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

Prakash, an unpaid seller, sold goods to Latha on credit. He delivered them to a carrier for transmission to Latha. Before the goods reach her, Prakash learns that Latha has become insolvent. Which right can he exercise?

Prakash can exercise the right of stoppage in transit. The goods are with a carrier and have not reached Latha, and she has become insolvent. An unpaid seller may then recover possession while the goods are in transit. Lien fails because he no longer holds the goods.

  1. ARight of lien over the goods
  2. BRight of stoppage in transitCorrect
  3. CRight of resale only after Latha is paid
  4. DRight to compel Latha to accept the goods

Explanation

The goods are with a carrier, so Prakash has parted with possession but the buyer has not yet received them. When the buyer becomes insolvent, an unpaid seller may stop the goods in transit and retake possession. Lien needs the seller to hold the goods, which he no longer does.

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