This article is written by Samia Mirza of Himachal Pradesh National Law University, Shimla, an intern under Legal Vidhiya.
ABSTRACT
Contract law is a field of law which is generally a yardstick to measure the legal competency of a lawyer and in depth understanding of contract law helps in building a strong legal conscience. Among various important aspects of contract law, the concept of lien and finder of goods is essential to be understood for anyone who wishes to have a clear understanding of law of contracts. Contracts are based on the concept of fulfilment of obligations. Sometimes it may not be possible for one of the parties to fulfil an obligation then and there and thus does it at a later time. Until the obligation is fulfilled, the other party has a right to retain the possession of property until the obligation is fulfilled, this is the right of lien. Under the contract law, a person who finds the goods and retains its custody is called the finder of goods. This article deals with both the concepts readily to provide an in depth understanding of both.
Keywords: Contract law, Lien, Finder of goods, Property
INTRODUCTION
Contract is an agreement between two parties which have agreed upon some terms and conditions which are to be fulfilled at a stipulated time as agreed upon by the parties. Contracts serve as the backbone of commercial transactions and in the plethora of contracts law and among these laws is one of the most essential concepts of lien and finder of goods. Mostly, a lot of contracts take place for the sale of goods, lien is a concept that provides the right to a person to hold the possession of goods of another party until the debt is fulfilled or the obligation is fulfilled. The finder of goods is the person or the party which finds some lost or abandoned goods. Under contract law, the finder of goods also has some obligation, rights and remedies. These two concepts can be easily observed in our surroundings as well and are of great significance for legal minds as well as business enthusiast. This article aims to provide an analysis on both the topics ranging from the definition, types, enforcement, rights etc. Both the topics are elaborated further with valid references and examples.
LIEN IN CONTRACT LAW
A lien is the legal right granted to a person or the entity (called the lien holder) to retain the possession of another person’s property or goods until the debt or obligation is satisfied. During the development of trade, lien has been considered a practice of self-help as it did not require the intervention of authority namely courts. The Supreme Court recognises lien in the sense that “Lien in its elementary sense is a right of a person or entity to retain the possession of goods until the demands of the possessor are satisfied. Therefore, the Right of Lien is a right granted by law and is merely not granted by a contract”.
PROVISION OF LIEN IN INDIAN CONTRACT ACT, 1872
Lien finds its basis in Indian Contract Law under Section 170 and Section 171 of the Indian Contract Act,1872. Section 170 deals with the concept of Bailee’s Particular Lien. It states that “Where the bailee has in accordance with the purpose of the bailment, rendered any services involving the exercise of the labour or skill in respect of the goods bailed, he has, in the absence of the contract to the contrary, a right to retain such goods until he receives due remuneration for the services, he has rendered in respect of them.” Section 171 deals with the concept of general lien. It states that “General lien of bankers, factors, wharfingers, attorneys and policy-brokers.—Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect.1 —Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect.1”
TYPES OF LIENS
There are two types of liens as recognised by law-
- Particular Lien
- General Lien
Section 170 of the Contract Act deals with Particular Lien while Section 171 deals with General Lien.
PARTICULAR LIEN
Particular lien are legal claims that allow a creditor to seize only specific assets pledged as collateral for a debt. It is a type of security interest that allows the creditor to hold onto the property as collateral until the debtor fulfils their financial duty or obligations. Unlike a general lien, which allows creditors to seize any and all assets of the debtor’s assets or property, a particular lien allows to seize only specific assets of the debtor.
IMPORTANCE/ADVANTAGES OF PARTICULAR LIEN
Some advantages of particular lien includes that the creditor knows exactly which property he or she can seize to satisfy the debt when they have a lien on it. There is also a provision for protection of property which is unrelated to debt is possible with particular lien. There is a priority of Particular lien between General Lien and Particular Lien. A Particular lien on property will be the satisfied before the general lien if the debtor has multiple liens on the property.
