Lien

 Lien and Its Types

Definition of Lien:

Lien is the right of an individual to retain possession of goods or securities belonging to another until certain debts owed to the person retaining the goods are satisfied. Unlike other forms of charges, a lien does not confer the power to sell the property, but merely to retain it. This right arises from the dealings between the parties rather than from an express or implied agreement.

Conditions for Exercising Lien

• Possession: The creditor must possess the goods.
• Lawful Debt: There must be a lawful debt owed by the owner of the goods to the person in possession.
• No Contract to the Contrary: There must be no agreement contradicting the right of lien.

Types of Lien

• Possessory Lien:
  • General Characteristics: A possessory lien can be exercised by the person in possession of the goods and is lost if possession is lost, the debt is paid, or the security is substituted. Possession must be continuous, rightful, and not for a special purpose.
• Subtypes:
  • Particular Lien: Confers the right to retain a specific item for which a debt arose. This arises from services provided, labor performed, or money spent on the goods.
  • Characteristics:
    • Right to retain goods until the debt is paid.
    • Arises in the ordinary course of business.
    • Does not require a specific agreement.
• General Lien: Allows retaining goods and securities for a general balance of accounts, not just for a specific debt. This right is usually given by law to bankers, solicitors, brokers, and warehouse-keepers.
• Characteristics:
  • Extends to the general balance of accounts.
  • A defensive right, not a right of action.
  • Applies to properties or securities acquired in the ordinary course of business.
  • Does not cover goods held for a special purpose.
• Banker's Lien:
  • Nature: An implied pledge giving the banker the right to sell the property after reasonable notice.
  • Conditions:
    • The property must be in the control of the banker.
    • The property must not be for a specific purpose inconsistent with the lien.
    • Possession must be obtained lawfully.
    • No contrary agreement should exist.
  • Limitations:
    • Does not extend to securities that do not belong to the customer.
    • Does not cover goods deposited for safe custody or specific purposes.
    • Cannot be applied to insurance policies after debt repayment, certain shares, and some fixed deposits.
• Negative Lien:
  • Nature: A declaration by a borrower that their assets are free from charges or encumbrances and will not be encumbered or disposed of without the bank's permission.
  • Purpose: Protects the banker's interests but does not allow direct realization of debts from these assets.
• Equitable Lien:
  • Nature: A right conferred by law on both movable and immovable property until specific claims are satisfied.
  • Examples:
  • An unpaid vendor's lien on property for the purchase money.
  • A partner’s lien on partnership property upon dissolution for debts paid.
• Maritime Lien:
  • Nature: A right binding a ship and its associated properties for payment of maritime claims.
  • Scope: Includes claims for wages, salvage, damages, and supplies related to maritime law.

Additional Important Points

• Termination of Lien:
  • Possessory lien ends with the loss of possession, payment of the debt, or substitution of the security.
  • Lien is inherently a defensive right, retaining goods until a debt is satisfied but not endorsing the sale of the goods.
• Equitable Nature:
  • Equitable liens arise by operation of law and are based on principles of fairness rather than contractual agreements.

Understanding the different types of liens and their conditions is essential for creditors to exercise their rights lawfully and effectively. This ensures that they can secure repayment of debts without infringing on the legal rights of the debtors.