Remedies of the buyer and seller 209(i) where the goods have been sold without any stipulation as to credit; or
(ii) where the goods have been sold on credit but the term of credit has expired; or
(iii) where the buyer has become insolvent.
By exercising the lien, the unpaid seller is not terminating the contract but merely exercising
a self-help remedy. As soon as the price is paid by the buyer, or by the buyer’s liquidator,
the lien will be lost and the seller will be obliged to hand over possession of the goods.
A lien can be particularly useful when a buyer has become insolvent before the goods have
been delivered. Notice that a lien cannot be claimed where the buyer has been granted
credit, unless the credit term has expired.
Example
Bashir buys a combine harvester from Sam for £58,000. The combine harvester was specific
goods in a deliverable state and therefore under s. 18 Rule 1 ownership passed to Bashir as
soon as the contract was made. Bashir is not given credit. Bashir pays half of the price but
Sam refuses to give up possession of the combine harvester until the full price is paid. Sam
has a right to do this. Sam is an unpaid seller and is exercising the right of lien. Bashir then
pays the rest of the price and Sam loses the lien. Sam must therefore now allow Bashir to
take possession of the combine harvester.Section 43 provides that an unpaid seller can lose a lien in three ways:
(i) By waiving the right to the lien, that is to say, by voluntarily surrendering the right to it.
(ii) By delivering the goods to a carrier to take to the buyer without reserving the right of
disposal of the goods.
(iii) By allowing the buyer to lawfully gain possession of the goods.
The seller’s retaining possession of the goods is therefore the key to the lien.
The right of stoppage in transit
The seller’s lien is lost once the goods are delivered to a carrier who is to take them to the
buyer. If the buyer has become insolvent, and only if the buyer has become insolvent, s. 46
may give an unpaid seller the right to stop the goods in transit. The effect of stoppage in
transit is that the seller will recover possession of the goods from the carrier. This is likely
to be very important because, if the goods are delivered to the buyer, the buyer’s liquidator
will be entitled to keep them. The seller would then be reduced to making a claim as an
unsecured creditor. If stoppage in transit is achieved, the buyer’s liquidator would have the
option of enforcing the contract, but the seller would have to be paid the full price of the
goods. To achieve stoppage in transit the unpaid seller must let the carrier know that this is
being done before the carrier delivers the goods to the buyer. As soon as the goods are
delivered to the buyer the right to stoppage in transit will be lost.
Example
Sanjay has sold 12 new cars to B Ltd. The contract price is £90,000. B Ltd has paid a
deposit of £9,000. The cars are handed over to a carrier for delivery to B Ltd. Therefore
ownership passes to B Ltd by virtue of s. 18 Rule 5. Sanjay then hears on the radio that B
t