Warehouse and Third-Party Logistics Attorney

A warehouse holds someone else's property and charges for the privilege. That simple arrangement carries a specific set of legal consequences: a duty of care defined by statute, a lien that must be perfected and enforced correctly, a liability limitation that only works if it was properly offered, and a set of documents (warehouse receipts, storage agreements, fulfillment contracts) whose terms decide who pays when inventory goes missing.

The Law Offices of Albert Goodwin represents warehouses, cold storage operators, fulfillment centers, and third-party logistics providers in New York City, as well as the customers whose inventory they hold.

Article 7 of the Uniform Commercial Code

Warehousing is governed in New York by Article 7 of the Uniform Commercial Code, which addresses documents of title, the warehouse operator's obligations, and the operator's lien. Three provisions drive most disputes.

The Standard of Care

A warehouse is liable for damages for loss of or injury to goods caused by its failure to exercise the care that a reasonably careful person would exercise under similar circumstances. Unlike a motor carrier under the Carmack Amendment, a warehouse is not close to strictly liable. It is liable for negligence. The practical consequence is that a bailment presumption does the initial work: when a customer proves delivery of goods in good condition and failure to redeliver them, the burden shifts to the warehouse to show it was not negligent. A warehouse that cannot explain what happened to the goods generally loses, which is why inventory control records, cycle count documentation, access logs, and video retention matter more than any argument made later.

Limitation of Liability

A warehouse may limit its liability by a term in the warehouse receipt or storage agreement, ordinarily stated per article, per unit, or per unit of weight. The statute conditions that limitation: the customer must be given the opportunity to increase the limit by declaring a higher value, and the warehouse may charge an increased rate for that higher liability. A limitation buried in a document the customer never received, or imposed without any stated opportunity to declare a higher value, is vulnerable. Warehouses that use a per-pound limit should be able to prove how it was communicated, and customers facing a limitation defense should test exactly that.

A limitation also may not protect a warehouse from liability for conversion to its own use.

The Warehouse Lien

A warehouse has a lien against the bailor on the goods covered by the storage document or on the proceeds, for charges for storage, transportation, insurance, labor, and other charges present or future in relation to the goods, and for expenses necessary for the preservation of the goods or reasonably incurred in their sale. The lien on goods stored by a merchant in the course of its business extends to all goods of that merchant in the warehouse, which is a powerful remedy against a delinquent customer.

Enforcement is by sale, and the procedure is exacting: notification to all persons known to claim an interest in the goods, a statement of the claim and the goods, a demand for payment within a specified time, a conspicuous statement that unless payment is made the goods will be advertised and sold, advertisement in the manner the statute requires, and a commercially reasonable sale. A warehouse that shortcuts these steps loses the lien's protection and becomes liable for conversion, frequently for far more than the storage charges it was trying to collect.

Practical note. The lien is also the warehouse's leverage in a payment dispute, and the customer's leverage runs the other way: a customer whose inventory is held hostage may sue for conversion and seek immediate relief, and may argue the charges are inflated. These disputes escalate quickly because both sides are watching a seasonal window close. We handle them from either side, and often resolve them with a bonded release and an expedited accounting rather than a year of litigation.

Storage, Fulfillment, and 3PL Agreements

Modern 3PL contracts go well beyond storage: receiving, put-away, pick and pack, kitting, returns processing, freight arrangement, and inventory system integration. The provisions that decide disputes include:

• Shrinkage allowance. An agreed tolerance, expressed as a percentage of units handled, above which the provider pays. Without one, every inventory variance becomes an argument.
• Inventory valuation. Cost, landed cost, or wholesale price. The difference on a five-figure shrinkage claim is substantial.
• Liability caps and consequential damages waivers, including whether the cap is per occurrence, annual, or tied to fees paid over a lookback period.
• Service level agreements, with defined metrics, measurement methodology, and remedies. Metrics without a measurement method are unenforceable in practice.
• Insurance. Whether the customer insures its own goods, whether the provider carries warehouse legal liability coverage, and whether waivers of subrogation are mutual.
• Rate escalation and accessorial charges, which is where most customer disputes actually originate.
• Termination and transition. Notice periods, the obligation to cooperate in an orderly removal of inventory, and, critically, whether the provider may withhold goods for disputed charges during transition.
• Data and systems. Ownership of inventory data, integration obligations, and responsibility for errors originating in the customer's system.

See business contract drafting and supplier contract negotiation.

Competing Claims to Stored Goods

Warehouses are regularly caught between parties who each claim the inventory: a customer and its secured lender with a perfected security interest, a customer in bankruptcy and its creditors, a consignor and a consignee, or a buyer and a seller in a failed transaction. Releasing goods to the wrong party creates liability to the right one.

The correct response depends on the documents. A negotiable warehouse receipt must be surrendered for delivery. A non-negotiable receipt or a bare storage agreement raises different questions. Where claims genuinely conflict, an interpleader action allows the warehouse to deposit the dispute with the court and step out of it. When a customer files for bankruptcy, the automatic stay restricts enforcement of the lien, and continuing to sell stored goods without relief from the stay is a serious error. See UCC disputes and creditor rights.

Cold Storage and Regulated Commodities

Temperature-controlled facilities carry heightened exposure. A refrigeration failure that spoils a food or pharmaceutical customer's inventory produces a total loss claim, and the customer may be legally barred from selling the product at any price, which eliminates the salvage argument. Facilities storing food are subject to federal food safety requirements applicable to holding facilities, including preventive controls and, for temperature-controlled transport and holding, sanitary transportation rules. Documentation of continuous monitoring, alarm response, and generator testing is the difference between a defensible claim and an indefensible one. Facilities handling alcohol, tobacco, pharmaceuticals, or controlled substances face additional licensing and custody requirements.

Facility Issues

The warehouse business also generates ordinary real estate and operating disputes: lease terms that do not permit the intended use, loading dock and access easements, sprinkler and fire code compliance for high-piled storage, certificate of occupancy problems that surface during a use change, racking installation defects, and disputes with equipment lessors. In New York City, a facility use change frequently triggers zoning and permitting questions that should be resolved before the lease is signed rather than after the customer's inventory arrives. See commercial leases and commercial lease disputes.

You can contact us by phone at 212-233-1233 or by email at [email protected].