This article is written by Yasir Iqbal Memon, Final year law student from Government Sindh Law College Hyderabad during his internship at Ledriot India.
Abstract.
This Article Provides in detail examination of the concept of lien in contract law. It includes its emergence, Types, Characteristics, and implications. The article explores Historical background of lien and its evolution India and Pakistani law and examines the key principles and courts decisions that shape the concept of lien in contract law.
Key words.
Lien, Contract Law, Historical background, Types of lien, characteristics of lien, implications of lien.
Introduction.
The strict meaning of word “Lien” through word references can be followed as Charge or obstacle. A lien is the standard or common law that advance over time and afterward on been included as principal Concept in the Law of contract that gives a security intrigued for the banks. It is a right to hold Ownership of merchandise, property, resources until an obligation or an commitment has been fulfilled. Onwards we might look at the definitions, Sorts, Characteristics and suggestions. We will too look at the chronicled foundation of lien and its advancement in Indo-Pak.
Definition of lien.
A lien may be characterized as a charge or an hindrance of the one party who has done something for another party and holds the other parties property or products presently until unless he has been paid for his work administrations anything done through the contract or in common course of trade he can hold such merchandise, property, resource of the other party as the case may be until he has been paid/satisfied for his claim. The lien as it were bolsters the hold of ownership of any property or merchandise but not energize to back the deal of the same. Let’s see around the definition of Black’s Law Lexicon, which characterizes lien as a lien is a legitimate right or intrigued that a bank has in another’s property, enduring as a rule until a obligation or obligation that is secures is satisfied1 In one of the choice of Sindh Tall court it characterized lien is “a right in personam ( in one man) to hold that which is in his ownership, But has a place to another till certain requests of the individual in ownership are satisfied”. It can emerge by one of three ways (i) By common law (ii) by express or inferred contract (iii) By common course of managing in the exchange in which lien is claimed. Which encourage can be classified as common lien and particular lien. [1] Which further can be classified as general lien and specific lien.
Historical Background and Evolution of Term Lien.
Lien is the item of Exchange and Value to anticipate any kind of obstacle on the portion of one party to ease the other the party which can likely to be endure from the acts of the other party has been given the right to lien over the products, Property of the other Party. The common carrier is maybe the to begin with extraordinary lesson of people to be given a particular common law lien due to their obligation to secure entry of merchandise .The concept of lien has its roots in old civilizations, with prove of its presence found in the laws and traditions of antiquated Mesopotamia, Greece, and Rome.[2].The concept of lien has its roots in ancient civilizations, with evidence of its existence found in the laws and customs of ancient Mesopotamia, Greece, and Rome.
- Ancient Mesopotamia
The most punctual recorded prove of lien dates back to antiquated Mesopotamia, which can be found in composed is particularly in the Code of Hammurabi (circa 1754 BCE). The code set up rules for exchange, commerce, and obligation collection, counting arrangements for lien. For occurrence, Article 48 of the Code of Hammurabi states that a leaser can hold ownership of a debtor’s products until the obligation is paid. [3]
- Ancient Greece
The concept of lien being impartial in nature can be found in thoughts, speculations and Rationalities as it adjusts with common law and equity. In old Greece, the concept of lien was recognized in the frame of “pignus” or “hypotheca”. The Greek logician Aristotle (384-322 BCE) examined the concept of lien in his most notorious work “Rhetoric”, where he clarified that a leaser can hold ownership of a debtor’s property until the obligation is paid..[4]
- Roman Law
The Roman Realm advance created the concept of lien, which was recognized as “pignus” or “hypotheca”. The Roman legal scholar Gaius (circa 110-180 CE) examined the concept of lien in his work “Institutiones”, where he clarified that a bank can hold ownership of a debtor’s property until the obligation is paid..[5]
- English Common Law
The concept of lien was presented to Britain by the Normans in the 11th century. The English common law recognized different sorts of liens, counting possessory liens, legally binding liens, and evenhanded liens. The English legal adviser Sir William Blackstone (1723-1780 CE) examined the concept of lien in his work “Commentaries on the Laws of Britain”, where he clarified that a lien is a right to hold ownership of a debtor’s property until the obligation is paid..[6]
- The Evolution of lien in subcontinent India.
