What is Document of title to goods?

A document of title to goods is a formal document that proves ownership of goods or property. A document of title to goods is used in the ordinary course of business to prove possession or control of goods.

Section 2(4) of the Sale of Goods Act defines a document of title to goods as “A document used in the ordinary course of business as a proof of possession or control of goods authorising or purporting to authorise either by endorsement or delivery, the possessor of documents to transfer or to receive the goods thereby represented”

Some examples of documents of title to goods include:

Bill of lading

Dock warrant

Warehouse keeper’s certificate

Railway receipt

Multimodal transport document

Warrant or order for the delivery of goods

Sea or air waybill

Other documents related to the transfer of title to goods include:

Letter of credit

An authorization made by a buyer to their agent to make payment to a seller

Pledge

The borrower delivers the goods to the lender, who keeps them until repayment of the secured loan.  (Example: Key Cash Credit (KCC) facilities extended by the banks.)

Risks involved in documents of title to goods:

The banker cannot assert his right of ownership if the endorsement is forged. (Forgery confers no title).

If the buyer becomes insolvent before the goods are delivered to him the unpaid seller may stop the goods in transit.

Shipping and railway authorities do not testify about such documents; they only testify about the number of bags or packages received for transportation. Bankers may be duped if the document is forged or the quantity written is fraudulently altered by the seller.

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