sale of goods- project

Right of stoppage in Transit for Sale

ContentsIntroduction................................................................................................................................1

Stoppage in transit......................................................................................................................1

Section 50 – Right of stoppage in transit...................................................................................2

Section 45 – Unpaid seller.........................................................................................................3

Section 51 – Commencement and end of transit........................................................................3

Conclusion..................................................................................................................................7

National Law Institute University, Bhopal


Introduction

Stoppage in transitWhere the goods have been delivered to a carrier or other bailee for the purpose of

transmission to the buyer, who has become insolvent, the seller may stop the goods as long as

they are in transit. This is one of the methods of protecting the unpaid seller against the risk

of his goods going to the possession of an insolvent.

In Booth Steamship Co v Cargo Fleet Iron Co1, as Lord READING said: it is a right founded

upon the plain reason that one man’s shall not be applied to the payment of another man’s

debts.

Lien and stoppage in transit distinguished.-Both the rights are designed for the protection

of the unpaid seller. The effect of their exercise is also the same, because when the seller

stops the goods in transit he resumes possession and the goods once again fall into the spell

of his lien until the price is paid. Yet, “it is important to keep them distinct, because, though

the rights are analogous, they are in certain respects governed by different considerations.”2

The following are the point of difference-

1) “The seller’s lien attaches when the buyer is in default, whether he be solvent

or insolvent. The right of stoppage in transit only arises when the buyer is

insolvent.”3

2) Lien is exercisable as long as the seller is in possession, stoppage in transit as

long as the goods “are passing through channels of communication for the

purpose of reaching the hands of the vendee”.4

3) Lien ends where the right of stoppage commences. When the seller hands over

possession to the carrier, his lien ends and the right of stoppage in transit

commences.

1 [1916] 2 KB 570 at 5802 Chalmer’s SALE OF GOODS, 124 (13th Edn by Seighart, 1957)3 Ibid4 Bowen LJ in Kendall v Marshall, Stevens & Co, (1883) 11 QBD 356 at 368



Section 50 – Right of stoppage in transitSubject to the provisions of this Act, when the buyer of goods becomes insolvent,

the unpaid seller, who has parted with the possession of the goods, has the right

of stopping them in transit, that is to say, he may resume possession of the goods

as long as they are in course of transit, and may retain them until payment or

tender of the price.

The first requirement is that the seller should be unpaid; second, that the buyer should

have become insolvent; third, that the property should have passed to the buyer, for if

the seller reserves the right of disposal, the goods remain his property, and, therefore,

under his lien; and last, the goods should be in course of transit. The first three

requirements are questions of fact which can be easily ascertained. The last

requirement is also question of fact, but this fact, namely, whether the goods are in

transit, is sometimes difficult to ascertain. The goods may be in the custody of a

carrier and yet there may not be transit. Contrarily, they may not be with a carrier and

yet they may be in transit. Much depends upon the capacity in which the middleman

holds the goods. If he holds the goods as an agent for the seller, there is no transit

because the goods are under the seller’s lien. If he holds them as an agent of the

buyer, there is no transit because the buyer has acquired possession, which puts to an

end to the seller’s rights against the goods. It is only when he holds the goods as an

independent contractor, that is, in his own right as a carrier or bailee, that there is

transit in law and that there is question of stoppage in transit. It is not necessary that

the goods should be actually moving.

CAIRNS LJ says: the essential feature of stoppage in transit is that the goods should be

in possession of a middleman, or some person intervening between the vendor who

has parted with and the purchaser who has not yet received them.5

Section 45 – Unpaid sellerThe seller of goods is deemed to be an “unpaid” seller within the meaning of this Act-

i. when the whole of the price has not been paid or tendered;

5 Schotsmans v Lancashire & Yorkshire Rly Co, (1867) 2 Ch App 332 at 338: 36 LJ Ch 361



ii. when a bill of exchange or other negotiable instrument has been received as

conditional payment, and the condition on which it was received has not been

fulfilled by reason of the dishonour of the instrument or otherwise.

