2021 Colorado Code
Title 4 - Uniform Commercial Code
Article 7 - Documents of Title
Part 2 - Warehouse Receipts - Special Provisions
§ 4-7-204. Duty of Care - Contractual Limitation of Warehouse's Liability

1. A warehouse is liable for damages for loss of or injury to the goods caused by its failure to exercise care with regard to the goods that a reasonably careful person would exercise under similar circumstances. Unless otherwise agreed, the warehouse is not liable for damages that could not have been avoided by the exercise of that care.
2. Damages may be limited by a term in the warehouse receipt or storage agreement limiting the amount of liability in case of loss or damage beyond which the warehouse is not liable. Such a limitation is not effective with respect to the warehouse's liability for conversion to its own use. On request of the bailor in a record at the time of signing the storage agreement or within a reasonable time after receipt of the warehouse receipt, the warehouse's liability may be increased on part or all of the goods covered by the storage agreement or the warehouse receipt. In this event, increased rates may be charged based on an increased valuation of the goods.
3. Reasonable provisions as to the time and manner of presenting claims and commencing actions based on the bailment may be included in the warehouse receipt or storage agreement.

History. Source: L. 2006: Entire article R&RE, p. 474, § 2, effective September 1. L. 2007: (a) and (b) amended, p. 367, § 8, effective August 3.

This section is similar to former § 4-7-204 as it existed prior to 2006.

Prior Uniform Statutory Provision: Former Section 7-204.

Changes: Updated to reflect modern, standard commercial practices.

Purposes of Changes:

1. Subsection (a) continues the rule without change from former Section 7-204 on the warehouse's obligation to exercise reasonable care.

2. Former Section 7-204(2) required that the term limiting damages do so by setting forth a specific liability per article or item or of a value per unit of weight. This requirement has been deleted as out of step with modern industry practice. Under subsection (b) a warehouse may limit its liability for damages for loss of or damage to the goods by a term in the warehouse receipt or storage agreement without the term constituting an impermissible disclaimer of the obligation of reasonable care. The parties cannot disclaim by contract the warehouse's obligation of care. Section 1-302. For example, limitations based upon per unit of weight, per package, per occurrence, or per receipt as well as limitations based upon a multiple of the storage rate may be commercially appropriate. As subsection (d) makes clear, the states or the federal government may supplement this section with more rigid standards of responsibility for some or all bailees.

3. Former Section 7-204(2) also provided that an increased rate can not be charged if contrary to a tariff. That language has been deleted. If a tariff is required under state or federal law, pursuant to Section 7-103(a), the tariff would control over the rule of this section allowing an increased rate. The provisions of a non-mandatory tariff may be incorporated by reference in the parties' agreement. See Comment 2 to Section 7-103. Subsections (c) deletes the reference to tariffs for the same reason that the reference has been omitted in subsection (b).

4. As under former Section 7-204(2), subsection (b) provides that a limitation of damages is ineffective if the warehouse has converted the goods to its own use. A mere failure to redeliver the goods is not conversion to the warehouse's own use. See Adams v. Ryan Christie Storage, Inc., 563 F. Supp. 409 (E.D. Pa. 1983) aff'd 725 F.2d 666 (3rd Cir. 1983). Cases such as I.C.C. Metals Inc. v. Municipal Warehouse Co., 409 B,E, 2d 849 (N.Y. Ct. App. 1980) holding that mere failure to redeliver results in a presumption of conversion to the warehouse's own use are disapproved. “Conversion to its own use is narrower than the idea of conversion generally.” Cases such as Lipman v. Peterson, 575 P.2d 19 (Kan. 1978) holding to the contrary are disapproved.

5. Storage agreements commonly establish the contractual relationship between warehouses and depositors who have an on-going relationship. The storage agreement may allow for the movement of goods into and out of a warehouse without the necessity of issuing or amending a warehouse receipt upon each entry or exit of goods from the warehouse.

Cross References: Sections 1-302, 7-103, 7-309 and 7-403.

Definitional Cross References:

“Goods”. Section 7-102.

“Reasonable time”. Section 1-204.

“Sign”. Section 1-201.

“Term”. Section 1-201.

“Value”. Section 1-204.

“Warehouse receipt”. Section 1-201.

“Warehouse”. Section 7-102.

I.GENERAL CONSIDERATION.

Annotator's note. Since § 4-7-204 is similar to § 4-7-204 as it existed prior to the 2006 repeal and reenactment of this article, relevant cases construing that provision have been included in the annotations to this section.

