The heart of the bailment relationship which results when a logistics customer transfers property to a warehouse for storage is the warehouse receipt. It is much more than a receipt. It is a document of title and provides essential terms. An attorney retained to provide advice relating to damages or foreclosure of a warehouse lien needs to be experienced with the UCC and also with third party logistics contracts which are often incorporated into the warehouse receipt.
The Bailment Relationship
A warehousing contract creates a bailment relationship. The commercial law principles that govern such contracts can be found within state statutes which adopt the provisions of Article Seven of the Uniform Commercial Code (UCC).
UCC-7 covers “Documents of Title” which include warehouse receipts and bills of lading. The most important document of the bailment relationship which results when a logistics customer tenders property to a warehouse for storage is the warehouse receipt.
The Warehouse Receipt
The warehouse receipt is not just a receipt, it is a document of title. It memorializes the terms of the storage, and what fees will be
charged. It serves as documentation much like commercial negotiable paper. It provides the opportunity for the attorneys representing the parties, especially the warehouse, to state specific terms which might not necessarily be imposed by law. It designates to whom the warehouse will release the property. It may limit the warehouse’s liability and thus limit claims.
Damages Under the UCC
Under UCC-7, a warehouse is liable for damages for loss or injury to the goods by its failure to exercise care with regard to the goods that a reasonably careful person would exercise under similar circumstances. However, unless otherwise agreed, the warehouse is not liable for damages that could not have been avoided by the exercise of that care.
The warehouse’s liability, may thus, on request of the bailor, be increased on all or part of the goods covered by the storage agreement or the warehouse receipt. The doing so, will generally, however increase the rates of storage.
The Warehouse Lien
The warehouse receipt also serves as the warehouse lien on the goods for charges for storage or transportation, insurance, labor, or other expenses necessary for the preservation of the goods. The lien is extinguished upon the warehouse’s release of the stored goods.
A warehouse can also require their customers to contractually agree to a general or cross lien by which a lien arises on any of the customer’s property in the warehouse for charges incurred on any of the customer’s other property in the warehouse.
The UCC also provides the legal framework for foreclosure of a warehouse’s lien, followed by sale of the property at auction. States impose various additional obligations regarding notice of such sales and the time allowed to make payment and satisfy the lien. An attorney providing advice relating to a foreclosure must therefore look not only to the UCC but also to any additionally related laws of the state where the bailment occurred.
Termination of Storage
UCC-7 also provides the right of a warehouse to terminate a storage if it reasonably believes the stored goods have been abandoned or are subject to deterioration or harmful effects to the facility or other goods in the facility.
To provide protection and clarity to both the warehouse and a third party logistics customer in the event of a breach by either party, the additional distribution logistics terms contained in any logistics contract between the parties should also be incorporated by reference in the warehouse receipt by the lawyer drafting or reviewing the terms of the receipt.
The Law Offices of Sebastian Gibson can be contacted at (760) 776-1810 or toll free at (855) WHAT NOW. With offices in Orange County’s Newport Beach and Palm Desert in the Palm Springs and Coachella Valley area, we provide exceptional legal representation to victims of personal injury big rig and tractor trailer truck accidents, to entertainment clients and to both individuals and companies in a wide variety of business and contract matters throughout California, the U.S. and to international clients as well. The Sebastian Gibson law firm is the firm to come to for assistance in the logistics, warehousing and trucking industry and for UCC matters.
