Question 3 OR (b)
Unpaid seller; lien and stoppage in transit compared
6 marks
- Time to write
- About 12 minutes
- Topic
- Unpaid seller
Question
Question 3 OR (b) · 6 marksUnder the Sale of Goods Act, of 1930, who is an unpaid seller? Compare the rights of lien and of stoppage in transit that an unpaid seller has.
Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- Who…?Compare…Two asks in one question: answer both.
- CompareCompare in a table, basis by basis.
What the paper leaves open
The OR alternative of this paper is lettered (c) and (d), not (a) and (b), and the paper prints the OR marker as "(OR)"; the printed letters are kept.
Write it in this order
- Read; underline the asks; jot your points 1 min
- 1 Unpaid seller (s. 45) and his rights against the goods (s. 46) 2 marks 3 min
- 2 Lien and stoppage in transit compared 3 marks 5 min
- 3 Example and conclusion 1 mark 2 min
- Check: every ask answered, key terms underlined 1 min
Short on time? Trim steps 1 and 2 evenly rather than skip one: each is capped at its own marks. End with step 3 in a line or two.
Try it first. About 12 minutes for 6 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
Unpaid seller. Under section 45(1) of the Sale of Goods Act, 1930 a seller is an unpaid seller:
1No payment yet, so Karim locks the crates and folds his arms—the goods stay with him.
LienThe right to retain the goods in his possession until payment or tender of the price.
2Word comes that the buyer has gone broke: he races the truck down the highway to stop it.
Stoppage in transitWhere the buyer becomes insolvent, the right to stop the goods while they are in the course of transit.
3The mangoes will not wait, so he sells them fresh to the next buyer at the market.
ResaleWhere the goods are perishable.
- when any part of the price remains neither paid nor tendered, and the seller has a present right to sue for the price; or
- when he took a bill of exchange or another negotiable instrument as conditional payment, and that condition has failed, through dishonour of the instrument or for any other reason.
Under section 45(2), the term seller covers anyone standing in a seller's shoes, for example an agent of the seller who has received the bill of lading by endorsement, or a consignor or agent who has paid the price himself or is directly answerable for it. Example: a Ludhiana hosiery maker sells woollens worth ₹4 lakh to a Shimla retailer, who pays ₹3 lakh; the maker is an unpaid seller for the balance. So is a seller whose cheque for the full price is returned unpaid.
Rights against the goods. By section 46(1), even though property in the goods may have passed to the buyer, the unpaid seller may hold the goods for the price as long as they remain in his possession (lien); if the buyer turns insolvent, he may stop them in transit once he has given up possession; and he has a right of resale within the limits the Act sets. Where property has not passed, he has a matching right of withholding delivery (s. 46(2)).
Lien and stoppage in transit compared:
| Basis | Lien (ss. 47-49) | Stoppage in transit (ss. 50-52) |
|---|---|---|
| Nature of the right | A right to retain possession: the seller keeps the goods and refuses delivery until the price is paid or tendered | A right to regain possession: the seller recovers goods already sent and keeps them until paid |
| Possession | The seller must be in possession; he may hold the goods even as the buyer's agent or bailee | The seller must have parted with possession, the goods must be with a carrier or other bailee, and the buyer must not yet have got them |
| When it can be used | Goods sold without any stipulation as to credit; goods sold on credit after the credit period has expired; or the buyer has become insolvent | Only when the buyer has become insolvent |
| Insolvency of the buyer | Not required: the lien is available against a solvent buyer too | Essential |
| Start and end | Lasts while the goods are in the seller's possession and ends once they leave it | Begins where the lien ends, and ends once the goods are delivered to the buyer |
| How exercised | By simply keeping the goods | By seizing the goods himself, or by notifying his claim to the carrier or bailee who holds them (or to his principal, in time for the principal, using reasonable diligence, to pass it on and prevent delivery); the carrier then redelivers to the seller, who bears the cost |
Example: the Ludhiana maker still holding half the woollens in its godown may keep them under its lien even though the retailer is solvent. If it has already handed the goods to a transporter for Shimla and then learns the retailer is insolvent, it can only stop them in transit, by notice to the transporter before delivery.
Conclusion. Both rights secure the price against the goods; stoppage in transit is in effect a lien extended to goods the seller has dispatched, available only on the buyer's insolvency and only until the goods reach the buyer.
Where the 6 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Unpaid seller (s. 45) and his rights against the goods (s. 46) | 2 |
| 2 | Lien and stoppage in transit compared | 3 |
| 3 | Example and conclusion | 1 |
| Total | 6 |
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