Lien is the right to retain the possession of the property of another till the other person meets the demands of the person in possession. The basis of the contract of lien was that it was not between the parties and the party had its rights because it was imposed law by the common law courts.
The major difference between a pledge and a Lien is that in a lien the person in possession only reserves a right to retain the possession of the goods. He reserves no right to sell the property that is in his possession. Lien is a right while the pledge is a contract between the parties and can only be created by contract. But, it is implicit that the contracting parties are free to create a lien by contract and waive the right of lien.
The two types of Lien which are recognized by the common law courts are:
- Particular lien
- General lien
In Particular lien, the person reserves the right to retain the possession of the goods until the charges due in respect of the property are paid.
A general lien is a right to retain the possession for the payment of the sum which is owed and even if the payment is not connected with the property in possession.
Bailee’s particular lien, which is specified under section 170, states that where the Bailee has in accordance with the purpose of Bailment, rendered any service which involves activity such as the exercise of Labor skill in respect of the goods which are bailed, he has in absence of the contract to the contrary, a right in order to retain such type of goods until he receives due remuneration for the services he has rendered in respect of them.
A general lien is defined under Section 171 of the Indian Contract Act, 1872. Section 171 talks about the General Lien of bankers, factors, wharfinger, attorneys and policy brokers, in absence of a contract to the contrary, retain, as a security for the general balance of the account, and any goods which are to be bailed to them unless there is an express contract to that effect.
Lien of a finder of goods
The Sale of Goods Act, 1930 grants certain rights to an unpaid seller in the case when the goods have already been transferred to the buyer but the buyer fails to pay the price of the said goods to the seller. One such right is the right of Lien. Hence, the seller can have the right to lien on the goods supplied if he has not been paid.
Note: “Bailment” is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them.
1. Choose the correct answer:
I. Lien can only be created by contract between parties because consent of both parties is essence of contract.
II. Lien is a right to be enforced by common law courts.
a. Only I
b. Only II
c. Both I and II
d. None of the above
2. Which of the following can be attributed to the above paragraph?
a. Lien can never be revoked by parties.
b. Lien gives a right to sell if amount due cannot be recovered in due time.
c. Pledge is contractual in nature.
d. Both a and b
3. X gave a piece of cloth to Y, a tailor, to make shirt out of cloth. Y tailored the shirt but X paid the part of the whole amount and refused to pay the remaining. Decide the correct proposition?
a. It amounts to contract of pledge arising out of voluntary contract.
b. There cannot be any lien on a mere piece of cloth.
c. Y can have right to lien to recover the unpaid amount.
d. Y can sell the piece of cloth to recover the amount.
4. X deposited a sum of money in the bank subject to the contract that in any case it will not be subject to any right of bank over sum of money. X had also taken loan from the bank and failed to repay the loan even after one year of due date. Decide the correct proposition?
a). The bank will have general lien over the sum of money deposited since X failed to repay the loan.
b). The bank will not have general lien since both the transactions are different.
c). The bank will not have right to lien since the contract to deposit sum of money states otherwise.
d). The loan can only be repaid by attaching the property of X.
5. X bought goods from Y and paid 70cent of the amount, and decided to pay the rest of the amount on fixed date. However, X failed to pay the rest of the amount on date fixed because of his financial losses caused by fire in his factory. Further, X could not also pay on extended day fixed for the payment. Decide the correct answer?
a. Y cannot have right to lien because X failed to pay because of genuine reason.
b. Y cannot have right to lien because X never intended to not to pay.
c. Y cannot have right to lien because X paid the 70 percent of the amount.
d. Y can have right to lien because X failed to pay the rest of the amount.