Has the original seller any right of stoppage in transit? Give answer with reference to section (s) of the Sale of Goods Act and case law, if any.

Question: Has the original seller any right of stoppage in transit? Give answer with reference to section (s) of the Sale of Goods Act and case law, if any. [Punj. JS 1998]

Find the answer to the Law of Sale of Goods only on Legal Bites. [Has the original seller any right of stoppage in transit? Give answer with reference to section (s) of the Sale of Goods Act and case law, if any.]

Answer

Under the Sale of Goods Act, an unpaid seller has the right of stoppage in transit as per Section 54. This right allows the seller to stop the goods while they are in transit to the buyer if certain conditions are met. The purpose of stoppage in transit is to protect the seller's interest and prevent the goods from reaching the buyer when the buyer has failed to pay for them.

Section 54 in The Sale of Goods Act, 1930

Sale not generally rescinded by lien or stoppage in transit.—

(1) Subject to the provisions of this section, a contract of sale is not rescinded by the mere exercise by an unpaid seller of his right of lien or stoppage in transit.
(2) Where the goods are of a perishable nature, or where the unpaid seller who has exercised his right of lien or stoppage in transit gives notice to the buyer of his intention to re-sell, the unpaid seller may, if the buyer does not within a reasonable time pay or tender the price, re-sell the goods within a reasonable time and recover from the original buyer damages for any loss occasioned by his breach of contract, but the buyer shall not be entitled to any profit which may occur on the re-sale. If such notice is not given, the unpaid seller shall not be entitled to recover such damages and the buyer shall be entitled to the profit, if any, on the re-sale.
(3) Where an unpaid seller who has exercised his right of lien or stoppage in transit re-sells the goods, the buyer acquires a good title thereto as against the original buyer, notwithstanding that no notice of the re-sale has been given to the original buyer.
(4) Where the seller expressly reserves a right of re-sale in case the buyer should make default, and, on the buyer making default, re-sells the goods, the original contract of sale is thereby rescinded, but without prejudice to any claim which the seller may have for damages.

The right of stoppage in transit is a legal remedy provided to unpaid sellers to protect their interests when a buyer, who has not paid for the goods, is in the process of receiving the goods in transit. The primary objective is to allow the seller to reclaim possession of the goods and prevent their delivery to the buyer until payment is made. This right enables the seller to retain ownership and avoid the risk of losing the goods without receiving payment.

Conditions for Exercising the Right of Stoppage in Transit:

a) Goods in Transit: The right of stoppage in transit can only be exercised if the goods are still in transit. Once the goods have reached their destination and have been delivered to the buyer, the right of stoppage in transit is no longer applicable.

b) Buyer's Insolvency: Generally, the right of stoppage in transit arises when the buyer becomes insolvent or defaults on the payment. However, it's important to note that the buyer's insolvency is not an absolute requirement for exercising this right. If the buyer has not paid, even if they are not insolvent, the seller may still have the right to stop the goods in transit.

c) Actual Possession by a Carrier: The goods must be in the possession of a carrier, such as a shipping company or a transportation service, and must be in the process of being delivered to the buyer. If the buyer has already taken physical possession of the goods, the right of stoppage in transit cannot be exercised.

The case of "Couturier v. Hastie" (1856) 5 HLC 673 is a significant landmark case in the context of the right of stoppage in transit. In this case, the Court of Exchequer dealt with the question of whether the right of stoppage in transit could still be exercised when the goods had perished before reaching the buyer.

In brief, the facts of the case were as follows: The plaintiffs (sellers) sold a cargo of corn to the defendants (buyers), who were merchants dealing in corn. During the transit of the goods, the cargo of corn perished due to the high temperature, which caused fermentation. The sellers were unaware of this and demanded payment from the buyers upon arrival of the ship carrying the corn. The buyers refused to pay, arguing that the goods were destroyed before arrival. The sellers then sought to exercise the right of stoppage in transit to reclaim the goods or claim their value.

The Court held that the right of stoppage in transit was not applicable in this case because the goods had already perished before reaching the buyers. The Court emphasized that the right of stoppage in transit can only be exercised when the goods are still in existence and in transit.