Skip to content

CMA Foundation · Fundamentals of Business Laws and Business Communication · Sale of Goods Act, 1930

Mehta Exports, an unpaid seller, exercises its right of lien over goods sold to Rao Ltd. Rao Ltd. does not pay within a reasonable time. What is the effect of Mehta Exports exercising the lien on the contract of sale?

The contract is not rescinded merely because the unpaid seller exercised the lien. Rescission does not follow automatically; the seller must use the resale provisions, such as giving notice of intention to resell, if the buyer fails to pay.

  1. AThe contract is rescinded merely by the exercise of the lien
  2. BThe contract is not rescinded by the mere exercise of the lienCorrect
  3. CThe contract is rescinded only if the buyer is solvent
  4. DThe property in the goods reverts to the seller automatically

Explanation

The Act says a contract of sale is not rescinded by the mere exercise by an unpaid seller of lien or stoppage in transit. The seller may later resell in the circumstances the Act permits, such as giving notice of intention to resell. Nothing makes property revert automatically.

Did you get it right without looking?

One question tells you little. A timed set on Sale of Goods Act, 1930 shows your real accuracy, how long you take and where you lose marks.

Practise Sale of Goods Act, 1930Free diagnostic mock

More Sale of Goods Act, 1930 questions