remedies to breach of contract

8/12/2019 Remedies to Breach of Contract

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Remedies

1Institute of Lifelong Learning, University of Delhi

Subject: Commerce

Lesson: RemediesCourse Developer : Reena Marwah

College, Department: University of Delhi



Remedies


Introduction

The Sale of Goods Act 1930 provides the remedies available to both the sellerand the buyer in different possible circumstances. When a buyer and a seller has

entered into a contract, each party is to perform the promise made to the other.If one of the parties does not perform one or more of the promises made, thenthere is breach of contract and the other party can have remedy for the breach.

An Unpaid Seller

The definition of „unpaid seller is provided in section 45 of the Sale of Goods Actand it runs as follows “the seller of the goods deemed to be an unpaid seller is:

when the whole of the price has not been paid when a bill of exchange or other negotiable instrument has been

received as conditional payment and the condition on which it wasreceived has not been fulfilled by reason of the dishonour of theinstrument or otherwise.”

Thus, a seller who has received only a part of the payment is an unpaid seller.However, a seller is not an unpaid seller if the buyer has tendered, i.e. offered topay the price, and the seller has refused to accept the payment. In such a case,the seller will lose the rights of an unpaid seller.

Illustration: Seema sold certain goods to Bindu for Rs.10,000. Bindu made the payment by cheque. Seema presented the cheque to the banker for payment butit got dishonoured as there was not enough money in the bank account of Bindu.Seema can return the cheque to Bindu and claim the payment as Seema is in the

position of an ‘unpaid seller’ .

The seller must not refuse to accept the payment when tendered. If the price hasbeen offered by the buyer but the seller wrongfully refuse to accept it, the selleris not considered as an„unpaid seller .

Illustration: Suresh sold certain quantity of jute to Jatin for Rs.5000. Jatin paidRs.2500 and failed to pay the balance. In this case, Suresh is in position of an‘unpaid seller’. The cost of the jute is Rs. 5,000, and until Jatin makes the entire

payment, Suresh can claim the payment due to him

Where the price has been paid to the seller by bill of exchange, cheque orpromissory note, etc., the seller is not an unpaid seller . However if such bill ofexchange, cheque, etc. is dishonoured, the seller becomes an „unpaid seller .



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The Rights of An 'unpaid Seller'

The rights of an„unpaid seller can be studied u nder two main heads:a) Rights against the goods and b) Rights against the buyer.

Rights of an ‘unpaid seller’ against the goods: In some cases after the sale of goods the seller continues to have possession ofthe sold goods. At such times, an unpaid seller has certain rights against thegoods. These can be further studied under two heads;

a) Where the property of goods has passed to the buyer; andb) Where the property of goods has not passed to the buyer.

Where the property of goods has passed to thebuyer

When the property in goods has passed to the buyer, there are three rights of anunpaid seller. These are:

Right of Lien, Right of stoppage in transit Right of Re-sale

These are discussed in detail below:

o Right of LienThe Right of Lien means, the right to keep the possession of the goods until thecharges or the price has been paid. This right is available to the unpaid sellerwhere the goods have been transferred to the buyer. This is because lien dependson possession. Even if the seller has handed over the documents of title to thebuyer, the lien is not affected. “According to Section 47, the unpaid seller canexercise lien, only when the following conditions are satisfied:

o where the goods have been sold without stipulation as to credit; oro where the goods have been sold on credit but the term of credit

has expired; oro when the buyer has become insolvent.”

This Section implies that the unpaid seller can exercise his lien over the goods,even if he is in possession of such goods only as an agent for the buyer. It is tobe noted that the right of lien will be only for the price of the goods and not forany other charges.

“If in such case where the unpaid seller has made only a part of the delivery of

the goods he has the right of lien on the rest of the goods, unless such a partdelivery has been made under an agreement to waive the lien” [Section 48].



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If under the contract the delivery of goods is to be made in installments the sellercannot stop the delivery of the rest of the installments in case the buyer defaultsin making the payment for one installment. However, the seller can stop thedelivery when the buyer becomes insolvent or the default by the buyer actuallyimplies a cancellation of entire contract.

