PROJECT ON:

“UNPAID SELLER AND HIS RIGHTS”

SUBMITTED TO:
Miss Priya Kumari

SUBMITTED BY:
PALLAVI KASHYAP
LL.B. 1ST YEAR
ENROLLMENT ID: 22FLUCDDN01010
 CONTENTS
Table of cases 2
Abstract 3
Introduction 4
Provisions of chapter v 5
Unpaid seller’s lien 6
Termination of lien 8
Stoppage in transit 10
When transit comes to an end 13
Transfer by buyer and seller 14
Loss or profit on resale 15
Measure of damage on resale 16
When resale is properly made 16
conclusion 17

TABLE OF CASES
Miles v. Gorto 7
Eduljee v. John Bros. 9
Citicrop Maruti Finance Ltd. v. Vijayalaxmi 9
Schotmans v. Lancashire Yorkshire Ry. Co. 12
Turner v. The Trustees of Liverpool Docks 12
Whitehead v. Anderson 13
Bird v. Brown 13
Mysore Sugar co. Ltd. Banglore v. Manohar Metal Industries 15
P.S.N.S. Ambalavana Chettiar v. Express Newspapers ltd. 16
 ABSTRACT
This assignment goes over the rights available to unpaid seller under
the SALE OF GOODS ACT, 1930. An unpaid seller refers to a seller
who has not received payment for the goods or services that they
have sold to a buyer. The term "unpaid seller" is commonly used in
the context of commercial transactions, where the seller has the
legal right to retain possession of the goods until they are paid in full
by the buyer.
Under the Sale of Goods Act 1979 (UK), an unpaid seller has certain
legal rights and remedies, which include the right to:
1. Withhold delivery of the goods until payment is made
2. Sue the buyer for the price of the goods
3. Retain possession of the goods and resell them to recover the
unpaid price
4. Stop the goods in transit if the buyer becomes insolvent
5. Claim damages for any losses suffered as a result of the buyer's
breach of contract
However, the seller's rights and remedies may vary depending on the
terms of the contract between the buyer and the seller, as well as
the applicable laws in the jurisdiction where the transaction took
place. It is therefore important for sellers to understand their legal
rights and seek legal advice if necessary when dealing with unpaid
buyers.
 INTRODUCTION

An unpaid seller is a seller who has not received payment for the
goods sold to the buyer. The term is used in the context of a sale of
goods contract where the buyer has failed to pay the purchase price
or has defaulted on payment. An unpaid seller has certain legal rights
to recover the unpaid price and to regain possession of the goods.
For Example: A purchased goods worth Rs. 20,000 from B. The ownership has
already been transferred to A. But A has not paid whole price or paid Rs. 15,000
to B. Here B is an unpaid seller.

The Sale of Goods Act, 1930 provides certain rights to the unpaid
seller. The seller can exercise his right of lien, stoppage in transit, and
resale of the goods. The right of lien allows the seller to retain
possession of the goods until the buyer pays the price. The right of
stoppage in transit enables the seller to stop the delivery of the
goods in transit if the buyer becomes insolvent. The right of resale
enables the seller to resell the goods to recover the unpaid price.
The unpaid seller can also sue the buyer for the price of the goods
sold, and can claim damages for any loss suffered as a result of the
breach of contract. In addition to these remedies, the seller can also
claim interest on the unpaid price and recover any expenses incurred
in trying to recover the unpaid price.
LET’S DISCUSS THE PROVISIONS RELATED TO UNPAID SELLER AND
HIS RIGHTS PROVIDED UNDER OF THE SALE OF GOODS ACT, 1930
The Unpaid seller has following rights:

 Rights against goods

  Rights against the buyer of goods
Provisions related to right of unpaid seller against goods is provided
under chapter v of the act
PROVISIONS UNDER CHAPTER V

SECTION 45
Definition of unpaid seller is given under this section. This section
says:
(a) when the whole of the price has not been paid or tendered;
(b) when a bill of exchange or other negotiable instrument has been received as
conditional payment, and the condition on which it was received has not been
fulfilled by reason of the dishonour of the instrument or otherwise.
(2) In this Chapter, the term "seller" includes any person who is in the position
of a seller, as, for instance, an agent of the seller to whom the bill of lading has
been endorsed, or a consignor or agent who has himself paid, or is directly
responsible for, the price.
A seller is an unpaid one when the whole of the price has not been
paid to him. It means that when only a part of the price has been paid
(and not the whole of it), the seller is an unpaid seller. It may also be
noted that a person is an unpaid seller to whom neither the whole of
the price has been paid nor the same has been tendered. If the price
has been tendered by the buyer but the seller has wrongfully
refused to take the same, he is not an unpaid seller.
The position of the seller's Agent may sometimes be the same as that
of the seller for the purpose of the exercise of rights conferred by this
Chapter. For example, an Agent of the seller to whom the bill of
lading has been endorsed or a consignor or Agent who has himself
paid, or is directly responsible for the price, can exercise the rights of
an unpaid seller.1

