Section 53 of The Sale of Goods Act, 1930
- (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 sellers 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 sellers 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.
Summary
- Generally, if a buyer sells or pledges the goods to a third party, the original unpaid seller still keeps their right to a lien or to stop the goods in transit.
- This right is only lost if the original seller officially agreed to the buyer's sale or pledge to someone else.
- If the buyer transfers a document of title to a person who pays for it and acts in good faith, the original seller's rights are affected.
- If that transfer was a sale, the original seller's right to keep or stop the goods is completely defeated.
- If that transfer was a pledge, the original seller can still use their rights but must satisfy the claims of the person who took the pledge first.
- In a pledge case, the seller can insist that the person holding the pledge tries to get their money from other items belonging to the buyer first.
Practical examples
FAQ
1. Does a sub-sale by the buyer cancel the original seller's lien under Section 53 of the Sale of Goods Act?
No, under Section 53 of the Sale of Goods Act, 1930, the unpaid seller's right of lien or stoppage is not affected by the buyer selling the goods unless the seller assented to it.
2. What happens if a document of title is sold to a good faith purchaser under Section 53 of the Sale of Goods Act?
Under Section 53 of the Sale of Goods Act, 1930, the original unpaid seller's right of lien or stoppage in transit is defeated if the document was transferred as a sale for consideration in good faith.
3. Can a seller still stop goods if the buyer has pledged them using a document of title under Section 53?
Yes, under Section 53 of the Sale of Goods Act, 1930, the seller can still stop them, but it can only be done subject to the rights of the person who received the pledge.
4. Can a seller force a pledgee to use other securities first under Section 53 of the Sale of Goods Act?
Yes, under Section 53 of the Sale of Goods Act, 1930, the seller can require the pledgee to satisfy their debt using other goods or securities of the buyer if available.
Test yourself
Q1.Under Section 53 of the Sale of Goods Act, 1930, when is the seller's right of stoppage in transit "defeated"?
Q2.Under Section 53 of the Sale of Goods Act, 1930, what happens if the buyer transfers a document of title as a "pledge" instead of a sale?
Q3.Under Section 53 of the Sale of Goods Act, 1930, what is the effect if the original seller "assented" to a sub-sale by the buyer?
Q4.Under Section 53 of the Sale of Goods Act, 1930, what can an unpaid seller demand of a pledgee?