Sale of Goods Act Section 53 — Effect of sub-sale or pledge by buyer
CHAPTER V RIGHTS OF UNPAID SELLER AGAINST THE GOODS — Transfer by buyer and seller
Commercial / Corporate
Summary
Sub-section (1) explains that, as a general rule, the unpaid seller’s right to hold onto the goods (lien) or to stop them while they are in transit is not lost just because the buyer has sold or disposed of the goods to someone else. This protection for the seller only disappears if the seller has agreed to the buyer’s sale or disposal.
However, there is an exception. If a document of title for the goods was issued or lawfully given to the buyer, and the buyer then transfers that document to another person who receives it in good faith and for payment, the outcome depends on the type of transfer. If that transfer was a sale, the unpaid seller’s right of lien or stoppage in transit is completely defeated. If that transfer was a pledge or any other disposal for value, the unpaid seller’s right of lien or stoppage in transit can only be enforced in a way that respects the rights of the person who received the document.
Sub-section (2) deals with the situation where the transfer is by way of pledge. In that case, the unpaid seller can ask the pledgee (the person holding the goods as security) to first use any other goods or securities of the buyer that the pledgee already has and that are available against the buyer, to satisfy the amount secured by the pledge, as far as possible, before turning to the goods in question.
Official Text
(1) Subject to the provisions of this Act, the unpaid seller’s right of lien or stoppage in transit is not affected by any sale or other disposition of the goods which the buyer may have made, unless the seller has assented thereto:
Provided that where a document of title to goods has been issued or lawfully transferred to any person as buyer or owner of the goods, and that person transfers the document to a person who takes the document in good faith and for consideration, then, if such last mentioned transfer was by way a sale, the unpaid seller’s right of lien or stoppage in transit is defeated, and, if such last mentioned transfer was by way of pledge or other disposition for value, the unpaid seller’s right of lien or stoppage is transit can only be exercised subject to the rights of the transferee.
(2) Where the transfer is by way of pledge, the unpaid seller may require the pledgee to have the amount secured by the pledge satisfied in the first instance, as far as possible, out of any other goods or securities of the buyer in the hands of the pledgee and available against the buyer