N.Y. Uniform Commercial Code Law § 7-504: Rights Acquired in Absence of Due Negotiation; Effect of Diversion; Stoppage of Delivery

Section 7--504. Rights Acquired in Absence of Due Negotiation; Effect of

Diversion; Stoppage of Delivery.

(a) A transferee of a document of title, whether negotiable or

nonnegotiable, to which the document has been delivered but not duly

negotiated, acquires the title and rights that its transferor had or had

actual authority to convey.

(b) In the case of a transfer of a nonnegotiable document of title,

until but not after the bailee receives notice of the transfer, the

rights of the transferee may be defeated:

(1) by those creditors of the transferor which could treat the

transfer as void under Section 2--402 or 2-A--308;

(2) by a buyer from the transferor in ordinary course of business if

the bailee has delivered the goods to the buyer or received notification

of the buyer's rights;

(3) by a lessee from the transferor in ordinary course of business if

the bailee has delivered the goods to the lessee or received

notification of the lessee's rights; or

(4) as against the bailee, by good-faith dealings of the bailee with

the transferor.

(c) A diversion or other change of shipping instructions by the

consignor in a nonnegotiable bill of lading which causes the bailee not

to deliver the goods to the consignee defeats the consignee's title to

the goods if the goods have been delivered to a buyer in ordinary course

of business or a lessee in ordinary course of business and, in any

event, defeats the consignee's rights against the bailee.

(d) Delivery of the goods pursuant to a nonnegotiable document of

title may be stopped by a seller under Section 2--705 or a lessor under

Section 2-A--526, subject to the requirements of due notification in

those sections. A bailee that honors the seller's or lessor's

instructions is entitled to be indemnified by the seller or lessor

against any resulting loss or expense.