Section 51 – Commencement and end of transit.Section 51 tries to solve the difficulty by laying down basic propositions which

govern the commencement and end of transit:

Delivery to buyer [S. 51(1)] – Goods are deemed to be in course of transit from the

time when they are delivered to a carrier or other bailee for the purpose of

transmission to the buyer, until the buyer or his agent takes delivery of them. Thus,

transit ends when the goods are delivered to the buyer or his agent.

In G I P Rly Co v Hanmandas6, the seller consigned the goods with G I P Rly Co for

transportation to the buyer. On arrival at the destination the company had delivered

the goods to the buyer who had loaded them on his cart, but the cart had not yet left

the railway compound when a telegram was received by the company to stop the

goods. The company did not do so and were sued by the seller in damages. It was held

that the transit had ended as soon as the goods were handed over to the buyer. The

railway company was, therefore, left with no power to stop them.

Where the buyer does not accept the goods, the transit does not end even if the goods

have been landed at the port of destination. This happened in James v Griffin7 where

on arrival of the goods at the port of destination in river Thames, the buyer sent his

son to have the goods landed, but told him that, on account of his insolvency, he did

not intend to receive the goods and would like the seller to have them. When the

goods were so lying, the seller’s instruction to stop them was received. The buyer’s

trustee in bankruptcy claimed the goods.

Interception by buyer [S. 51(2)] – The transit ends when the buyer or his agent takes

delivery of the goods from the carrier before their arrival at the appointed destination.

It may be wrongful for the carrier to deliver the goods to the buyer before their arrival

at the appointed destination and the carrier may be held liable in damages for

depriving the seller of his opportunity, but transit ends with that. The mere fact that

6 ILR (1889) 14 Bom 577 (1837) 4 M & W 623: LJ Ex241.



the buyer takes his seat as a passenger in the ship which is carrying the goods does not

amount to delivery to the buyer before their arrival at the appointed destination. This

kind of arrangement was found to exist in Lyons v Honffnung.8 The buyer was at

Sydney. He instructed the seller to send the goods to Sydney from where they would

be going to Kimberley and that he would go by the same ship and would take the

goods with him.

It was not known as a fact whether the buyer sailed in the ship, but he became

insolvent and the seller gave notice to stop. It was held that the notice was effective. It

was not the buyer who was carrying the goods. The carrier was carrying both, the

goods and the buyer, and the transit had not ended by the buyer’s entry into the ship.

Acknowledgement to buyer [S. 51(3)] – When the goods have arrived at their

appointed destination and the carrier acknowledges to the buyer or his agent that he is

now holding the goods on his behalf, the transit is at an end, and it is immaterial that

the goods are still with the carrier or that the buyer has indicated a further destination.

It requires a very clear acknowledgement to put an end to the original contract of

carriage.

In Whitehead v Anderson9, a quantity of timber sold was consigned on board a ship.

The ship arrived at the destination. The buyer was bankrupt at the time. Nevertheless

his agent went on board the ship, saw the timber and told the captain that he had come

to take possession of it. The captain said he would deliver it on freight being paid.

Before this could be done, the seller sent a notice to stop and consequently the goods

were delivered to the seller’s agent. It was held that the carrier was within his rights in

returning the goods to the seller because the transit had not ended. The captain’s

agreement to deliver was conditional and the condition, being not fulfilled, the buyer

had not acquired constructive possession.

Rejection by buyer [S.51(4)] – If the goods are rejected by the buyer and the carrier

or other bailee continues in possession of them, the transit is not at an end. This will

be so even if the seller himself has refused to take back the goods.

