Business Laws

Unpaid Seller and His Rights

under Sales of Goods Act, 1930

Submitted to: Submitted by:

Dr. Amita Verma Yashika

[Link].B(C)
171/19
Semester 7th
 MEANING OF UNPAID
SELLER
A seller who has not received the full price of the goods sold is termed as
unpaid seller.
According to Section 45 of the Sale of Goods Act, 1930

The seller of goods is deemed to be an ‘Unpaid Seller’ when-

(A) THE WHOLE OF THE PRICE HAS NOT BEEN PAID, OR

(B) TENDERED, OR

(C)A BILL OF EXCHANGE OR OTHER NEGOTIABLE INSTRUMENT WAS

GIVEN AS PAYMENT, BUT THE SAME HAS BEEN DISHONOURED

Examples: (1) X sold certain goods to Y for ‘ 5,000.Y paid ` 4,000 but fails to pay the
balance. X is an unpaid seller.
EXAMPLES:
 X sells goods of Rs. 5,00,000 to Y on a credit of
one month, but after expiry of one month he
did not pay the price, here X is said to be unpaid
seller.
 X sells goods of Rs. 5,00,000 to Y and Y issued a
cheque for payment, but it is dishonored, here
X is said to be unpaid seller.
 X sells goods of Rs. 5,00,000 to Y on a credit of
one month, but after expiry of one month he
has paid only 1,00,000 the price, here X is said
to be unpaid seller.
Thus, a seller is said to be unpaid seller when following
conditions satisfied :

a) The goods have been sold

b) The price of goods sold is due
c) The price has not yet been paid or tendered
d) A negotiable instrument has been received as payment
but has dishonored.

NOTE:

 A seller is termed as unpaid seller even if a part

payment of price remains unpaid.
 However, the seller cannot be termed as unpaid for
non-payment of expenses
RIGHTS OF AN UNPAID SELLER
RIGHTS OF AN
UNPAID
SELLER

AGAINST AGAINST THE

GOODS BUYER

SUIT FOR
LIEN PRICE

STOPPAGE SUIT FOR

IN DAMAGES
TRANSIT

SUIT FOR
RESALE
INTEREST
 Rights of an Unpaid Seller against the Gooods
(A) Rights against the Goods: Unpaid seller’s rights against the goods may be discussed
under the following two heads, namely:

1. Where the ownership of the goods has transferred to the buyer: In this case, the
unpaid seller has the following rights:
(a) Right of lien.
(b) Right of stoppage of goods in transit.
(c) Right of resale.

2. Where the ownership of the goods has not transferred to the buyer: In this case, the
unpaid seller has the
(a) Right of lien.
(b) Right of stoppage of goods in transit.
(c) Right of resale.
(d) Right of withholding the delivery of
goods sold
 (A) RIGHTS OF AN UNPAID SELLER AGAINST THE
GOODS
(1) Rights of lien (Section 47): lien is a right to retain the
goods in the possession until certain conditions
fulfilled.

An unpaid seller has a right to retain the possession of the

goods , until the payment or tender of the price of such
goods.

Example: A sold certain goods to B for a price

` 500 and allowed him to pay the price within
one month. B becomes insolvent during this
period of credit. A, the unpaid seller, can
exercise his right of lien.
 It can be exercised by him in the
following cases only:
 GOODS HAVE BEEN SOLD WITHOUT ANY STIPULATION
OF CREDIT

 GOODS HAVE BEEN SOLD ON CREDIT BUT THE TERM OF

CREDIT HAS EXPIRED;

 THE BUYER BECOMES INSOLVENT.

 THE GOODS MUST BE IN THE POSSESSION OF SELLER

 THE POSSESSION MUST BE CONTINUOUS

 It can be exercised by him in the
following cases only: Cont..
 THE SELLER MAY EXERCISE LIEN EVEN SELLER
HAS POSSESSION OF GOODS AS A BAILEE OR
AGENT OF BUYER

 WHEN PART DELIVERY HAS MADE SELLER CAN RETAIN

REMAINING GOODS FOR UNPAID PRICE

 THE WHOLE GOODS CAN BE RETAINED FOR PART DUE

PAYMENT

 LIEN CAN BE EXERCISED EVEN AFTER OBTAINING A

DECREE FOER PRICE OF GOODS
 The Unpaid Seller Loses His Right Of Lien
The Under
Following Circumstances:
• When he delivers the goods to a carrier or other bailee for the purpose
of transmission to the buyer without reserving the right of disposal of
1 the goods.

• Where the buyer or his agent lawfully obtains possession of the

2 goods.

• Where seller has waived the right of

3 lien.

• By Estoppel i.e., where the seller so conducts himself that he leads

4 third parties to believe that the lien does not exist.
 EXAMPLE

A, sold a car to B for`1,00,000 and delivered the same to the railways for the
purpose of transmission to the buyer. The railway receipt was taken in the name of B
and sent to B. Now A cannot exercise the right of lien.
 Right of stoppage goods in transit

Meaning :

The right of stoppage in transit means to stop the goods while they are in transit with an
Object to regain and then retain the possession until the price is paid .

