A sells goods to B and delivers him the document of title of goods. B pays A through cheque. In fulfillment of contract of sale B transfers the document of title to C. Before C could obtain delivery of goods, B’s cheque has been dishonoured by the bank. Hence A gives instructions to stop delivery of goods to C until paid. Is A’s action justified?
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Hi Anushka,
In the given case A was given a cheques by Bwhich was later dishonoured. Hence A will be treated as unpaid seller. And unpaid seller has right to stop in transit before it is delivered and connot be exercised once it is delivered. But in this case same goods has been sold to C in transit means delivery is done when document of title was transferred. (Means delivery from A to B was taken place when title deed was transferred to C) Hence we can say that claim of A to stop goods is unjustified.
And also if you see from C’s angle, C has purchased goods in a good faith.