Legal Definitions - STOPPAGEIN TRANSITU

Stoppage in Transitu refers to a specific legal right that allows a seller of goods to prevent those goods from being delivered to a buyer under certain circumstances, even after the goods have left the seller's possession.

This right typically arises when the buyer becomes unable to pay for the goods (for example, due to bankruptcy or insolvency) while the goods are still being transported by a third-party carrier (like a shipping company, airline, or trucking firm) and have not yet reached the buyer. In such a situation, the seller can instruct the carrier to stop the delivery and return the goods, thereby protecting themselves from financial loss.

Here are some examples illustrating this concept:

• Example 1: Construction Materials

  Imagine "BuildRight Supplies" ships a large order of custom-fabricated steel beams to "CityScape Developers" for a new high-rise project. The beams are on a freight train, halfway across the country. Before the train arrives, CityScape Developers publicly announces it has filed for Chapter 11 bankruptcy and will be unable to pay its outstanding invoices.

  In this scenario, BuildRight Supplies can exercise its right of stoppage in transitu. They would contact the railway company and instruct them to halt the delivery of the steel beams to CityScape Developers and instead return them to BuildRight or redirect them to a new, solvent buyer. This prevents BuildRight from losing both the valuable steel beams and the payment for them.

• Example 2: Specialized Industrial Equipment (International)

  Consider "TechInnovate Inc." in Germany, which sells a highly specialized industrial robot to "Automate Solutions Ltd." in the UK. The robot is loaded onto a cargo ship bound for a UK port. While the ship is at sea, Automate Solutions Ltd. enters liquidation, meaning it's closing down and cannot fulfill its financial obligations.

  TechInnovate Inc. can invoke stoppage in transitu. They would notify the shipping company to prevent the robot from being delivered to Automate Solutions Ltd. upon arrival in the UK. Instead, TechInnovate can arrange for the robot to be returned to Germany or held at the port for resale, ensuring they don't lose the valuable equipment to a bankrupt buyer.

• Example 3: Wholesale Perishable Goods

  Suppose "FreshHarvest Farms" ships a full truckload of organic produce to "Gourmet Grocers," a regional supermarket chain. The truck is on the highway, a day away from delivery. Gourmet Grocers suddenly announces it is ceasing operations immediately due to severe financial distress and will not be able to pay its suppliers for current deliveries.

  FreshHarvest Farms can exercise stoppage in transitu. They would contact the trucking company and instruct the driver to divert the truck, preventing delivery to Gourmet Grocers. FreshHarvest could then try to sell the produce to another grocery chain or return it to their distribution center, mitigating their potential loss of both the goods and the payment.