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

Harish Traders sold 200 bags of cement to Dinesh on credit. Property in the goods has passed to Dinesh, the goods are still in Harish's godown and the credit period has not expired. Dinesh has not become insolvent. Which of the following is correct?

Harish cannot exercise lien. A seller's right of lien arises only when goods are sold without credit, when the credit period has expired, or when the buyer is insolvent. None applies here, as the credit term is still running and Dinesh is solvent.

  1. AHarish can exercise the right of lien because he still has possession of the goods
  2. BHarish cannot exercise lien because the credit period has not expiredCorrect
  3. CHarish can resell the goods immediately without notice
  4. DHarish can stop the goods in transit

Explanation

An unpaid seller in possession can exercise lien only if the goods were sold without any stipulation as to credit, or the credit term has expired, or the buyer becomes insolvent. Here the credit period is running and the buyer is solvent, so lien is not available. Stoppage in transit is also not available since the goods are not in transit.

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