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CA Foundation · Business Laws · The Sale of Goods Act, 1930

Gopal sold goods to Imran on credit and delivered them to a carrier. Imran, while the goods were in transit, sold them to Jatin, who paid full price in good faith and received the bill of lading endorsed to him. Gopal, still unpaid, now tries to stop the goods in transit. What is the legal position?

Gopal cannot stop the goods against Jatin. When the buyer transfers the document of title to a good-faith purchaser who pays value, the unpaid seller's right of stoppage in transit is defeated, even though the original seller remains unpaid.

  1. AGopal can stop the goods because he is unpaid
  2. BGopal can stop the goods only if Imran is insolvent
  3. CGopal can stop the goods but must refund Jatin
  4. DGopal cannot stop the goods against Jatin, since the document of title was transferred to a good-faith buyer for valueCorrect

Explanation

Where the buyer transfers the document of title to a person who takes it in good faith and for consideration, the unpaid seller's right of stoppage is defeated if the transfer is by way of sale. Jatin paid full price and acted in good faith. Therefore Gopal's unpaid status does not help, and insolvency is irrelevant.

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