Meaning
Commercial instruments represent the legal right to possess and transfer specific goods while they remain in storage or transit. Possession of documents of title allows a party to demand delivery of the cargo from a carrier or warehouseman. These papers act as a substitute for the physical goods in the marketplace.
Negotiable Status
Certain types of these instruments can be transferred to new owners through endorsement and physical delivery. This capability allows documents of title to facilitate trade by enabling the sale of goods while they are still at sea or held in a bonded warehouse. A buyer who holds the endorsed document gains the same rights as the original shipper.
Warehouse Receipt
Storage facilities issue these records to acknowledge the deposit of goods and to define the terms of the bailment. When used as documents of title, these receipts provide a secure way for lenders to take a security interest in the stored inventory. The bank holds the document and only releases it once the loan is repaid or the goods are sold.
Cargo Delivery
Carriers rely on the presentation of the original bill to release the shipment at the port of destination. If the documents of title are lost or delayed, the cargo remains at the terminal, incurring storage fees and delaying the production schedule. This system ensures that only the rightful owner takes possession of the freight.
