Essential Features of Right of Stoppage of Goods in Transit

Right of Stoppage of Goods in Transit:
 

Meaning of Right of Stoppage of Goods in Transit: The right of stoppage in transit means the right of stopping the goods while they are in transit, to regain possession and to retian them till the full price is paid. Lord Cairns LJ in case of Schotsmans v. Lances and Yorks Rly. Had made the following observation in this regard:

“The essential feature of stoppage in transit is that the goods should be in the possession of a middleman or some other person intervening between the vendor who has parted with and the purchaser who has not received them.”

Conditions under which Right of Stoppage in Transit can be Exercised [Section 50]: The unpaid seller can exercise the right of stoppage in transit only if the following conditions are fulfilled:

(i)   The seller must have parted with the possession of goods, i.e., the goods must not be in the possession of seller.

(ii) The goods must be in the course of transit.

(iii) The buyer must have become insolvent.

Note: The buyer is said to be insolvent when he has ceased to pay his debts in ordinary course of business, or cannot pay his debts as they become due, whether he has committed an act of insolvency or not.

Note: The seller’s right of stoppage in transit is based on the principle that one man’s goods shall nto be applied to the payment of other man’s debt. [Lord Reading in Booth Steamship Co Ltd. V. Cargo Fleet Iran Co.]

Duration of Transit [Section 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 in that behalf takes delivery of them from such carrier or other bailee.

Note: The carrier must hold the goods in the capacity of an independent person and not in the capacity of an agent for the seller or buyer. If the carrier holds the goods as an agent for the seller, there is no question of exercising the right of stoppage in transit because the seller can exercise his right of lien. If the carrier holds the goods as an agent for the buyer, the seller cannot exercise the right of stoppage in transit because the delivery to the carrier amounts to delivery to buyer. 

What is Goods? Types of Goods

Rights of an Unpaid Seller against the goods

Essential Features of Right of Stoppage of Goods in Transit

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