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

Nirmala Exports sold 500 sarees to Pooja on 30 days' credit. After the goods were handed to a transporter for delivery to Pooja, Nirmala learnt that Pooja had been declared insolvent. Which right can Nirmala exercise?

Nirmala can exercise the right of stoppage in transit. The buyer has become insolvent and the goods are still with the carrier, so they are in course of transit. Lien is unavailable because the seller no longer has possession of the goods.

  1. ARight of stoppage in transit, as the buyer is insolvent and the goods are in transitCorrect
  2. BRight of lien, as the goods are with the transporter
  3. CNo right, because the credit period has not ended
  4. DOnly the right to sue for damages for non-acceptance

Explanation

An unpaid seller may stop goods in transit when the buyer becomes insolvent, even if credit was agreed. The goods are with a carrier, so they are in transit and not in the seller's possession. Lien needs the seller's possession, so option B is wrong.

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