Termination of Lien: The unpaid seller loses the right of lien as soon he fails tohave the possession of goods. Under Section 49 of the Sale of Goods Act theunpaid seller of goods can lose his lien when he delivers it to a carrier or deliversto the buyer or by a waiver or when the buyer makes the payment. These areexplained below:

Delivery to Carrier: When the unpaid seller delivers the goods tocarrier so that they may be taken to the buyer, the right of lien islost. However, this should be done without the seller reserving theright of disposal. If the seller reserves the right of disposal then theseller will consider the carrier as his agent and the latter will haveto act under the supervision of the seller.

Case Law 1:Valpy vs. Gibson 1 :The goods sold were delivered to the buyer’s shipping agents, who had put themon board a ship. However, the goods were returned to the sellers for repacking.While they were still with the sellers for this purpose, the buyer became insolventand the sellers claimed to retain the goods in the exercise of right of lien becausethey were unpaid. However it was held that he could not do so as he lost theirlien by delivery of goods to the shipping agent.

Case Law 2:

Jain Mills & Elec. Store v. State of Orissa,2:

A sold 100 bags of cement to B and delivered them to the Railways for the purpose of transmission to the buyer B. A obtained the railway receipt in B’sname and sent the same to B to enable him to obtain the delivery of the goodsfrom the Railways. While the bags of cement were in transit, the buyer (B)became insolvent, and the seller (A) was still unpaid. In this case, the seller’sright of lien is lost as the goods are delivered to the carrier (Railways). However,he still has the right of stoppage in transit

Delivery to the Buyer: The unpaid seller loses the right of lien when

the buyer or buyer s agent obtains the possession of the goods in alegal manner. However, the lien continues in case the buyer takespossession of the goods without the permission of the seller.

By Waiver of Lien: There can be an express or implied waiver oflien. When in a contract of sale it is specifically written that theseller does not have the right to retain possession until thepayment of price, it is an express waiver. An implied waiver iswhen goods are sold on credit or if there is a sub-sale or if theseller uses the goods for himself or refuses to deliver them.

Payment by the buyer: The seller will not be an unpaid seller whenthe buyer makes the payment for the goods. Here the seller

1 [ (1847) 4C.B. 837] 2 AIR 1991, Orissa 117.



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cannot term himself as an unpaid seller by refusing to accept thepayment for the goods by the buyer.

Right of Stoppage in TransitAs stated earlier the lien is lost in the case where the seller no longer has thepossession of goods. However, in certain situations an unpaid seller can have theright to continue with the possession of goods as long as they have not beendelivered to the buyer and may also have the right over them till the buyer has

made the payment. The seller has the right of stopping the goods and takingtheir possession from the carrier by exercising the right of stoppage in transit.This right of stoppage in transit is for goods only and for this right to be used bythe seller, the following three conditions must be satisfied:

The seller must be unpaid; The buyer must be insolvent; and “The seller must have parted with the possession of goods and the

buyer must not have acquired it,” i.e., goods should be in transit(Section 50).

The right of stoppage in transit is against goods only. The last requirement is aquestion of fact, but it is sometimes difficult to ascertain because much dependsupon the capacity in which the carrier holds the goods. If the carrier holds goodsas agent of the seller, goods are under the seller s lien. If he holds them as agentof the buyer, there is no transit because the buyer has acquired possession. It isonly when a middleman holds the goods in his own name as a carrier that thegoods are in transit. Transit does not mean that the goods should be actuallymoving.

Illustration: Amar of Ahmedabad sold certain goods to Vikas of Delhi anddelivered the goods to Chauhan, a common carrier for the purpose oftransmission to Vikas. Before the goods could reach him, Vikas became insolvent.In this case Amar can stop the goods in transit by giving a notice to Chauhan.



