Department of Law

Bahria University Islamabad

ASSIGNMENT ON

“Right of Stoppage in Transit”

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 Submitted By

Muhammad Ibrahim and Faraz Ali Mughal

Registration No: 01-177162-021 and 01-177162-039

Submitted To

Sir Adnan

Table of Contents

Introduction……………………………………………………….. 3

History………………………………………………………………3

Stoppage in transit…………………………………………………4

Duration of stoppage…………………………………………………………...4

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Right of Stoppage Under different Laws…………………………5

Common law……………………………………………………………………5

Civil law…………………………………………………………………………6

USIG…………….………………………………………………………………7

Case Study ………………………………………………………….8

Case 1 ……………………………………………………………………………8

Case 2……………………………………………………………………………9

Conclusion………………………………………………………….10

Bibliography……………………………………………………….11

Introduction
Stopping goods in the course of their delivery at a distance. When the buyer of goods

becomes insolvent, an unpaid seller who has parted with the possession of the goods has the right of stopp

ing them intransit, that is to say, he may resume possession of the goods as long as they are in the course 

of transit and may retainthem until payment or tender of the price. By stopping the goods in the course of 

their transit, the seller puts the carrier underan obligation to redeliver the goods to him and thereby re-

acquires the right of possession of the goods. The exercise of theright of stoppage in transit does not in its

elf terminate the contract of sale; it merely prevents the buyer from obtaining possession of the goods

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and puts the seller in a position in which he can effectively exercise his statutory power of resale.Goods

are deemed to be in the course of transit from the time when they are delivered to a carrier or other bailee

or custodier for the purpose of transmission to the buyer until the buyer or his agent in that behalf takes

delivery of them from the carrier or other bailee or custodier. If the goods are subject to rejection by the

buyer and the carrier or other bailee or custodier continues in possession of them, the transit is not

deemed to be at an end, even if the seller has refused to receive them back.

History :

International private law has long recognized the right of contracting parties to suspend performance upon

an anticipatory breach of the contract. Originally, the draft convention of 1978 only provided for

suspension where the grounds for suspension were not known at the time the contract was drawn up.

Article 62 of the 1978 draft convention, which later became the current Article 71,1 further stipulated that

the breaching party’s conduct must offer “good grounds” for the other party to conclude that the

breaching party will not perform a substantial part of its obligations under the contract. The final wording

of the Article was the product of long deliberations.1

Stoppage in Transit

This right is contained in section 50 of sale of Goods Act which provides that where buyer becomes

insolvent and the unpaid seller has parted with possesion of goods he can stop the goods in transit until

the price is paid or offered to him.

Unpaid seller can stop the goods in following cases

1) While the buyer becomes insolvent.

1
Legislative History 1980 Vienna Diplomatic Conference, G. Report oftheFirstCommittee, U.N. Doc. A/CONF.97/11
(1980).

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 2) While the goods are out of actual possession of seller but have not reached buyer’s possession.

3) The unpaid seller can stop the goods in transit only for payment of the price of the goods and not

for any other charges.

4) When the goods reach destination.

5) While the buyer or his agent takes possession of delivery even if it is did not reach its destination.

6) In case the carrier is agent of the buyer the transit comes to an end the instance carrier receives

the goods and seller cannot stop transition.

Duration of transit :

The duration of transit is the period between the commencement and end of transit. The transit

commences from the time when the goods are delivered to the middleman and continues till buyer or his

agent takes delivery.

The important provisions relating to duration are as follows :

1) Where goods are rejected by the buyer and carrier continues to have the possession of the goods

the transit does not come to an end . (section 51(4))

2) Where the goods are delivered in parts the seller may stop the remainder of the goods unless the

delivery of the goods shows the intention to give up the possession of the whole goods. (section

51(7)),

3) Where the goods are delivered to a ship chartered by the buyer then it is a question of the fact in

each case whether the carrier is acting independently or as an agent of the buyer. If circumstances

show that the carrier is acting as an agent of the buyer then transit comes to an end as soon as the

goods are loaded on the board ship. (section51(5)).

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Right of Stoppage under different Laws :

a) Common-Law

Stoppage in transit is a remedy aimed at securing the payment of It was originally developed by

the English Chancery Courts, and was based on the equitable doctrine under which a beneficial

owner was allowed to trace the property held by a fiduciary, including a bailee, even where the
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property had been transferred. Where a seller transfers possession of the goods to the buyer

without receiving payment of the price, the situation can be considered a conditional delivery of

possession contingent upon the buyer's making payment. If the buyer fails to do so, or it becomes

apparent that he cannot pay, the seller is entitled to order the carrier to stop the goods in transit.

