201(45); UWRA (Can.), ss. 19(j), (k)

Comment

The definition combines the definition of "warehouse receipt" and the definition of "warehouseman" in sections 1(j) and (k) of the Uniform Warehouse Receipts Act (Can.).

Definition of delivery order

Legislation
UCC 7-102(d)

Comment

A delivery order refers to an order given by an owner of goods to a person in possession of them (the carrier or warehouseman) directing that person to deliver the goods to a person named in the order. A delivery order was not regarded as a document of title at common law with the result that the transfer of the delivery order did not effect transfer of constructive possession of the goods. Attornment on the part of the bailee was required (i.e., an acknowledgement that the bailee held the goods on behalf of the transferee). The Uniform Documents of Title Act permits the use of negotiable delivery orders (if the order directs delivery to a named person or order). However, it is still necessary to single out delivery orders for special treatment. Until the delivery order is accepted by the bailee, there is no basis for imposing obligations on the bailee. See discussion under sections 18 and 19. See also the definition of "issuer".

Definition of issuer

Legislation
UCC 7-102(g).

Comment

1.    The definition designates the owner of the goods as the issuer in respect of an unaccepted delivery order. Once the bailee accepts the delivery order, the bailee is treated as the issuer and the document is treated as an ordinary warehouse receipt or bill of lading for all intents and purposes.

2.    The definition is designed to reverse the common law rule first laid down in Grant v. Norway (1851), 10 C.B. 665, 20 L.J.C.P. 93. See the discussion under section 8.

Other definitions

Comment

The definitions of "bailee", "consignee" and "consignor" simply set out the normal commercial meaning of these terms. The definitions of "purchase", "security interest" and "value" are consistent with those used in the Uniform Personal Property Security Act.

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