1
Sec45(2), sale of goods act, 1930
SECTION 46
This section tells the ambit of rights an unpaid seller can exercise:
(1) Subject to the provisions of this Act and of any law for the time being in
force, notwithstanding that the property in the goods may have passed to the
buyer, the unpaid seller of goods, as such, has by implication of law-
(a) a lien on the goods for the price while he is in possession of them;
(b) in case of the insolvency of the buyer a right of stopping the goods in transit
after he has parted with the possession of them;
(c) a right of re-sale as limited by this Act.
(2) Where the property in goods has not passed to the buyer, the unpaid seller
has, in addition to his other remedies, a right of withholding delivery similar to
and co-extensive with his rights of lien and stoppage in transit where the
property has passed to the buyer.
When the buyer has not paid the full or partial price of the goods
supplied to him, then the seller who has transferred the ownership of
goods to the buyer has the following rights with regard to the goods.
a) Right of lien b) Right of stoppage of goods in transit c) Right of
re-sale
A) UNPAID SELLER’S LIEN

SECTION 47
(1) Subject to the provisions of this Act, the unpaid seller of goods who is in
possession of them is entitled to retain possession of them until payment or
tender of the price in the following cases, namely:-
(a) where the goods have been sold without any stipulation as to credit; (b)
where the goods have been sold on credit, but the term of credit has expired;
(c) where the buyer becomes insolvent.
(2) The seller may exercise his right of lien notwithstanding that he is in
possession of the goods as agent or bailee for the buyer.
By a mere exercise of this right, the contract of sale of goods is not
automatically rescinded.2 The right of lien means a right to detain the
goods until the price is paid. It presupposes that the seller is
continuing in possession of the goods. If the seller has delivered the
goods to the buyer, he cannot claim back the goods for that purpose of
exercising the right of lien.3 According to Sec. 47, this right can be
exercised in the following situations:
1. When the goods have been sold without any stipulation as to
credit, i.e., the sale of the goods has been on cash basis. It has already
been observed under Sec. 32 that if there is no agreement to the
contrary, the payment of the price and the delivery of the goods are
concurrent conditions. It means that if the goods have not been sold
on credit, the seller expects that the buyer shall pay the price against
the goods. The seller can refuse to deliver them to the buyer, or in
other words, he can exercise the right of lien over the goods
Hence it was held in Miles v Gorton the buyer is not ready and
willing to pay the price in exchange for the goods. The position in this
regard has been thus stated by Bayley B4
2. When the goods have been sold on credit, the seller can exercise
the right of lien on the expiry of the period of credit. As soon as the
period of credit expires, the price becomes due and the seller can
exercise the right of lien thereafter. For example, on 1st January, A
sells a horse to B, the buyer having a right to take the delivery at any
time he likes and the price is payable on 1st March. If the buyer has
not taken the delivery of the horse by 1st March and he demands the
delivery after this date, the seller can refuse to part with the horse
until the buyer pays for them
3. The seller can also exercise the right of lien when, before the
delivery of the goods to him, the buyer becomes insolvent. For
example, the goods are sold on 1st January and the period of credit
extends up to 1st March, if the buyer becomes insolvent on 15th
2
Section 54(1), sales of goods act, 1930
3
M/s. Jain Mills and Electrical Stores v. State of Orissa, AIR 1991 Ori. 117.
4
Miles v gorton, (1834)
January and he had not yet taken the delivery of the goods, the seller
may exercise his right of lien if the buyer demands delivery at any
time after 15th January although originally he had agreed to deliver
the goods to the buyer on credit. By the insolvency of the buyer
during the period of credit, the right of lien which may have been
suspended earlier for the period of credit is revived and the credit
granted earlier comes to an end.

Section 48
Where an unpaid seller has made part delivery of the goods, he may exercise his
right of lien on the remainder, unless such part delivery has been made under
such circumstances as to show an agreement to waive the lien.

Section 49
(1) The unpaid seller of goods loses his lien thereon-
(a) 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 the goods;
(b) when the buyer or his agent lawfully obtains possession of the goods; (c) by
waiver thereof.
(2) The unpaid seller of goods, having a lien thereon, does not lose his lien by
reason only that he has obtained a decree for the price of the goods.