This right was originally based on the principle of privity of contract, under which only the

shipper and the carrier had the right of contractual claims against one another. The consignee

might have the right of suit only if title passed to him upon or by reason of an endorsement. 3 In

that case, the transfer of a document of title has the effect of transferring contractual rights to a

transferee, so that he becomes a party to the contract of carriage with the carrier, having the same

rights and duties, as contained in the bill of lading, as the transferor. Since title normally will not

pass to the buyer unless he pays the price, the shipper retains the right to give instructions to the

carrier even after the transfer of a negotiable document to the buyer. This probably represents the

basis on which the right of stoppage was originally created, though it is quite difficult to trace its

historical origins.the price and protecting the interests of unpaid sellers. The right of stoppage has

been incorporated into the legislations of most common law jurisdictions. Under English law,

stoppage in transit was defined as "the right of the unpaid vendor, on discovery of the insolvency

of the buyer, and notwithstanding that he has made constructive delivery of the goods to the

2
Hallett's Estate, (1880) 13 Ch.D. 696 (A.C.) (U.K.); Nippon Yusen Kaisha v. Ramjiban Serowjee, [1938] A.C. 429, 450
(P.C. 1938) (appeal taken from Calcutta H.C.) (U.K.).
3
Bills of Lading Act, 1855, 18 & 19 Vict., § 1 (repealed and replaced by the Carriage of Goods by Sea Act, 1992)
(U.K.).

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 buyer, to retake them ... before they reach the buyer's possession." 4 Section 44 of the British Sale

of Goods Act of 1979 and section 2-705 of the American Uniform Commercial Code (hereinafter

the "U.C.C.") give the unpaid seller of goods the right to stop the goods in transit when the buyer

becomes insolvent." Under this remedy, the unpaid seller has the right to order the carrier not to

deliver the goods to the buyer regardless of whether or not the buyer is the lawful holder of the

document which indicates him as the consignee. The seller has the right to stop the goods in

transit, even after he has ceded possession (as long as the goods are in transit), by giving notice of

his claim to the carrier or other bailee holding custody of the goods.

b) Civil Law

Most civil law jurisdictions do not recognize stoppage in transit. Instead of the common law

principle of privity of contract, civil law recognizes the principle of contracts for the benefit of

third parties. Under this principle, the transfer of a negotiable document has the effect of

transferring contractual rights to a transferee, as a third party to the contract between the shipper
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and the carrier. This is also in line with the civil law theory on "Wertpapiere" (literally:

"valuable paper"), under which the third party holder of negotiable documents acquires

contractual rights not through a transfer of rights, but from the negotiable document itself.These

two concepts are compatible, not contradictory, because by the transfer of a negotiable document

to a third party, in fact, the rights embodied in the document are, in fact, also transferred. Thus,

the transferee becomes a party to the contract of carriage with the carrier, with the same rights

and duties as the transferor as contained in the negotiable document. Based on these principles,

the seller loses the right to give instructions to the carrier after he transfers the negotiable

document to the buyer because he has lost the source of this right against the carrier: the

negotiable document. By transferring the negotiable document, the contractual rights against the

carrier embodied in that document are also transferred, including the right of control and the right

4
Booth Steamship Co., Ltd. v. Cargo Fleet Iron Co., Ltd., (1916) 2 K.B. 570, 580 (A.C.) (U.K.) (Reading, C.J.).
5
Handelsgesetzbuch [HGB] [Commercial Code] May 10, 1897, Bundesgesetzblatt, Teil I [BGB1. I] 17, as amended, §
364(1) (F.R.G.).

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 of suit. This means, of course, that the seller is deprived of the right of control, including the right

to give orders to the carrier, after he transfers the bill of lading to the buyer. The seller may retain

control over the goods only if he retains one original document. But this may merely allow the

seller to prevent delivery of the goods to the buyer, and does not include the right to give

instructions to the carrier. The carrier who would obey the seller's order to stop the goods in

transit after the negotiable document is transferred to the buyer would breach the explicit rules on

negotiability. The carrier may obey such orders only if the seller can produce all the original

negotiable documents. As a result, the right of stoppage is not recognized in most civil law

jurisdictions. Civil law has developed its own instruments for the seller's protection, such as the

right of retention. 6 The main difference between the right of retention and the right of stoppage in

transit relates to the right of giving orders to the carrier. With stoppage of transit, an unpaid seller

is allowed to make orders to the carrier, while in the case of right of retention, the unpaid seller

cannot give direct orders to the carrier. Alternatively, under civil law, an unpaid seller may rely

on an injunction granted by the court as a provisional remedy by which the seller may prevent the

carrier from delivering the goods to the consignee.

