Delivery of an order is an order addressed by a person in whose name the goods are lodged to the custodian of such goods, to deliver the mentioned goods or part thereof to a specified person named in the said order. The order may be addressed to a shipping company, a dock company, a warehouse keeper, etc. We mention certain procedures for the delivery of an orders below to make them effective.
Till the delivery of goods is taken on the production of the delivery order, the property in the goods is taken on the production of the delivery order, the property in the goods continues to be vested in the person in whose name the goods were originally lodged.
Delivery orders and transferable by endorsement and delivery. A delivery order serves the limited purpose of affecting the delivery of the goods it relates to and is not intended to circulate from hand to hand.
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Legal incidents relating to Delivery Order
- Till the delivery of such goods is obtained, the ownership of such goods rests with the person in whose name the goods were originally lodged. Therefore, he can cancel the delivery order at any time before goods are delivered.
- A person who obtains a delivery order must take immediate steps of either obtaining a warrant or receipt from the warehouse-keeper for the goods represented by the delivery order or ensure that suitable transfer entries are made in the register of the warehouse-keeper. If he does not do any of these, there is the possibility of a second delivery order being issued, in the cancellation of the first one.
Precautions to be taken for delivery of an order
- Where the bank holds a delivery order as security, no constructive possession of the goods is presumed till the delivery order is presented and noted by an entry in the bank’s favor in the books of the custodian of the goods. So, the banker should immediately present the delivery order to the custodian of goods and obtain either physical or constructive possession of goods.
- As the issue of delivery order does not guarantee the existence of goods in the hands of the custodian, there have been instances where bogus delivery orders were issued in respect of goods that never existed in the warehouse. Such delivery orders passed in the market by endorsement and delivery in lieu of goods themselves and a number of businessmen and banks were duped before the mischief was detected.
When a bank makes an advance on such delivery orders it takes care to see that the goods are transferred to its own name before making the advance. The banker should always take into account the respectability of both the company issuing the order as well as the customer offering the document as security. Care should also be taken that the delivery orders do not remain outstanding for a long time.
Truck/Motor Transport Receipt
Inland transport by truck has of late increased considerably. Like railway receipts issued by the railway companies for goods booked by rail, the truck transport companies also issue receipts to consignors when goods are booked for transportation by truck. Customers often approach banks to give them advances against the security of truck receipts.
Truck receipts issued by concerns of repute can very well serve as security for a banker to advance against. Banks may consider giving such facilities after taking suitable precautions. The banker has to take virtually the same type of precautions as in the case of railway receipts.
Truck receipts are accepted as security for advances to a limited extent because they have not yet acquired the status of documents of title to goods as no system has been developed as yet in our country to recognize truck companies as acceptable transport carriers.
Post parcels and air consignment
Sometimes an arrangement is made by a creditworthy customer with a bank that he may be advanced, say up to 50% of the cost of parcels consigned by him either by post or by air. In either of the two cases, he sends the parcels directly to the bank as the consignee.
He thereafter sends the post/air fright receipt to the bank as evidence of dispatch of parcels along with an invoice and relative bill of exchange drawn on the party to whom the parcels have to be delivered against payment.
It must however be noted that advances, if any, made against such receipt should be considered to have been made on the security of the goods and not against documents of title to goods. Similarly, the receipts issued by the airway companies have also not so far attained the status of documents of title to goods.
Documents needed for delivery of an order
- Demand Promissory Note
- Letter of continuity (in case of overdraft)
- Letter of Lien
- Letter of Guarantee, if any
- Letter of assignment
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