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Duration of Transit (Section 51):The goods are stopped to be in transit in the following situations:

o “When they are delivered to a carrier or to other agent for thepurpose of delivery to the buyer, until the buyer or his agent takesthe delivery of them from such carrier or the other bailee” [Section51(1)].

o “If the buyer rejects the goods and the carrier or the other baileecontinues to possess them, the transit continues, even if the sellerhas refused to receive them back” [Section 51(4)].

o “When goods are delivered to a ship chartered by the buyer, itdepends on the circumstances of the case whether the goods are inthe possession of the master as a carrier or as agent of the buyer.When the seller knows that he is delivering the goods to someoneas a carrier, who is receiving them in the character, he deliversthem with an implied right of stopping them so long as they remainin the possession of the carrier as a mere carrier “[Section 51(4)].

o “When part delivery has been made, the remainder of the goods

may be stopped in transit, unless the delivery of a part of goodsshows an intention to give up the possession of the whole of thegoods” [Section 51 (7)].

When Transit comes to an End?Transit comes to an end and the seller loses the right to stop the goods intransit in the following cases:1. Delivery to the buyer: “When goods are delivered to the buyer or his

agent, the transit comes to an end” [Sect ion 51(1)]. Where the buyerdoes not accept the goods, the transit does not end even if the goodshave reached the place of destination.

2. Interception by the buyer: “If the buyer or his agent in that behalf

obtains delivery of goods before their arrival at the appointeddestination, the transit comes to an end.” [Section 51(2)]. The buyeror his agent may take delivery with or without the consent of thecarrier. However, as far as the seller s right of stoppage is concerned,that comes to an end.

3. Acknowledgm ent to the buyer: “ If after arrival of the goods at theappointed destination, the carrier or the other bailee acknowledges tothe buyer or his agent that he is now holding the goods on his behalf,the transit period ends. It is immaterial that the goods are still with thecarrier or the buyer has indicated a further destination” [Section51(3)]. However, there must be a very clear acknowledgement to putan end to the original contract of carriage. (It should be noted that

where the goods have to be carried by more than one carrier as part ofthe original contract, the transit continues till the goods arrive at theirultimate destination).

4. Delivery on ship chartered by buyer: “ Where the goods are deliveredto a ship chartered by the buyer, and if the circumstances show thatthe carrier is acting as an agent of the buyer, then the transit comes toan end as soon as the goods are loaded on board the ship” [Section51(5)].

5. Wrongful denial to deliver: “ Where the carrier or the other baileewrongfully refuses to deliver the goods to the buyer or his agent inthat behalf, the transit is deemed to be at an end”[Section 51(6)].However, if that has been done rightfully, the transit may not end(e.g., on refusal by buyer to pay freight charges when their payment isa precondition to delivery).



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6. When part delivery of goods is made to the buyer or his agent: “Ifpart delivery shows an agreement to give up possession of the wholeof the goods, transit comes to an end. However, in general, delivery ofa part is not equivalent to delivery of the whole and the seller can stopthe remainder of the goods”[Section 51(7)].

7. How stoppage in transit can be undertaken: An unpaid seller canexercise the right of stoppage in transit either:

a. By taking the possession of goods; orb. “By giving due notice of his claim to the carrier or the other

bailee in whose possession the goods are. Such notice may begiven either to the person in actual possession of goods or hisprincipal” [Section 52(1)].

In case the notice is given to the principal, then to be effective andworkable, it must be given at such time and in such circumstances thatthe principal, by the exercise of reasonable carefulness, may communicateit to his servant or agent to prevent a delivery to the buyer.

When enough notice is given by the seller to the carrier to stop thegoods, the carrier should re-deliver the goods or deliver them according to

the seller s directions. The seller must pay the charges for re -delivery.

Differences between Right of Lien and Right ofStoppage in Transit

Right of Lien Right of Stoppage in Transit1. This right can be exercised

when the goods are in actualpossession of the seller.

This can be enforced so long as the goodsare in the possession of the intermediaryor carrier or agent between the seller andthe buyer.

2. This can be exercised evenwhen the buyer has the

capacity to pay but does notpay.

This takes place when the buyer becomesinsolvent.