The concept of lien existed in antiquated India, where it was known as “bandhan” or “bandhaka”. The old Indian lawful content, the Dharmashastra, recognized the right of a bank to hold ownership of a debtor’s property until the obligation was paid. Old India (3000 BCE – 500 CE) indeed amid such time a bank might hold ownership of a debtor’s property, counting arrive, until the obligation was paid.[7] even during such time a creditor could retain possession of a debtor’s property, including land, until the debt was paid.[8]
After Muslim Advent. Medieval period of India (500 – 1757 CE)
During the medieval period, the concept of lien proceeded to advance. The Islamic law of lien, known as “rahn”, was presented to the subcontinent by Muslim rulers. Concurring to Islamic law, a leaser seem hold ownership of a debtor’s property as security for an obligation..[9]
After England advent of India & Pre-Partition Era (1857-1947)
During the British colonial period, the concept of lien was presented in India, counting the zone presently comprising Pakistan. The Indian Contract Act, 1872, and the Transfer of property of Property Act, 1882, recognized the concept of lien. [10]
- Post-Partition Era of Subcontinent
Both countries resulting from partition of India. Adopted the English Legal system leaved by the English which was implicated during anglo-indian period 1857-1947. The countries inherited the Indian laws, including the Indian Contract Act, 1872, and the Transfer of Property Act, 1882. These laws continued to govern the concept of lien in Pakistan and India.
- Global development of concept of lien in international Instrument .
In the modern era, the concept of lien has evolved to include various types of liens, such as mechanics’ liens, artisans’ liens, and bankers’ liens. The concept of lien has also been recognized in international law, including the United Nations Convention on the Assignment of Receivables in International Trade (2001).[11]
Kinds of Lien.
Kinds of lien may be taken as statutory and common law lien or equitable lien. Further elaborating them as General and Particular Lien. General lien may defined from section 171 of Contract Act, And particular lien can also be taken from contract law but being broader concept it dealt with common law Jurisprudence.
- General Lien.
A General lien may be characterized as statuary right given to certain class of the individual who can made lien on the property of another individual without any express contract to this impact if any benefit charges or any kind of legitimate installment remains on the portion of other party. It applies basically to certain benefit suppliers like financiers, variables, wharfingers, attorneys, and arrangement brokers. Common liens are those in which A the right to hold the property is claimed for a common adjust of accounts whereas specific lien is a right to hold property “for a charge on account of labor utilized or costs presented upon the indistinguishable property detained”.These benefit suppliers have the right, truant a opposite assention, to keep the commodities endowed to them as collateral for any unpaid adjust owed by their clients. Preconditions.The pre-condition for the pertinence of segment 171 of the Contract Act, 1872 is that there must not be an express or inferred contract characteristic of the deliberate of the depositors/debtor/Principal.
- Bankers
Bankers lien may be express or suggested through contract, as distant as the arrangements of segment 171 recognize the financiers Common lien to hold ownership of any property bolted in bank of indebted person whom bank have given cash and is not satisfying its conditions at that point the bank may utilize any of its property to be in lien until and unless such cash is paid. The Supreme Court held that a bank can work out a lien over a customer’s resources to recuperate a obligation. But so distant presently that seldom happens as a rule banks through their understandings of advance hold the property of the indebted person until such obligation is released[12]. But so far now that rarely happens usually banks through their agreements of loan retain the property of the debtor until such debt is discharged.
- Factors
The factors are those who are assigned a work which can include to sell the goods or repair them basically agents are called factors who has been assigned a particular work by their principal and upon completing those their commission or service charges remains on side of their principals they can lien the goods of their principal or its properly until and unless they are satisfied, their charges are fulfilled by the principal.
- Wharfingers
Wharfingers or carriage are the basic class of lien. They carry responsibility to safe passage of goods to the owner and by common law, equity, then by contract act statue they have been given right to retain the goods until and unless they have been discharged and their dues have been paid by the owner.
- Attorneys of the High Court.
The final class of people have been mentioned in section 171 is that attorneys of high court but in some countries have disregarded it as the attorneys might misuse it due to their high negotiating skills because only they can retain is the papers of the case or surety papers, Countries like India[13] and USA have disregarded it , while if the money of the Attorney remains on the part of client they can file a case or give an application to the court not to engage any other council unless they are been paid this practice is common in Pakistan,
- Particular Lien.
