Also known as: tangible negotiable document of title · negotiable documents of title · documents of title
Written by attorneys · grounded in primary & secondary sources — see below
A category of collateral consisting of negotiable documents of title in tangible form. A secured party may take possession of such documents pursuant to an oral security agreement to satisfy the requirement for attachment of a security interest. Perfection by possession of the documents also perfects a security interest in the goods they cover while the goods remain in the bailee's possession.
Tanya Tang purchases steel coils from a warehouse operator in the ordinary course of its business. She pays cash and receives negotiable warehouse receipts covering the coils. Tanya grants a security interest in the receipts to a lender under an oral agreement. The lender takes possession of the receipts, satisfying attachment and perfecting its interest in both the documents and the coils while they remain with the bailee.
Tundra Resources stores harvested grain with a cooperative that issues negotiable warehouse receipts. Tundra grants a security interest in the receipts to a bank to secure a loan. The bank takes possession of the receipts. The bank's security interest attaches and is perfected in both the receipts and the grain while the grain remains with the bailee.
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The secured party perfects by perfecting its interest in the negotiable documents themselves. Possession of the tangible negotiable documents of title perfects the interest in both the documents and the covered goods while they remain with the bailee.
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Tangible negotiable documents of title are among the types of collateral that may be possessed. The list also includes goods, instruments, money, tangible chattel paper, and certificated securities.
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Yes. While the goods remain in the bailee's possession under the negotiable documents, a security interest perfected in the documents has priority over any security interest that becomes perfected in the goods by another method during that period.
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