What is the legal status of a warehouse receipt?

What is the legal status of a warehouse receipt?  That was a question before the Commercial Court in the recent case of Natixis v Marex and Access World [2019] EWHC 2549 (Comm), concerning Nickel stored at warehouses and ‘transferrable’ warehouse receipts given to the buyer.

In this case the receipts were discovered to be forged and the claims between the parties involved issues of fundamental mistake and breach of duty of care.  However, the Court took the opportunity to review the legal status of warehouse receipts – which are commonly passed around in commodity sales where goods are stored ashore.  The Court confirmed that warehouse receipts are not documents of title (unlike Bills of Lading which are documents of title to the goods they represent). 

The legal relationship between the warehouse and the original depositor of the goods is a bailment contract on the terms of the warehouse receipt.  However, there is no legal relationship between the warehouse and any buyer of the goods based upon the warehouse receipt being transferred to that buyer.  Only once the warehouse ‘acknowledges’ that it holds the goods on behalf of the buyer (as per section 29(4) Sales of Goods Act 1979) does a legal relationship arise between the warehouse and the buyer.

The lesson to learn from this case is that a buyer requires separate confirmation from the storage warehouse that the goods there are now held on the buyer’s behalf and not on behalf of the original depositor/seller of the goods, even if the seller has transferred to the buyer the warehouse receipt for the goods.  Otherwise, the buyer risks being unable to compel delivery of the goods by the warehouse.   

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