Article 13 of the Saudi General Warehouses Law

This article sets out the legal effect of endorsing each of the two documents whose issue and endorsement Article 12 regulates:

1. Endorsing the pledge document separately from the storage receipt: this results in a pledge over the goods in favor of the endorsee. That is, the endorsee becomes a secured creditor, not an owner.
2. Endorsing the storage receipt: this results in the transfer of ownership of the goods to the endorsee.
3. Where both occur: if the pledge document was endorsed to another person, ownership of the goods passes to the person to whom the storage receipt was endorsed subject to the pledge.

The new owner's obligation in the third case: the person to whom the storage receipt was endorsed must, on the date the debt falls due, do one of two things:

• pay the debt secured by the pledge document, or
• enable the secured creditor to satisfy his right from the price of the goods that passed to him.

So buying the goods through endorsement of the receipt does not extinguish the right of the secured creditor who holds the pledge document. It is therefore important for whoever receives the storage receipt to check whether the pledge document is still with it or has been endorsed to someone else.

Article 14 then sets out the required form of endorsement: it must be dated, and if the pledge document is endorsed separately it must include the amount of the secured debt, its due date, the creditor's name and address, and the endorser's signature. Anyone dealing in these documents in a large transaction is best advised to consult a lawyer specializing in commercial matters or finance.