C) Stoppage in Transit Under the CISG

Under the CISG, the seller has at his disposal a number of remedies. One such remedy in the

seller's hand is the stoppage in transit as defined by Article 71(2):

If the seller has already dispatched the goods before the grounds described in the preceding

paragraph become evident, he may prevent the handing over of the goods to the buyer even

though the buyer holds a document which entitles him to obtain them. The present paragraph

relates only to the rights in the goods as between the buyer and the seller.7 This means that a seller

who has already dispatched the goods may prevent handing over the goods to a buyer who

refuses to pay or becomes unable to pay the price, even though the buyer holds the document

6
Code Civil [C. civ.] art. 1613 (Fr.); Handelsgesetzbuch [HGB [Commercial Code] § 455 (F.R.G.)
7
CISG, supra note 4, art. 71(2)

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 which entitles him to obtain the goods. Article 71(2) does not require an actual breach of contract

by the buyer in order for the seller to exercise the right of stoppage. In order to exercise the right

of stoppage, it must be apparent that the buyer will not ultimately fulfill his duty of payment. 28

The right of stoppage is directed against the buyer, even if he is the lawful holder of a negotiable

document, which gives him the constructive possession of the goods and the right to demand

delivery of the goods against the carrier. Article 71(2) allows the seller to reclaim possession,

even if the seller has lost control and possession during the course of the transaction. The right of

stoppage is terminated when the goods are delivered to the buyer.

Case Study :

1) Ruling Court Case. Tufts Vs. Sylvester, Volume 79 Maine Reports, Page 213; Volume 1

American State Reports, Page 303

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Tufts sold a bill of goods to be shipped at Boston to the buyer at Farmington, Massachusetts. The

buyer became insolvent after the purchase, and countermanded the order of goods, but the

countermand was made too late. Before the goods came, he had gone into insolvency, and an officer

of court-messenger had taken possession of his property. An express company, bringing the goods,

tendered them to the buyer, who refused to accept them. But the messenger had accepted the goods

from the carrier, paying the charges. After this, but before an assignee was appointed, Tufts, the

seller, made a demand upon both the carrier and the messenger for the return of his goods. This was

an action to recover the possession of them.The question upon these facts is, whether the goods were

seasonably stopped in transit to preserve the lien of Tufts.Chief Justice Peters said: "We think they

were. The right of stoppage in transit is favored by law. It is clear that the goods did not go into the

buyer's possession. He refused to receive them. He had a moral and legal right to do so. 'He may

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Ruling Court Case. Tufts Vs. Sylvester, Volume 79 Maine Reports, Page 213; Volume 1 American State Reports,
Page 303

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 refuse to take possession', says Mr. Benjamin, 'and thus leave unimpaired the right of stoppage in

transit, unless the vendor be anticipated in getting possession by the assignee of the buyer.' "

Judgment was given for Tufts.

2) Ramendra Nath Roy vs Brajendra Nath Dass on 10 February, 1919

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As regards railway receipt No. 9. The consignees in the railway receipt were the Lansdowne Jute

Mills Co., and the evidence of Mr. Robertson who was in Bird & Co., and who was appointed

receiver by the Court, was to the effect that the Lansdowne Mills got delivery of the goods on the

2nd January, 1914, and the notice of stoppage in transit was not given until the 10th January,

1914, so that it appears that in the case of these goods the transit was at an end before the notice

of stoppage was given. It was contended that the only way in which the plaintiff's right to stop in

transit could be defeated was by an "assignment," which meant an endorsement by the person in

whose name the bills of lading were made out and who was entitled to the control of the goods. It

was urged that B.N. Dass was not entitled to the control of the goods, as the bills of lading were

in the names of the ultimate buyers, viz., the Mills; that B.N. Dass could not assign by merely

handing the bills of lading to the Mills or to Cartwrights on behalf, of the Mills. It was admitted

that if the bills of lading had been made out in the name of B.N. Dass and he had endorsed them

to the Mills or to Cartwrights on behalf of the Mills, the plaintiff's right to stop in transit would

have been at an end; but it was urged that as the bills of lading in this case were made out in the

name of the Mills, the right of stoppage in transit was not defeated, even though the handing over

of the bills of lading by B.N. Dass to Cartwrights on behalf of the Mills would pass the property

and though the result as regards the passing of the property would be the same as if the bills had

been in B.N. Dass' name and he had endorsed them.

Conclusion :

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Calcutta high court (1919) ILR 46 Cal 831

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 Stoppage in transit is an outdated instrument in international sales. The right of stoppage in transit has

lost its importance in the modern system of international sales due to widespread use of letters of

credit and retention of title clauses. In modern business, the right of stoppage might be important only

in rare cases where the sale is on credit and the payment is made through an open account upon

delivery. In those situations, the most convenient way in which an unpaid seller can protect his

interests against the buyer's default is to retain possession of the document of title until payment.

Policy reasons also speak against the use of stoppage in transit. The carrier should not have to get

involved in legal wrangling about the supremacy between the right of stoppage of an unpaid seller

and the constructive possession acquired by the lawful holder of a bill of lading. Additionally, this

kind of interference with the right of stoppage with the rules on presentation of negotiable documents

may adversely affect the status of bills of lading and undermine the whole system of financing in

international sales.

Bibliography

 CISG Reoprt,

 Calcutta high court archives.

 American State Reports.

 UK Civil Code.

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  Bills of Landing Act 1855.

 Legislative history Vienna.

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