3. This comes to an end as soonas the goods are no longer inthe possession of the seller.

This comes to an end as soon as thegoods are delivered to the buyer.

4. This right comes to an endwhen the goods are no longerin the possession of the seller.

This starts when the right of lien ends,and continues to hold till the delivery ofgoods to the buyer.

5. This right is exercised to retainpossession of goods.

This right is to regain (take back) thepossession of the goods.

In case of sub- sale or pledge by buyer on unpaid seller’s

right of lien and stoppage in transit. The unpaid seller s right oflien or stoppage in transit is not affected by sale or disposal ofgoods by the buyer.However, in the following circumstances, the unpaid seller s right oflien and stoppage in transit cease to hold:

A. Seller’s consent: Where the buyer sells or disposes of goods withthe consent of the seller, the seller is bound by it. However, a mereacknowledgement of the receipt of information from the seller s endis not considered sufficient unless the circumstances show that theseller intended to give up all rights against the goods [Section53(1)].

B. Transfer of documents of title: “ When the seller has issueddocuments of title to the goods to the buyer and the buyer has soldor pledged the goods by transferring the documents of title, then incase of sale, the seller s right of lien and stoppage in transit cannot



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be exercised. However, if the final sale was by way of pledge orother mortgage for value, the rights of unpaid seller becomesubject to the pledge. However, it is necessary that the transfereeshould act in good faith and for consideration”(Section 53).

“If there is a transfer in the form of a pledge, the unpaid seller mayrequire the pledgee to have the amount secured by the pledgefulfilled as far as possible, out of any other goods or securities ofthe buyer with the pledgee and available against thebuyer”[Section 53(2)]. Where a pledge takes place, the seller mayexercise his rights by paying off the pledgee. If the pledgeepossesses other securities against the one who has pledged, theunpaid seller can require him to satisfy his claim as far as possible,out of other securities. Where the pledgee needs to sell the goods,he has to hand over the surplus sale proceeds, if any, to the unpaidseller.

Illustration: Amarender sold 200 tons of iron to Vikram. Amarender handed over the iron to a shipping company and sentthe bills of lading to Vikram, who then obtained a loan from hisfriend Chauhan and pledged with him the bill of lading as securityagainst which the loan would be repaid. While the goods were intransit, Vikram became insolvent and Amarender became theunpaid seller. In this case, the right of stoppage by Amarender willdepend on the right of Chauhan, who is the pledgee. In fact,Chauhan will continue to have charge of the goods as the loan hasto be recovered by him. In this illustration, assume that along withthe bill of lading Vikram also pledges some securities withChauhan. In such a situation, then Amarender can ask Chauhan tomake good the amount due to him by selling the securities andthen make Amarender liable for the balance amount.

Right of Re-saleAfter discussing the right of lien and the right of stoppage in transit, the

third important right is the right of resale. Section 54 indicates that “the unpaidseller has the right of resale.” When the seller uses his right of lien or stoppage intransit, the contract continues to remain in force and the buyer can claim deliveryof goods by paying for the goods. The seller is not expected to wait indefinitelyfor the buyer to make the payment. However, just because the seller is unpaid,the property in the goods cannot pass to the unpaid seller again. The buyer hasthe right to the property, and he has the option to pay the price and take thedelivery of goods at any time. Thus, under section 54, the seller has been given alimited right to resell the goods in certain circumstances.

The seller has the right to resell the goods under the following circumstances.

Where the goods are of perishable and will lose value in a shorttime. When the goods are of perishable nature, the unpaid seller canresell the goods, in such a situation where buyer fails to pay the pricewithin a reasonable time. The term perishable implies not only physicaldeterioration but also commercially un-saleable. In case of perishablegoods, the unpaid seller need not give any notice of resale.

Where the unpaid seller has used his right of lien or of stoppage in

transit and gives notice to the buyer of his decision to resell the goods. W here the unpaid seller who has exercised right of lien or



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stoppage in transit gives notice to the buyer of his intention to resell, theunpaid seller may, if the buyer does not pay or tender the price within areasonable time, resell the goods.

