A sells two tons of oil to B, and sends one ton of oil by road and remaining one ton of oil by ship. Mr. B receives delivery of the one ton of oil sent by road on August 11, 2022, but before he receives the delivery sent

CS Executive · Jurisprudence, Interpretation and General Laws · PYQS · December 2023
A sells two tons of oil to B, and sends one ton of oil by road and remaining one ton of oil by ship. Mr. B receives delivery of the one ton of oil sent by road on August 11, 2022, but before he receives the delivery sent by ship, he becomes insolvent in September, 2022. A, still being unpaid, stops the goods in transit. The official Receiver in B's insolvency claims the goods. (i) Decide whether Official Receiver will succeed. Explain. (ii) Also discuss, can A resell the undelivered one ton of oil ?

Answer & Explanation:

(i) The right of stoppage in transit is a right of stopping the goods while they are in transit, resuming possession of them and retaining possession until payment of the price. The right can be exercised by the unpaid seller: When the buyer becomes insolvent: The buyer is insolvent if he has ceased to pay his debts in the ordinary course of business, or cannot pay his debts as they become due. It is not necessary that he has actually been declared insolvent by the court. The goods are in transit: The goods are in transit from the time they are delivered to a carrier or other bailee like a wharfinger or warehouse keeper for the purpose of transmission to the buyer and until the buyer takes delivery of them. The right to stop in transit may be exercised by the unpaid seller either by taking actual possession of the goods or by giving notice of the seller's claim to the carrier or other person having control of the goods. In view of the above it can be said that A can stop the goods in transit as B becomes insolvent, hence, Official Receiver will not succeed. (ii) According to section 54(2) of Sale of Goods Act, 1930, where the goods are of a perishable nature, or where the unpaid seller who has exercised his right of lien or stoppage in transit gives notice to the buyer of his intention to re-sell, the unpaid seller may, if the buyer does not within a reasonable time pay or tender the price, re-sell the goods within a reasonable time and recover from the original buyer damages for any loss occasioned by his breach of contract, but the buyer shall not be entitled to any profit which may occur on the re-sale. If such notice is not given, the unpaid seller shall not be entitled to recover such damages and the buyer shall be entitled to the profit, if any, on the re-sale. Further, according to section 54(4) of Sale of Goods Act, 1930, where the seller expressly reserves a right of re-sale in case the buyer should make default, and, on the buyer making default, re-sells the goods, the original contract of sale is thereby rescinded, but without prejudice to any claim which the seller may have for damages. In view of the above, A can resell the undelivered one ton of oil in accordance with above provisions.

Topics: Sale of Goods Act

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