Delivery to ship chartered by buyer [S. 51(5)] – Where the goods are delivered to a

ship chartered by the buyer, it is a question of fact in each case whether the carrier is

8 (1890) 15 App Cas 391 PC.9 (1842) 9 M & W 518: 60 RR 819



acting independently or as agent of the buyer. If the circumstances show that the

carrier is acting as an agent of the buyer, then the transit is at an end as soon as the

goods are loaded on board the ship. Thus, whether the goods were delivered on board

the ship belonging to the buyer, and by the bills of lading also the goods were

deliverable to the buyer, the transit ended as soon as the goods were put on board.10

But the mere fact that the ship chartered by the buyer and he has given no indication

of the destination of the goods does not mean that the carrier has become the agent of

the buyer.

In Rosever China Clay Co, ex p:11 the contract was for the sale of china clay at f. o. b.

Fowey. The buyer chartered a ship and instructed the seller to load the goods at

Fowey, which was accordingly done. The destination of the ship was not told to the

seller, nor any bill of lading signed. The sellers gave notice stopping the goods. The

notice was held to be effective. “The principle is this,” said JAMES LJ, “when the

vendor knows that he is delivering the goods to someone as carrier, who is receiving

them in that character, he delivers them with the implied right of stopping them so

long as they remain in the possession of carrier as carrier.”

Wrongful refusal to deliver [S. 51(6)] – Where the carrier wrongfully refuses to

deliver the goods to the buyer or his agent, the transit is at an end. It is obvious that

the goods should have arrived at their destination, because otherwise the carrier has

the right to refuse to deliver them.

Bird v Brown12 shows when refusal to deliver is wrongful. The goods had arrived at

their destination. The buyer being insolvent, a merchant, acting for the seller but

without his authority, gave stop notice to the carrier. Subsequently to that the trustee

of the bankrupt buyer demanded the goods. The carrier refused to deliver the goods

and handed them to the merchant. Subsequently to this the seller ratified the

unauthorised stop notice. The court said: “There could be no valid stoppage in

transitu after the formal demand of the goods by Bird (Trustee). The goods had then

arrived at Liverpool, the master was bound to deliver the goods to Bird and he could

not by his wrongful detainer of them prolong the transit and so extend the time during

which the stoppage might be made.”

10 Scotsmans v Lancashire & Yorkshire Rly Co, (1867) 2 Ch App 332: 36 LJ Ch 361.11 (1879) 11 Ch D 560 at p. 56812 (1850) 4 Ex 786: 80 RR 775



Part delivery [S. 51(7)] – Where the goods have been delivered in part, the seller

may stop the remainder of the goods, unless the part delivery shows an agreement to

give up the possession of the whole.



ConclusionThe right of stoppage in transitu, that is the right to reclaim the possession of the goods while

still in transit, from the seller to the buyer, was founded in the civil law, and looked upon as a

remedy of the court of equity primarily, but is now, and has been for a long time, looked

upon as a legal remedy and right, and is of universal application in courts of law. It is an

extension of the right of the vendor's lien. The lien is lost by parting with possession of the

goods, but the right to resume the lien may be acquired, by the exercise of this right of

stopping the goods in transit up to any time previous to the vendee's actually acquiring

possession of the goods. The right arises with the transfer of title to the goods and the

delivery to the carrier to be turned over to the purchaser. It may be said to begin where the

hen leaves off. The right of stoppage in transitu, arising from original ownership, can only be

exercised by the vendor, or one standing in his position; it could not be exercised by one

having a mere lien on the goods.


http://chestofbooks.com/society/law/Popular-Law-5/Questions-Carriers.html

http://chestofbooks.com/society/law/Popular-Law-5/Section-20-Lien.html

http://chestofbooks.com/society/law/Popular-Law-5/Section-67-What-Is-Included-In-Terms-Goods-Wares-And-Merc.html

http://chestofbooks.com/society/law/Popular-Law-5/Section-12-Rights-And-Liabilities-Of-Bailor-And-Bailee-Towa.html

sale of goods- project

Documents