The general rule is that the buyer cannot defeat the seller's right of lien or retention or stoppage in transitu by selling or pledging the goods, but the rule is subject to exception in favour of a third person who in good faith and for value takes a transfer of a document of title to the goods.

As to the meaning of "document of title," and as to the effect of the transfer of such a document, see chapter 4, 43.

The Sale of Goods Act (Ont. s. 46; U.K. s. 47) provides: 46. Subject to the provisions of this Act, the unpaid seller's right of lien or retention or stoppage in transitu is not affected by any sale or other disposition of the goods which the buyer may have made, unless the seller has assented thereto. Provided that, where a document of title to goods has been lawfully transferred to any person as buyer or owner of the goods, and that person transfers the document to a person who takes the document in good faith and for valuable consideration, then, if such last-mentioned transfer was by way of sale the unpaid seller's right of lien or retention or stoppage in transitu is defeated, and if such last-mentioned transfer was by way of pledge or other disposition for value, the unpaid seller's right of lien or retention or stoppage in transitu can only be exercised subject to the rights of the transferee. In the United Kingdom the subject matter of this section is also covered in part by the following section of the Factors Act, 1889, which has been omitted from the Factors Act in Ontario (see chapter 4, 46):

10. Where a document of title to goods has been lawfully transferred to a person as a buyer or owner of the goods, and that person transfers the document to a person who takes the document in good faith and for valuable consideration, the last-mentioned transfer shall have the same effect for defeating any vendor's lien or right of stoppage in transitu as the transfer of a bill of lading has for defeating the right of stoppage in transitu.

As to the effect upon the seller's right of stoppage in transitu of the transfer by the buyer to a third person of a bill of lading, see Lickbarrow v. Mason, 1793, 6 East 21 n., 1 Smith, L.C. 12th ed. 1915, p. 726, 4 R.C. 756; In re Westzinthus, 1833, 5 B. & Ad. 817, 4 E.C. 845; Leask v. Scott, 1877, 2 Q.B.D. 376, 4 R.C. 790; Ex parte Golding Davis & Co., 1880, 13 Ch. D. 628, 4 R.C. 851; Kemp v. Falk, 1882, 7 App. Cas. 573, 23 R.C. 399. See also Cahn v. Pockett's Bristol Channel Steam Packet Co., [1899] 1 Q.B. 643, in chapter 4, 44. With regard to stoppage in transitu the proviso to the section of the Sale of Goods Act above quoted (Ont. s. 46; U.K. s. 47) adopts the rule of the common law declared in Lickbarrow v. Mason, supra, and extends it so as to make it applicable to the transfer by the buyer of documents of title other than bills of lading. With regard to lien, it applies the same extended rule, a lien not being lost at common law, as against a buyer or sub-buyer or other transferee, by the issue or transfer of any document but a bill of lading, that being the only document which per be transfer-red possession.

25 Halsbury, Laws of England, p. 260, note (o). It is there further pointed out that some difficulty arises in the interpretation of the words "subject to the rights of the transfere" in the case of a pledge by the buyer or owner of a document of title for an antecedent debt, in view of the provision of the Factors Act (Ont. s. 5; U.K. s. 4: see chapter 4, 46), and the opinion is expressed that the section of the Factors Act should be read as a second proviso to the section of the Sale of Goods Act. A delivery order was issued by the owner of goods and delivered by him to another person, who in turn transferred it to a third person who took it in good faith for value. It was held that the delivery order was a document of title and that the unpaid vendor's lien of the original owner was defeated.

Ant. Jurgens Margarinefabrieken v. Dreyfus, [1914] 3 K.B. 40. In the United States the Uniform Sales Act provides: 62. Subject to the provisions of this act, the unpaid seller's right of lien or stoppage in transitu is not affected by any sale, or other disposition of the goods which the buyer may have made, unless the seller has assented thereto.

If, however, a negotiable document of title has been issued for goods, no seller's lien or right of stoppage in transitu shall defeat the right of any purchaser for value in good faith to whom such document has been negotiated, whether such negotiation be prior or subsequent to the notification to the carrier, or other bailee who issued such document, of the seller's claim to a lien or right of stoppage in transitu. As to the negotiation of a negotiable document of title, see chapter 4, 47.