KRS 355.7-502: Rights acquired by due negotiation.

(1) Subject to KRS 355.7 -205 and 355.7-503, a holder to which 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 ri ghts 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 the issuer except those

arising under the t erms of the document or under this article. 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.

(2) Subject to KRS 355.7 -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:

(a) The due negotiation or any prior due negotiation constituted a breach of duty;

(b) Any person has been deprived of possession of a negotiable tangible

document or control of a negotiable electronic document by

misrepresentation, fraud, accident, m istake, duress, loss, theft, or conversion;

or

(c) A previous sale or other transfer of the goods or document has been made to a

third person.