In this case, (i.e. in the event of a resale) the unpaid seller canrecover the difference of price between the price due from thebuyer and that received by the resale. Any profit that arises onresale belongs to the seller because the resale is actually becauseof a breach of contract by the buyer. The law does not permit thebuyer to benefit as a result of his own wrong. In case where noprior notice has been given, the seller cannot claim the damagesfrom the original buyer.

Notice of ResaleUnless the goods are of perishable nature, the seller is expected togive a reasonable notice of resale to the buyer of his intention toresell the goods. What is reasonable notice is a question of factdepending upon the nature of goods, the distance between theparties and other circumstances of the case. The notice has been

made compulsory for two reasons:The first reason is to allow the buyer to have an opportunity offulfilling the contract by paying the price before such resale even atthe last moment. Secondly, in case the buyer does not have thecapacity or means to repay or does not pay, he can have theopportunity to see and confirm that on such resale the goods fetcha reasonable or good price. In case the resale is not properlyconducted, the seller cannot keep any surplus or be entitled to suethe buyer if there is a deficiency. Here it must be understood thatthis does not prevent the subsequent buyer from getting a goodtitle to the goods.If the notice of resale is not given, Section 54(2) also provides that,

“the unpaid seller shall not be entitled to recover the damages forbreach and he has also to hand over the profit, if any, made on theresale to the buyer.” Moreover, Section 54(3) also further provides that, “where anunpaid seller who has exercised the right of lien or stoppage intransit resells the goods, the buyer acquires a goods title thereto asagainst the original buyer notwithstanding that no notice of resalehas been given to the original buyer.”

Where the seller expressly reserves his right of resale. The sellercan also resell goods when he has clearly reserved the right of resale incase where the buyer does not fulfill his part of the contract or pays the

due amount. In such cases he is not required to give any notice to thebuyer of his decision to resell. If the seller sells the goods, the originalcontract comes to an end but the seller can still claim damages from thebuyer.In all the above cases where the seller resells the goods whether with orwithout notice, the buyer from him gets a good title thereto as against theoriginal buyer. This is because the original buyer being in default, is notentitled to the possession of goods, and therefore cannot sue to recoverthe goods or their value.



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Rights of an Unpaid Seller where the Ownership of the Goods has notpassed to the Buyer. Where the property in goods has not passed to the buyer, the unpaid seller has,in addition to his other remedies, a right of withholding delivery. This right issimilar to and goes along with the unpaid seller s righ t of lien and stoppage intransit where the property has passed to the buyer [Section 46(2)].

Seller has the right to hold back delivery of the goods until theprice is paid even though the sale was on credit.

Rights against the buyerIn addition to the rights, which he has against the goods, the unpaid seller hasthe following remedies against the buyer. These rights are called rights inpersonam as these are available against the buyer personally:Suit for price. “Where under a contract of sale the property in goods has passedto the buyer and the buyer wrongfully neglects or refuses to pay for the goodsaccording to the terms of the contract, seller may sue him for the price of thegoods” [Section 55(1)]. However sometimes, under a contract of sale the price ispayable on a certain day whether the goods are delivered or not. “In such cases ifthe buyer wrongfully neglects or refuses to pay the price, the seller may sue himfor the price although the property in the goods may not have passed to thebuyer and the goods may not have been appropriated to the contract” [Section55(2)].Illustration: Rama sold 100 grams of silver to Shyama for Rs.2, 000/- The

payment was to be made within two months of the sale. Shyam was unable to pay the price within the agreed period of two months. Here Rama can file a suitagainst Syama for the recovery of the price of silver.

