Within a period of comparatively recent date there has crept into commercial usage an instrument known as the trust receipt. Because of the extensive use now being made of the trust receipt in Washington, it is well to become acquainted with some of its legal aspects. In British law the rights of the lending bank under the trust receipt have been steadfastly upheld on the ground that the trust receipt is a necessary instrument of commerce. This view has been quite generally followed in the American courts, with the difference, however, that the courts deem it a part of their judicial duty to decide whether these instruments (which have nothing to do with technical trusts) are chattel mortgages, contracts of conditional sale, or something different from either. Trust receipts have been held to be conditional sales in those jurisdictions where, at the time of the decisions, conditional sale contracts did not have to be recorded. On the other hand, at least one writer contends that the creditor (the banker) is a mortgagee, and that the trust receipt arrangement constitues, in legal effect, a chattel mortgage. At any rate the earlier view was in favor of the banker, one court going so far as to classify the trust receipt as a bailment in order to avoid the harsh rule making conditional sales fraudulent.
Harry O. Arend,
Notes and Comments,
The Trust Receipt—Its Possible Legal Status in Washington,
Wash. L. & Rev.
Available at: https://digitalcommons.law.uw.edu/wlr/vol2/iss2/6