“Particular liens” and have desirously watched against “common liens”. It may be famous that the right of common lien does not exist by the common law. They emerge either out of common utilization or by understanding. When it comes to a specific lien, the individual having the ownership of the property have specialist to deny to grant up possession of items until the related charges are settled. The particular arrangement of a bailee’s specific lien is laid out in Segment 170 of the Indian/Pakistani Contracts Act. It states that, unless something else indicated in the contract, a bailee who has performed labor-intensive administrations related to the reason of the bailment is entitled to keep the safeguarded merchandise until they are paid decently for their administrations. An able illustration for this arrangement would be: A brings a unpleasant wood which the carpenter have turned it into a wonderful cart, presently he gives his administrations unless he has been paid he can hold the cart.
- Types of Lien.
Following are types of lien according to their circumstances.
- Possessory Lien.
Possessory Lien can be characterized as the lien in which borrower and leaser through their assent set the terms and conditions for reimbursements of the loan/credit given by the bank to indebted person, which is collateral to the security given by the indebted person to the leaser. The leaser holds the ownership of the property unless and until obligation or obligations are fulfilled and all conditions have appropriately full filled by the indebted person, presently it’s another case the ownership can as it were be genuine but not helpful. If the conditions are not met legitimately the leaser either goes into the prepare of owning the property or continues to offer it to fulfill the obligation.
- Non- Possessory Lien.
Non- Possessory lien may be characterized as the lien in which borrower holds the ownership of property which is given as security to the credit he gets, But in cases the records title will be hold by the leaser and in such case he can’t exchange or make another charge on the same property which is as of now lien to a bank. In non-possessory lien the Ownership to the lender may be useful but not genuine since in such case the physical ownership remains in hold of the him but the title documents leaves with the creditor. If the borrower do not fulfill his/her commitment at that point ownership can be taken by bank or any other creditor of which already lien has been create and holds the title of the property over which lien was set up. Most commonly this lien is made by contracts of mortgage.
- Contractual Lien.
A contractual lien is a right to retain possession of goods or property that is created by a contractual agreement between the parties. This kind of lien is independent of any common law usage about lien or equitable it can only be enforced through agreement between the parties and process it tells not otherwise.
Characteristics of Lien
A lien has several key characteristics, including:
- Right to Retain Possession:
A lien gives the creditor/ Service render the right to retain possession of the goods or property until the debt is paid. This is the main characteristics of the lien without which the lien can have no purpose. But this does not include that a creditor/service render can take possession of the property or goods which are not in his possession forcefully from the debtor.
- Security Interest:
A lien is a security intrigued that permits the lender to hold onto the property until the obligation is paid. This gives the leaser right to hold the property but not offer it for sale.
- Limited to Specific Property:
A lien is limited to specific property or goods that are in possession of the creditors whether direct or through another person and does not extend to other property or assets which are not in his possession but may be owned by the debtor.
- Can be Waived or Abandoned:
A lien can be postponed or deserted by the lender. That can be either by provide or giving the ownership of merchandise to the indebted person. And after giving so he can’t claim right of lien over such property
Implications of Lien
A lien can have significant implications for both creditors and debtors. For creditors, a lien provides a security interest that can help to ensure payment of a debt on equity basis without any agreement giving such power to hold the property of debtor. For debtors, a lien can limit their ability to dispose of property or assets until the debt is paid.
Conclusion
In conclusion, the concept of lien is an important aspect of contract law that provides a security interest for creditors specifically to the class of persons mentioned in section 171 of contract law. Understanding the concept of lien is essential for businesses and individuals to protect their interests and avoid disputes. Indo-Pakistani law recognizes the concept of lien and provides a framework for its application in contract law.
[1] PLD 1957 (WP) Karachi 760.
[2] Sinner v. Upshaw, 2 Lord Rym 752, 92 English Reprint 3 (1702).
[3] Code of Hammurabi, translated by L.W. King (1915)
[4] Aristotle, Rhetoric, translated by W. Rhys Roberts (1924)
[5] Gaius, Institutiones, translated by W.M. Gordon and O.F. Robinson (1988)
[6] Sir William Blackstone, Commentaries on the Laws of England (1765-1769)
[7] Dharmashastra, translated by G. Bühler (1886)
[8] Arthashastra, translated by R.P. Kangle (1960)
[9] The Muwatta of Imam Malik, translated by A.A. Bewley (2015)
[10] Contract Act 1872 Section 170,171,221 & Transfer of Property act.
[11] United Nations Convention on the Assignment of Receivables in International Trade (2001)
[12] Habib Bank Limited vs. Muhammad Iqbal (PLD 2001 SC 604):
[13] R.D. SAXENA v. BALRAM PRASAD SHARMA (AIR 2000 SC 3039)