GENERAL LIEN
A general lien is a concept in contract law that grants a creditor a broader right to retain property of the debtor than particular lien as it does not specify any particular property which can be seized. The creditor can even seize the properties which are unrelated to debt until the obligations are satisfied unlike particular lien. In the context of Indian contract law, general liens are not explicitly recognised in the Indian Contract Act, 1872. Instead, the Act primarily deals with particular liens (Section 170) and specific situations where certain professionals or entities, such as bankers and factors, have rights to retain possession of property.
IMPORTANCE/ADVANTAGES OF GENERAL LIEN
General liens end up providing creditors with greater security than particular liens since they give them the right to seize any property of the debtor. It is more easier to enforce a general lien and they tend to be more flexible as the creditor has the right to choose any property. If a debtor has multiple liens, then the general lien will be satisfied before the particular lien.
PARTIES WHICH RESERVE A RIGHT OF GENERAL LIEN
- Bankers
- Wharfingers
- Factors
- Attorneys of High Court
- Policy Brokers
SIMILARITIES BETWEEN GENERAL AND PARTICULAR LIEN
Security interests such as liens allow creditor to claim an interest in debtor’s property as security or mortgage. Both of them are possessory in nature. In both cases, if the debtor fails to satisfy their debts or obligations, the creditor can take legal action to enforce the lien. They provide a level of assurance to the creditor that their financial interests will be protected.
While these similarities exist it is also important the specific legal and practical distinctions between general and particular liens as they have significant impact on contracts.
DIFFERENCE BETWEEN GENERAL AND PARTICULAR LIEN
| GENERAL LIEN | PARTICULAR LIEN |
| General Lien can be exercised against all the goods in possession of the bailee and goods are delivered to the bailee as security generally. | Particular Lien can be exercised only against some specific goods and mainly against which whose remuneration is due and goods are conferred for an additional value. |
| It is only available to the parties mentioned under Section 171. | It is available to any bailee. |
| It can be exercised on any due sum. | It is available done on the basis of remuneration of a particular work or thing. |
| It is mentioned under Section 171 of the Indian Contract Act,1872. | It is mentioned under Section 170 of the Indian Contract Act,1872. |
| The condition of improvement is not necessary in General Lien. | It can only be claimed if due to the exercise or skill of labour, there has been improvement in goods. |
| It is automatic in nature. | It is not automatic in nature. |
FINDER OF GOODS
In contract law, a finder of goods is an individual who discovers a lost or abandoned property belonging to any other party and decides to take possession of it. According to Section 71 of the Indian Contract Act, a person who finds goods belonging to any other party and takes them to into his custody, he is subject to same responsibility as a bailee.
PROVISION OF FINDER IN INDIAN CONTRACT ACT,1872
In India, the rights and duties of the finder of goods is covered by the Indian Contract Act,1872.
- Section 71– As per section 71 the finder of goods has the right to retain the goods or property until the lawful owner compensates the finder for any expenses incurred in preserving the goods. The finder may also have a lien over the property for such expenses.
- Section 168 – This section imposes a duty on the finder to make reasonable efforts to find the true owner and return the property to them. Failure to do so may result in legal consequences for them.
RIGHTS OF FINDER OF GOODS
- Right of Possession– The finder of goods has no rights to sue the owner of goods for compensation but he may retain the goods with him until he receives a compensation for any loss incurred by him for the preservation of goods. If the owner has specified any specific reward for the return of goods lost, the finder can sue for such type of reward and may retain the possession of goods until it is received.
- Right to Sell- Section 169 mentions that the finder of the goods has also been given the right to sell the goods under certain circumstances. This right is granted under following conditions-
- If the owner of the goods cannot be found or he refuses to pay lawful charges
- When the good is in danger of its perishing value
DUTIES OF FINDER OF GOODS
If a person finds some lost or abandoned goods, he does not become the owner of the goods. The finder becomes a special kind of bailee which has to take care of the lost or abandoned goods found by him until the owner of the goods is found. Thus he possesses some duties towards the goods he possesses.
