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CSEET · Business Laws and Management · Elements of Law relating to Sale of Goods

Ravi Traders sold goods to Mehta Stores. Ravi Traders exercised the right of lien because the price was unpaid, and did nothing else. What is the effect on the contract of sale?

The contract is not rescinded by the mere exercise of the lien. Under the Act, exercising lien or stoppage in transit does not by itself end the contract of sale; the seller may resell only in the circumstances the Act allows.

  1. AThe contract is automatically rescinded
  2. BThe contract is not rescinded by the mere exercise of the lienCorrect
  3. CThe contract is rescinded after a reasonable time
  4. DThe contract is rescinded only if the goods are perishable

Explanation

Section 54(1) states that a contract of sale is not rescinded by the mere exercise by an unpaid seller of his right of lien or stoppage in transit. Resale after notice or for perishable goods under section 54(2) does not make the contract automatically rescinded merely by exercising the lien.

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