Meaning
Legal provision granting a creditor the right to retain any property of a debtor currently in their possession to cover any outstanding balance. A general lien clause extends the security interest beyond the specific items related to a single transaction to include the entire debt history between the parties. The clause is typically found in master service agreements for shipping, warehousing and specialized manufacturing.
Broad Security
Coverage of the lien includes all goods and documents of title held by the creditor regardless of which specific invoice remains unpaid. When a general lien clause is active, a warehouse can hold a new shipment of components to force payment for a delivery made months earlier.
Default Recourse
Enforcement of the right allows the creditor to stop the flow of materials until the financial dispute is resolved. If the debtor fails to pay after a formal notice, the general lien clause may provide the creditor with a power of sale to recover the funds.
Contractual Scope
Clarity in the wording of the agreement prevents disputes over which assets are subject to the claim. A well-drafted general lien clause specifies the notice periods and the conditions under which the property will be released. This contractual certainty protects the provider of services from serial non-payment by a single client.