- Duty to Take Reasonable Care of Goods– According to Section 151, the finder of goods shall take such a care of the goods as a prudent or reasonable man would take care of his own goods. According to Section 152, the finder of goods is not responsible for any damage or deterioration of goods if he has taken reasonable care according to Section 151.
- Duty not to Make Unauthorized Use of Goods– According to Section 153, the contract of bailment is voidable from the end of the owner if the finder of goods makes any unauthorized use of goods. According to Section 154, if the finder of goods makes any use of goods which is not according to the terms of the bailment, the finder of goods is supposed to make compensation to the owner of the goods.
- Duty not to Mix Goods– According to Section 155, if the finder of goods with the consent of the owner mixed the goods of the owner with his own goods, they shall have an interest in their respective shares from the produced mixture. According to Section 156, when the goods are mixed by the finder of goods without the consent of the owner such that the goods can be separated, they will have an interest in their respective shares from the procedure but the finder will have to bear the cost of separation. According to Section 157, if the mixture is such that which cannot be separated then the finder has to bear the cost of any losses incurred by the owner.
- Duty to Return Goods– According to Section 160, it is the duty of the finder of goods to return the goods found by him to the true owner as per the directions given by him before the expiration period. According to Section 161, if by the fault of the finder of goods, the goods are not returned on time, he is responsible for the loss of goods by him.
LIEN OF FINDER OF GOODS
The lien of a finder of goods is a legal right granted to the finder of goods who discovers and takes possession of lost or abandoned property that does not belong to them. This lien allows the finder to retain possession of the found property until they are compensated for expenses incurred in preserving the goods and, in some cases, for any reward that may have been promised for the return of the property to its rightful owner. The lien of a finder of goods is a form of security interest that ensures the finder’s claim to reimbursement is prioritized over others who may claim ownership of the property. Overall, the lien of a finder of goods serves as a mechanism to protect finders who take responsibility for lost or abandoned property, ensuring that they are compensated for their efforts and expenses while preserving the rights of the true owner to reclaim their property if they can establish ownership.
Let us elaborate on this with the help of a case law. In the case of Gopaldas v Thakurdas the High Court reviewed the provision of the concept of agent’s lien. The agent was the firm for the commission of agents who brought some goods or commodities for the principals who were under their control. Even the principal supplied the monetary requirement for buying the goods or commodities. But at some other times, the agent spent the money from his own pocket or from his own end. Therefore, the agent sold the goods of the principal to recover his due amount he gained.
CONCLUSION
After a deep reading of the article we can easily conclude the importance of the concept of lien and the concept of finder of goods. Understanding the concept of liens and their legal implications is essential for both creditors and debtors to protect their respective interests and ensure that the lien is used as intended within the framework of contract Understanding the concept of finder of goods and legal principles is crucial for both finders and owners, as it clarifies the legal framework and helps maintain the integrity of property rights in the context of lost or abandoned goods. Clear understanding of both the concepts can provide an edge to any legal enthusiast for developing a conceptual clarity in Contract Law and is essential for the understanding of law as a whole.
REFRENCES
- Manohar, S. P., “Finder of Goods in Indian Contract Law: Rights, Duties, and Implications,” Journal of Legal Studies, vol. 40, no. 3 (2017): 321-340.
- Malhotra, A., “Property Law and the Role of Finders in India,” Indian Journal of Contract Law, vol. 9, no. 1 (2019): 78-96.
- Black’s Law Dictionary (11th ed., 2019), s.v. “Finder of Goods.”
- Chakraborty, R., “Abandoned Property and the Rights of the Finder: A Comparative Analysis,” Indian Journal of Law and Society, vol. 47, no. 2 (2020): 167-184.
- Indian Contract Act,1872
- https://indiankanoon.org/doc/903901/ last visited on 17.8.23
