Sale of Goods Act Section 54 — Sale not generally rescinded by lien or stoppage in transit
CHAPTER V RIGHTS OF UNPAID SELLER AGAINST THE GOODS — Transfer by buyer and seller
Commercial / Corporate
Summary
Sub-section (1) states that, subject to what follows in this section, a contract of sale is not automatically cancelled just because an unpaid seller exercises their right to keep hold of the goods (lien) or to stop the goods while they are in transit.
Sub-section (2) deals with two situations. First, if the goods are perishable, or if the unpaid seller who has exercised their right of lien or stoppage in transit gives notice to the buyer that they intend to re-sell the goods, the seller may re-sell them within a reasonable time if the buyer does not pay or offer the price within a reasonable time. In that case, the seller can recover damages from the original buyer for any loss caused by the buyer's breach, but the buyer is not entitled to any profit made on the re-sale. However, if no such notice is given, the seller cannot recover those damages, and the buyer is entitled to any profit from the re-sale.
Sub-section (3) provides that when an unpaid seller who has exercised their right of lien or stoppage in transit re-sells the goods, the new buyer gets a good title to the goods as against the original buyer, even if no notice of the re-sale was given to the original buyer.
Sub-section (4) covers the situation where the seller has expressly reserved a right to re-sell the goods if the buyer defaults. If the buyer then defaults and the seller re-sells the goods, the original contract of sale is cancelled, but the seller can still claim damages for any loss suffered.
Official Text
(1) Subject to the provisions of this section, a contract of sale is not rescinded by the mere exercise by an unpaid seller of his right of lien or stoppage in transit.
(2) 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.
(3) Where an unpaid seller who has exercised his right of lien or stoppage in transit re-sells the goods, the buyer acquires a good title thereto as against the original buyer, notwithstanding that no notice of the re-sale has been given to the original buyer.
(4) 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.