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Trust Receipt Transactions Explained

A trust receipt transaction involves an entruster releasing goods to an entrustee upon execution of a trust receipt. The entrustee agrees to hold the goods in trust, sell or dispose of them according to the terms, and remit the proceeds to the entruster. The obligations of the entrustee are to hold and dispose of the goods according to the terms, receive and turn over the proceeds to the entruster, insure the goods, keep the goods and proceeds separate and identifiable, return unsold goods or goods upon demand, and observe all other terms. The rights of the entruster are to receive proceeds from sales up to the amount owed, receive returned goods, and enforce rights in the trust

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16 views2 pages

Trust Receipt Transactions Explained

A trust receipt transaction involves an entruster releasing goods to an entrustee upon execution of a trust receipt. The entrustee agrees to hold the goods in trust, sell or dispose of them according to the terms, and remit the proceeds to the entruster. The obligations of the entrustee are to hold and dispose of the goods according to the terms, receive and turn over the proceeds to the entruster, insure the goods, keep the goods and proceeds separate and identifiable, return unsold goods or goods upon demand, and observe all other terms. The rights of the entruster are to receive proceeds from sales up to the amount owed, receive returned goods, and enforce rights in the trust

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Roni Mangalus
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© All Rights Reserved
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Notes on Negotiable Instruments.

What is a trust receipt transaction?


Under the Trust Receipts Law (TRL), a trust receipt transaction is any transaction
by and between an entruster and an entrustee where the former releases possession of
goods to the latter upon the execution of the entrustee of a trust receipt. By the receipt,
the entrustee binds himself to hold the goods in trust for the entruster and to sell or
otherwise dispose of them, with the obligation to remit the proceeds thereof to the
entruster.

What are the obligations of the entrustee?


The obligations are of the entrustee are:
1. Hold the goods, documents or instruments in trust for the entruster
and dispose of them strictly in accordance with the terms and
conditions of the trust receipt.
2. Receive the proceeds in trust for the entruster and turn them over to
the extent of the amount owing to the entruster as appears on the trust
receipt.
3. Insure the goods for their total value against loss from fire, theft,
pilferage, or other casualties.
4. Keep the goods or proceeds thereof separate and capable of
identification as property of the entruster.
5. Return the goods, documents or instruments in the event of non-sale or
upon demand of the entruster.
6. Observe all other lawful terms and conditions of the trust receipt.

What are the rights of the entruster?


The rights of the entruster are:
1. To receive the proceeds from the sale of the goods, etc. released under
a trust receipt to the extent of the amount owing to him as appears in
the receipt.

2. To receive the goods, etc. upon the return of the same by the entrustee
in case of non-sale.
3. To enforce all other rights conferred upon him in the trust receipt.

What is the right of a purchaser for value and in good faith upon buying the goods
sold by the entrustee?
The purchaser for value and in good faith acquires the goods, documents or
instruments free from the entrustees security interest.

Who bears the risk of loss of the goods?


The entrustee, even though he is not the owner of the goods. Loss of goods
pending their disposition, does not extinguish the entrustees liability, even if the loss
was not due to the fault or negligence of the entrustee.

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