“ The essential feature of stoppage in transit is that the goods should be in the possession of
a third person intervening between the vendor who has parted with and the buyer who has
Not received them .” Schotsmans v/s Lances
The right of stoppage in transit can be exercised when following conditions are satisfied :
• The seller must have parted with possession of goods
• The goods must be in transit
• The buyer must be insolvent
• NOTE : For this purpose buyer is deemed to be insolvent when he is ceased to pay his
debts in ordinary course of business or cannot pay his debt as they becomes due .
(2) Right of stoppage in transit:

The Right Of Stoppage In Transit Is Exercised Only When The Following Conditions
Are Fulfilled:
 Example
:
B at Delhi, orders goods of A, at Mumbai. A consigns and forwards the goods to B.
On arrival at Delhi, they are taken to B‘s warehouse and left there. B refuses to take
these goods and stop payment. The goods are in transit and the unpaid seller can
take them back.
The goods are said to be in transit when:
A . They are delivered to the carrier for the purpose of
transmission to the buyer until buyer or his agent take
delivery
B . The goods are rejected by the buyer
C . When part delivery has made with an intention of
part delivery and remaining goods are in transit.

The right to stoppage in transit can be exercised by :

A . Taking actual possession of goods
B .Notice to the carrier or other bailee to not to
deliver and retain and than redeliver the goods as per
the sellers directions
 Duration of transit (Section 51)

i. If the buyer or his agent in that behalf obtains delivery of

goods before their arrival at the appointment destination, the
transit is at end.[section 51(2)]

ii. Where the carrier or the other bailee wrongfully refuses to

deliver the goods to the buyer or his agent in that behalf, the
transit is deemed to be at an end.

iii. If the goods are rejected by the buyer and the carrier or the
other bailee continues in possession of them, the transit is not
deemed to be at an end, even if the seller has refused to
receive them back.
However seller can not exercise his right in the following
circumstances:

(i)Where the sub-sale or other disposition by the buyer has been done
with seller’s consent.[section 53(1)].

(ii)When goods are delivered to a ship chartered by the buyer, it is a

question depending on the circumstances of the particular case,
whether they are in the possession of the master as a carrier or as
agent of buyer.

(iii)Where a document of title to goods has been issued or lawfully

transferred to any person as buyer and that person transfers the
document in good faith and for consideration.[Provision to section
52(1).
 (3) Right of Re-
sale:
The unpaid seller can exercise the right to re-sell the goods under the following
conditions:

(i) Where the goods are of a perishable nature:

In such a case the buyer need not be informed of the intention of resale.

(ii) Where the goods are of non perishable nature:

(a) Where he gives notice to the buyer of his intention to re-sell

 the losses of resale can be reimburse from buyer

 the profit of resale is of seller
 (3) Right of Re-sale:
Cont…

(b) Where he fails to give notice to the buyer of his intention to re-sell

 the losses of resale can not be reimburse from buyer

 the profit of resale can be claimed by buyer

i) Where the goods

are of a perishable
nature ii) Where the goods are of
non perishable nature
 (B) RIGHTS OF UNPAID SELLER
AGAINST THE BUYER
(SECTION 55-61):
This rights of unpaid seller against the buyer is otherwise known as seller’s
remedies for breach of contract of sale. These rights are called rights in personam
and are in addition to his rights against the goods. The right in personam are as
follows:

(1)Suit for price (Section 55)

(a) Property in goods has passed:

Where buyer wrongfully neglects or refuses to pay for the goods even after
transfer of property in goods to him , the seller may sue him for the price of
the goods. [Section 55(1)]
 (B) RIGHTS OF UNPAID SELLER
AGAINST THE BUYER
(SECTION 55-61):Cont…
(b) Property in goods has not passed :Where in a contract of sale and the
price is payable on a certain day irrespective of delivery and the buyer
wrongfully neglects or refuses to pay such price, the seller may sue him
for the price although the property in the goods has not passed and
the goods have not been appropriated to the contract. [Section 55(2)].
 (B) RIGHTS OF UNPAID SELLER
AGAINST THE BUYER
(SECTION 55-61):Cont…
(2) Suit for damages for non-acceptance (Section 56):

Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the
seller may sue him for damages for non-acceptance . As regards measure of damages,
Section 73 of the Indian Contract Act, 1872 applies.

(3) Repudiation of contract before due date (Section 60):

Where the buyer repudiates the contract before the date of delivery, the seller may treat
the contract as rescinded and sue damages for the breach. This is known as the ‘rule of
anticipatory breach contract’.
 (B) RIGHTS OF UNPAID SELLER AGAINST
THE BUYER (SECTION 55-61):Cont…
(4) Suit for Interest [Section 61(2)(d)]:

(a) Where there is specific agreement

If it has agreed between the seller and the buyer as to interest on the price of the
goods from the date on which payment becomes due, the seller may recover interest
from the buyer.

(b) Where there is no specific agreement

if there is no specific agreement to this effect, the seller may charge interest on the price
when it becomes due from such day as he may notify to the buyer.

In the absence of a contract to the contrary, the Court may award interest to the
seller in a suit by him at such rate as it thinks fit on the amount of the price from
the date of the tender of the goods or from the date on which the price was payable
[Section 61(2)(a)].
RIGHTS OF PERSONAM/ RIGHTS
AGAINST BUYER

SUIT FOR PRICE

SUIT FOR
SUIT
DAMAGES
AGAINST
FOR NON
INTEREST
ACCEPTANC
E

REPUDIATION OF
CONTRACT BEFORE DUE
DATE
DISTINCTION BETWEEN RIGHT OF LIEN AND RIGHT OF STOPPAGE
IN TRANSIT

RIGHT OF LIEN RIGHT OF STOPPAGE

(1) Essence is to retain possession (1) Essence is to regain possession

(2) Seller should be in possession of

(2) In stoppage
goods under lien
(i) parted with the possession
(ii) possession should be with a carrier
(iii) buyer has not acquired the possession

(3) Can be exercised even when the

(3) Can be only exercised when
buyer is not insolvent
the buyer is insolvent.

(4)Right of lien is the starting

point of right of stoppage in (4) Right of stoppage in transit
transit begins when the right of
lien ends