Measure of damages. Where household goods, wearing apparel, and personal effects of a bailor have a market value, then the measure of damages for negligent harm to personal property bailed with a warehouseman is the difference between the fair market value of the goods at the time the injury was discovered and what would have been the fair market value at that time if the goods had not been damaged. Keefe v. Bekins Van & Storage Co., 36 Colo. App. 382, 540 P.2d 1132 .

Original costs of goods which were damaged while in possession of a warehouseman may be considered in determining market value, but only if combined with other factors such as the length of time the property has been used, its condition just before, and its salvage value after the damage occurred. Keefe v. Bekins Van & Storage Co., 36 Colo. App. 382, 540 P.2d 1132 (1975).

Where an item, while in the possession of a warehouseman, is merely damaged and is repairable at reasonable expense, the cost of repairs may be used as the measure of damages. Keefe v. Bekins Van & Storage Co., 36 Colo. App. 382, 540 P.2d 1132 (1975).

Where articles which have been damaged while in the possession of a warehouseman have no market value in the ordinary sense, they may be given a reasonable value on the basis of their value to the owner, and for this purpose, original cost and the practicability and expense of replacement can be considered. Keefe v. Bekins Van & Storage Co., 36 Colo. App. 382, 540 P.2d 1132 (1975).

II.DUTY OF CARE.

Law reviews. For article, “Impact of the Uniform Commercial Code on Colorado Law”, see 42 Den. L. Ctr. J. 67 (1965).

Annotator's note. Since § 4-7-204(1) is similar to repealed § 147-2-14, C.R.S. 1963, § 146-2-14, CRS 53, and laws antecedent to CSA, C. 173, § 21 (uniform warehouse receipts act), relevant cases construing those provisions have been included in the annotations to this section.

The legal relationship created in warehousing is that of bailor-bailee. Burroughs Corp. v. Rocky Mt. Prestress, Inc., 431 F.2d 1185 (10th Cir. 1970).

Bound only to common care. It is well settled that warehousemen are not like common carriers, insurers of goods committed to their care and liable for all losses not occasioned by the act of God or a public enemy, but are ordinary bailees for hire, bound only to common care and diligence and liable only for want of such diligence and care. Benedict Whse. & Transf. Co. v. McKannon Piano Co., 62 Colo. 180 , 161 P. 145 (1916).

Warehousemen are liable for loss due to their negligence. See Denver Union Term. Ry. v. Cullinan, 72 Colo. 248 , 210 P. 602 (1922).

When there is substantial evidence upon the issue, the question of reasonable care is for the jury, in view of all the surrounding circumstances. Benedict Whse. & Transf. Co. v. McKannon Piano Co., 62 Colo. 180 , 161 P. 145 (1916).

In the absence of evidence, the question of reasonable care is for the court. Benedict Whse. & Transf. Co. v. McKannon Piano Co., 62 Colo. 180 , 161 P. 145 (1916).

Appellate court must accept trier of fact's conclusion. The issues of negligence and proximate cause are to be resolved by the trier of the fact, and upon review the appellate court must view the evidence in the light most favorable to the party in whose favor the trier of the fact resolved the inferences to be drawn from the evidence. Hipps v. Hennig, 167 Colo. 358 , 447 P.2d 700 (1968).

An appellate court can reach a conclusion of what constitutes reasonable care or proximate cause different from the one reached by the trier of the fact, only in the clearest cases where the facts are undisputed and reasonable minds could draw but one inference from them. Hipps v. Hennig, 167 Colo. 358 , 447 P.2d 700 (1968).

It cannot be said that a warehouseman is required to foresee, as a matter of law, that the distribution of keys to other tenants or users of the building could result in a fire being set. Hipps v. Hennig, 167 Colo. 358 , 447 P.2d 700 (1968).

It cannot be said that as a matter of law all warehousemen must employ a night watchman or put in an automatic sprinkler system, and that the failure to do so subjects the warehouseman to liability for any fire which occurs on the premises. Hipps v. Hennig, 167 Colo. 358 , 447 P.2d 700 (1968).

To establish a prima facie case the bailor need only show that the goods were delivered to the bailee in good condition and that the bailee returned the goods in a damaged condition. Burroughs Corp. v. Rocky Mt. Prestress, Inc., 431 F.2d 1185 (10th Cir. 1970). See Bankers Whse. Co. v. Bennett, 148 Colo. 323 , 365 P.2d 889 (1961).

