Document of Title
Any written instrument, such as a bill of lading, a warehouse receipt, or an order for the delivery of goods, that in the usual course of business or financing is considered sufficient proof that the person who possesses it is entitled to receive, hold, and dispose of the instrument and the goods that it covers.
A document of title is usually either issued or addressed by a bailee—an individual who has custody of the goods of another—to a bailor—the person who has entrusted the goods to him or her. Its terms must describe the goods covered by it so that they are identifiable as well as set forth the conditions of the contractual agreement. Possession of a document of title is symbolic of ownership of the goods that are described within it.
Documents of title are an integral part of the business world since they facilitate commercial transactions by serving as security for loans sought by their possessors and by promoting the free flow of goods without unduly burdening the channels of commerce.
A person who possesses a document of title can legally transfer ownership of the goods covered by it by delivering or endorsing it over to another without physically moving the goods. In such a situation, a document of title is a negotiable instrument because it transfers legal rights of ownership from one person to another merely by its delivery or endorsement. It is negotiable only if its terms state that the goods are to be delivered to the bearer, the holder of the document, to the order of the named party, or, where recognized in overseas trade, to a named person or his or her assigns. The UNIFORM COMMERCIAL CODE and various federal and state regulatory laws define the legal rights and obligations of the parties to a document of title.