Suit for damages for non-acceptance of the goods . Sometimes the seller isready and comes forward to deliver the goods to the buyer. However the buyerwrongfully neglects or refuses to accepts the goods and pay for them. In thiscase, “the seller may sue the buyer for damages for non -acceptance. Before theseller becomes entitled to sue for damages, there must be either a wrongfulneglect or refusal on the part of the buyer to accept and pay for the goods”

(Section 56). Damages are decided in accordance with the principles laid down inSections 73 and 74 of the Indian Contract Act. The following rules are applicableunder such a case:

o Where there is a ready market for the goods,the extent of damages is prima facie to beascertained by the difference between thecontract price and the market price at thedate of the breach. The term available marketmeans that goods can be sold freely becausethere is existing demand.

o Where the goods do not have a ready market,the measure of damages will be the estimated

loss directly and naturally arising, in theordinary course of events, from the breach ofcontract. Therefore, the measure of damages



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will depend upon the facts present in eachcase.

Case Law 3:Thompson Ltd. v. Robinson 3 :R contracted to buy a ‘Vanguard’ car from T Ltd. who was a car dealer. R refusedto accept delivery. It was held that T Ltd. was entitled to damages for the loss oftheir bargain i.e. the profit they would have made as they had sold one car lessthan they otherwise would have sold.

In case the seller is ready and willing to deliver the goods and requests the buyerto take delivery which the buyer does not do within a reasonable time, the sellermay recover from the buyer (i) any loss occasioned by the buyer s refusal orneglect to take delivery; and (ii) a reasonable charges for the case and custody ofthe goods.

Suit for damages for repudiation of contract before the due date ofdelivery of goods. If the buyer cancels the contract before the due date ofdelivery of goods, the seller has two alternatives before him; he may immediatelyaccept the breach and bring an action for damages or he may wait till the date ofdelivery. If he accepts the breach immediately, the contract is thereby cancelledand damages will be determined according to the price prevailing on the day ofbreach and the contract price. “If the seller waits till the date of delivery, thecontract is open for both the parties and the buyer has the option of performingthe contract and also taking advantage of any additional circumstances that takeplace which would just ify him in declining to complete the contract.” (Section 60). Illustration: Hira agreed to sell to Mira 20 bags of jute at the rate of Rs. 100 perbag. According to the contract, the jute was delivered on 1 st January 2007.However, before this date, Mira informed Hira that she will not accept any jutefrom Hira. Since Mira refused, Hira sold the bags of jute to Jira at the rate of Rs.

90 prer bag; as this was the prevailing market price.In this case, Hira can file asuit against Mira for the recovery of damages of Rs. 10 per bag, as Hira had tosuffer a loss to that extent.

Suit for interest and special damages. There is nothing in the Sale of GoodsAct that can affect the right of the seller to recover interest or special damages inthe situation where the law permits that interest or special damages may berecoverable. “The Court may award interest at such rate as it thinks fit on theamount of the price to the seller in a suit filed by him for the amount of the price– from the date of the tender of the goods or from the date on which the price

was payable. If the seller delivers or sends the goods to the buyer and the buyerwrongfully refuses to accept and pay for them, Court may award interest on theprice. If the price is payable on a certain day irrespective of delivery, interest willbe calculated from that day, and if the goods are sold on credit, interest will becalculated from the date of expiry of the credit period” (Section 61).

3 (1955) 22 W.L.R.185



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price on the due date. The buyer must act in a reasonable way to mitigate theeffects of breach (Section 60).

Interest by way of damages . Sometimes, the buyer has already made thepayment but the seller fails to deliver the goods . In such a case w here theconsideration for the payment has failed, the buyer can recover the money paidfor the goods. He can also claim interest or special damages in any case where bylaw, interest or special damages may be recoverable.According to Section 61, “in the absence of a contract that states otherwise, theCourt may permit interest to be charged at such rate as it thinks reasonable onthe amount of the price – to the buyer in a suit by him for the refund of the pricein a case of breach of contract on the part of the seller – from the date on whichthe payment was made.”



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Points to RememberIntroduction

There can be breach of contract either by the seller or by the buyer.Thus, the main aspects covered in the lesson include (a) rights of the

unpaid seller; and (b) rights of the buyer, in case there is a breach bythe seller. Rights of the unpaid seller against goods. The rights of an unpaid seller against goods will be different depending upon thewhether the property in goods has passed or not. Where the property has passedthe unpaid seller has the following three rights. These are:

Right of Lien. Right of Stoppage in Transit Right of Re-sale.