As a presumption of negligence arises. Once goods are delivered in good condition to a warehouseman who accepts them, but cannot redeliver them, or can redeliver them only in a damaged condition, a presumption of negligence on the part of the warehouseman arises. Hipps v. Hennig, 167 Colo. 358 , 447 P.2d 700 (1968); Burroughs Corp. v. Rocky Mt. Prestress, Inc., 431 F.2d 1185 (10th Cir. 1970).

Where in February 1973, a warehouseman accepted the bailor's goods for storage and redelivered them in September, 1973, in a water-damaged condition, under these circumstances a presumption of negligence on the part of the warehouseman arose. Keefe v. Bekins Van & Storage Co., 36 Colo. App. 382, 540 P.2d 1132 (1975).

The burden of going forward with evidence to rebut that presumption rests on the warehouseman. Bankers Whse. Co. v. Bennett, 148 Colo. 323 , 365 P.2d 889 (1961); Hipps v. Hennig, 167 Colo. 358 , 447 P.2d 700 (1968); Burroughs Corp. v. Rocky Mt. Prestress, Inc., 431 F.2d 1185 (10th Cir. 1970); Keefe v. Bekins Van & Storage Co., 36 Colo. App. 382, 540 P.2d 1132 (1975).

Once the bailor has established these facts, it is incumbent on the bailee to come forward with evidence to show that the goods were returned in good condition, or that there exists some acceptable explanation as to why they were returned in a damaged condition. Burroughs Corp. v. Rocky Mt. Prestress, Inc., 431 F.2d 1185 (10th Cir. 1970).

The effect of this rule requiring the bailee to meet the presumption of negligence is to place the burden upon the one best able to discharge it. Bankers Whse. Co. v. Bennett, 148 Colo. 323 , 365 P.2d 889 (1961).

An essential part of every bailment contract is the obligation to deliver over the property at the termination of the bailment. The bailor must prove the contract, the delivery of the goods to the bailee, and their return in a damaged condition. When he has done this, the inference is deducible that the bailee is at fault and must answer, and especially is this true if the loss could not ordinarily have occurred without negligence. His failure to return the goods as delivered to him is inconsistent with what he agreed to do. The property was in his possession, under his care and oversight, and away from that of the bailor, who in most cases could not know under what circumstances it was damaged. Bankers Whse. Co. v. Bennett, 148 Colo. 323 , 365 P.2d 889 (1961).

There is, however, no shift in the burden of proof which still remains with the bailor. Hipps v. Hennig, 167 Colo. 358 , 447 P.2d 700 (1968); Burroughs Corp. v. Rocky Mt. Prestress, Inc., 431 F.2d 1185 (10th Cir. 1970).

Where foodstuffs are received by a warehouse in good marketable condition but are later contaminated while in storage, the question is, whether the warehouseman, if he had been the owner engaged in the sale, storage, and distribution of such would permit them to be stored with or come in contact with anything which would impregnate them with an odor, inasmuch as one engaged in such a business as storage of foodstuffs would presumably know of their susceptibility to absorb or acquire the taste and odor of other substances and take measures to guard against resulting contamination. Bankers Whse. Co. v. Bennett, 148 Colo. 323 , 365 P.2d 889 (1961).

III.CONTRACTUAL LIMITATION.

Annotator's note. Since § 4-7-204(2) is similar to repealed CSA, C. 173, § 3 (uniform warehouse receipts act), a relevant case construing that provision has been included in the annotations to this section.

Any attempt by provision in a warehouse receipt to absolve warehousemen from all liability resulting from failure to exercise ordinary care is invalid, and it has been so held in some jurisdictions independent of statute on the ground of public policy. French v. Bekins Moving & Storage Co., 118 Colo. 424 , 195 P.2d 968 (1948).

A provision in the contract between the parties declaring an agreed valuation of the goods stored which is less than their true value for the purpose of determining the measure of the warehousemen's obligation does not impair the obligation under this section if: (a) the parties fairly agree as to the valuation, and (b) the fact of actually greater value is unknown to the warehousemen. French v. Bekins Moving & Storage Co., 118 Colo. 424 , 195 P.2d 968 (1948).

Limitation not called to bailor's attention. Under the plain language of subsection (2), the liability of a warehouseman can be limited to the amount specified in a warehouse receipt, even though this limitation was not called specifically to the bailor's attention by the warehouseman. Keefe v. Bekins Van & Storage Co., 36 Colo. App. 382, 540 P.2d 1132 (1975).