Good Faith Purchase and Warehouse Receipts: Thoughts on the Interplay of Articles 2, 7, and 9 of the UCC

Warehouse receipts have in recent years supplemented their traditional role in the transport and storage of commodities by taking on significant marketing and financing functions. Conflict has inevitably arisen, however, between the financier, for whom the document of title represents a security interest in goods, and the purchaser, for whom such a document represents the right to take delivery of those same goods. The UCC, in Articles 2, 7, and 9, articulates a structure for resolving this confrontation; unfortunately, its logical foundation and operation has been understood and applied by both jurists and practitioners all too infrequently. The author demonstrates the Code's thoughtful orchestration of the doctrine of good-faith purchase and the related theories of estoppel, negotiability, and buyer in ordinary course.

He argues that a balance will be struck between the competing interests of lender and buyer only when courts analyze controversies arising out of the use of warehouse receipts in the manner intended by the Code and, in particular, when the doctrine of estoppel is properly applied to documentary transactions.