Where the property of goods has not passed, the unpaid seller will have oneright, i.e. to withhold the delivery of the goods.

Unpaid Seller’s Rights against the Buyer. The unpaid seller has the following rights against the buyer. These are: Suit for Price Suit for Damages Cancellation of the Contract Suit for Interest

Remedies for the Buyer against the Seller. In case, the seller has defaulted, the buyer will have the following remediesagainst the seller:

1. Suit for Damages for non-delivery of goods.2. Suit for Specific performance3. Suit for Damages where there is a breach of warranty4. Where the Contract is Cancelled before the due date by the Seller5. Right of buyer to recover interest by way of damages



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Questions

1 When can a seller of goods be deemed to be an unpaid seller?What are his rights against the (a) goods; and (b) the buyerpersonally?

2 Explain the nature of right of lien. When can the unpaid sellerexercise the right of lien? Under what circumstances is the lienterminated?

3 Discuss the rules regarding the duration of transit. When does itcomes to end?

4 What are the conditions required to be fulfilled for the exercise ofthe right of stoppage in transit?

5 Can an unpaid seller exercise his right of lien or stoppage in transiton the goods transferred by way of sale or other disposition by thebuyer?

6 „The right of stoppage in transit is an extension of an unpaidseller s right to lien. Comment.

7 Distinguish between unpaid seller s right of lien and right ofstoppage in transit. When can he resell the goods?8 What are the remedies available to the buyer in case of breach of a

contract of sale by the seller?

Practical Problems:

1 Azad sells and consigns certain goods to Vikram for cash and sends theRailway Receipt to him. Bhasker becomes insolvent and while the goods are intransit he assigns the Railway Receipt to Madan, who does not know thatBhasker is insolvent. Azad wants to exercise the rights of stoppage in transit.Can he do so?

Answer: No he cannot do so. The unpaid seller s right is defeated – Section53(i)

2 Asharam sells and consigns certain goods to Kishor. Kishor assigns bill oflading for these goods to Hardeep to secure the sum of Rs.10,000 due fromhim to Hardeep. Kishore becomes insolvent. Can Asharam stop the goods intransit?Answer: Yes, he can stop the goods in transit, subject to right of Hardeep –

Section 53.

3 Imran of Agra orders Hansraj of Delhi to supply certain goods. Thestationmaster of Agra informs Imran about the arrival of goods but before

Imran could receive the goods, he is declared insolvent. Hansraj wants toexercise his right of stoppage in transit. Can he do so?Answer: No. The right of stoppage cannot be exercised as the transit has

ended – Section 51.

4 Mahesh sells and consigns certain goods to Naresh. Mahesh being still unpaid,Naresh becomes insolvent while the goods are in transit. Naresh assigns thebill of lading for cash to Arvind who knows that Naresh is insolvent while thegoods are in transit. Naresh assigns the bill of lading for cash to Arvind whoknows that N is insolvent. Can Mahesh stop the goods in transit?Answer: Yes, he can stop the goods in transit as Arvind has not acted ingood faith.

5 Ramaswamy sold a quantity of rice to Shekhar, who made the payment bycheque which was dishonored on presentation. Ramaswamy gave a delivery



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16Institute of Lifelong Learning University of Delhi

order to Shekhar for the rice and Shekher resold it to Chetan, who acted in goodfaith and for consideration by endorsing the delivery order to Chetan.Ramaswamy refuses to deliver goods to Chetan on the plea of non-payment ofprice. Advise Chetan.

Answer: In this case, Chetan can get the goods from Ramaswamy onpresentation of the delivery order – Section 53.

References

Gogna P.P.S. (1999): A Text book of Mercantile Law, S .Chand & Co.Tulsian P.C. (2007): Business Law, Tata McGraw Hill, New Delhi.

Websites:

www.helplinelaw.com www.consumer-law.lawyers.com

http://www.helplinelaw.com/


http://www.consumer-law.lawyers.com/




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