Page 136 - DMGT407Corporate and Business Laws

Unit 5: Law of Sale of Goods

For example, On a sale of certain shares the relevant share certificates and transfer form duly Notes
signed are handed over by the seller to the buyer against payment of price by cheque.
Subsequently the buyer becomes insolvent. The seller has no lien on the share certificate or
transfer form, for his lien ceased when he parted with their possession.

5.7.3 Right of Stoppage in Transit

This right of the unpaid seller consists in preventing the goods from being delivered to the
buyer and resuming and regaining their possession while in transit, retaining them till the price
is paid. The right of stoppage in transit is earned only where the right of lien is lost and is
available only where the buyer has become insolvent (s.50).
Duration of transit [s.51]. Since the right of stoppage in transit can be exercised only during
transit, the question of duration of transit is of great significance. Goods are deemed to be in
course of transit from the time when these are delivered to a carrier or other bailee for the
purpose of transmission to the buyer, until the buyer or his agent in that behalf takes delivery
of them from such carrier or other bailee. When does the transit end? The transit comes to an end
in the following situations: (i) when the goods reach the hands of the buyer or his agent; (ii) if the
buyer or his agent obtains delivery of the goods before they reach their destination; (iii) if after
the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges to
the buyer or his agent that he holds the goods, on behalf of the buyer or the buyer’ agent. It is
immaterial that a further destination of the goods was indicated by the contract; (iv) where the
carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent; (v) if the
goods are rejected by the buyer and the carrier or other bailee continues to hold them, even if the
seller has refused to receive them back; (vi) when the goods are delivered to a ship, it becomes
a question depending on the circumstances of a particular case whether they are in the possession
of the master as carrier or as an agent of the buyer. If the ship is chartered by the buyer or is one
belonging to the buyer, the transit comes to an end as soon as the goods are loaded on the ship,
unless the seller had reserved the right of disposal of the goods; (vii) change of destination.
Where goods are agreed to be delivered at a particular place but the buyer then asks the seller to
deliver them at a different place, the transit continues till the goods are taken by the buyer or his
agent at that place; (viii) effect of part-delivery. Where part delivery of the goods has been made
to the buyer or his agent in that behalf, the remainder of the goods may be stopped in transit,
unless such part delivery has been given in such circumstances as to show an agreement to give
possession of the whole of the goods.

Examples:
1. Badal at Delhi orders goods of Anand at Kolkata. Anand consigns and forwards the
goods to Badal. On arrival at Delhi, goods are taken to Badal’s warehouse and left
there. Badal refuses to take the goods and stop payment. The goods are deemed to be
in transit and the unpaid seller can take them back.
2. The goods are delivered on board the ship belonging to the buyer. Under the bill of
lading the goods are deliverable to the buyer or his agents. Such a bill of lading is a
delivery to the buyer and therefore, there could be no right of stoppage in transit.
How the right of stoppage in transit effected? (s.52). The unpaid seller may exercise his right of
stoppage in transit either by taking actual possession of the goods or by giving notice of his
claim to the carrier or other bailee in whose possession the goods are. The notice of stoppage
may be given either to the person in actual possession of the goods or to the principal. In the
latter case (i.e., to the principal) the notice to be effectual, must be given at such time and in such
circumstances that the principal, by the exercise of the reasonable diligence, may communicate
it to his servant or agent in time to prevent delivery to the buyer. On receipt of the notice from

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