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

Nair Exports sold goods to Gill Ltd. on 60 days' credit and delivered them to a carrier for Gill. While the goods are in transit, Nair learns that Gill has become insolvent. What can Nair, the unpaid seller, do?

Nair can stop the goods in transit by giving notice to the carrier. An unpaid seller who has parted with possession may stop goods in transit when the buyer becomes insolvent. Lien is not available because Nair is no longer in possession.

  1. AExercise the right of stoppage in transit by notifying the carrier, as the buyer is insolventCorrect
  2. BOnly sue Gill for the price, as the goods have left Nair's possession
  3. CExercise a lien over the goods, because the carrier holds them on Nair's behalf
  4. DRescind the contract automatically without any notice to anyone

Explanation

Stoppage in transit is available to an unpaid seller who has parted with possession when the buyer becomes insolvent and the goods are still in transit. Nair can give notice to the carrier. Option C is wrong because lien needs the seller to be in possession, and delivery to a carrier for the buyer ends that.

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