TERMINATION OF LIEN
1. BY PAYMENT OF PRICE
The right of lien comes to an end when the seller ceases to be an
unpaid seller, ie, when the buyer pays or tenders the price to the
seller. It has been noted under Sec 47(1) that the unpaid seller is
entitled to exercise his right of lien until payment or tender of
the price in respect of certain goods, the payment or tender of
the price, therefore, terminates the seller's right to retain the
goods
2. BY DELIVERY TO THE CARRIER
 Since the right of lien is a right to retain the possession so long
as the seller continues in possession the right would obviously
come to an end when the seller loses the possession. The seller
loses the possession when he delivers the goods to a carrier or to
other bailee for the purpose of transmission to the buyer without
reserving the right of disposal of goods.
3. BY THE BUYER OBTAINING POSSESSION OF THE
GOODS
When the buyer or his Agent lawfully obtains the possession of
the goods, the right of lien comes to an end. If the buyer, at the
time of the contract of sale, is already in possession of the
goods, although as a bailee for the seller, the seller cannot
exercise the right of lien in respect of those goods. If the buyer
once obtains the possession, the right of lien comes to an end,
and such a right cannot be exercised even if the seller again gets
back the possession of those goods. Thus, in the case of Eduljee
v. John Bros. where a refrigerator after being sold was
delivered to the buyer and since it was not functioning properly,
the buyer delivered two of its parts to the seller for repairs, it
was held that the seller could not exercise his lien over those
parts.5
4. BY WAIVER
Unpaid seller's right of lien is also lost by waiver thereof.
According to Sec. 46(1)(a), an unpaid seller gets his right of lien
by implication of law. A party to a contract may waive his
rights, expressly or impliedly, according to Sec. 62. Sec. 49(1)
(C) expressly provides that the right of lien comes to an end by
waiver thereof.
Ownership of mortgaged goods.-Till such time as the
ownership is not transferred to the purchaser, the hirer normally
continues to be the owner of the goods.6
5. BY DISPOSITION OF THE GOOODS BY THE BUYER

5
Eduljee v. John Bros., AIR 1943 Nag. 249 : I.C. 356.
6
Citicorp maruti finance ltd v. vijayalaxmi (2012) 1 SCC 1.
 According to Sec. 53, the unpaid seller's right of lien or
stoppage in transit is not affected by any sale or other
disposition of the goods by the buyer. This general rule is
subject to two exceptions:
(i) when the seller himself assents to a sub-sale or other
disposition of the goods by the buyer;
(ii) when the buyer having lawfully obtained possession of
document of title to the goods transfers the same to a transferee
in good faith and for consideration and the transfer is by way of
'sale'.
In the above stated two exceptional cases, the unpaid seller's
right of lien comes to an end
6. UNPAID SELLER’S LIEN IN GOODS
The counsel for the appellants during the course of his
arguments in the High Court strongly urged that as the
appellants are shown to be unpaid seller, in exercise of their
right of lien under Sections 46 and 47 of the Act, they are
entitled to the return of the goods.

B) STOPPAGE IN TRANSIT

SECTION 50
Subject to the provisions of this Act, when the buyer of goods becomes
insolvent, the unpaid seller who has parted with the possession of the goods has
the right of stopping them in transit, that is to say, he may resume possession of
the goods as long as they are in the course of transit, and may retain them until
payment or tender of the price.
It is one of the rights which, as already mentioned, an unpaid seller
can exercise against the goods. This right means that when the goods
have already been delivered to a carrier for being transmitted to the
buyer, the carrier at the seller's request is to deliver the goods back to
the seller and not to deliver to the buyer even though the buyer might
have got the possession of document of title to the goods.
SECTION 51
(1) Goods are deemed to be in course of transit from the time when they are
delivered to a carrier or other bailee for the purpose of transmission to the
buyer, until the buyer or his agent in that behalf takes delivery of them from
such carrier or other bailee.
(2) If the buyer or his agent in that behalf obtains delivery of the goods before
their arrival at the appointed destination, the transit is at an end.
(3) If, after the arrival of the goods at the appointed destination, the carrier or
other bailee acknowledges to the buyer or his agent that he holds the goods on
his behalf and continues in possession of them as bailee for the buyer or his
agent, the transit is at an end and it is immaterial that a further destination for
the goods may have been indicated by the buyer.
(4) If the goods are rejected by the buyer and the carrier or 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.
(5) 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 the buyer.
(6) Where the carrier or 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.
(7) Where part delivery of the goods has been made to the buyer or his agent in
that behalf, the remainder of the goods may be stopped in transit, unless such
part delivery has been given in such circumstances as to show an agreement to
give up possession of the whole of the goods.
The right of stoppage in transit can be exercised so long as the goods
are in transit. It becomes important, therefore, to know as to what is
the duration of transit, i.e., when the transit begins and when it comes
to an end. Sec. 51 provides the rules regarding the same. According to
sub-sec. (1), the goods are deemed to be in the course of transit from
the time when they are delivered to a carrier or other bailee for the
purpose of transmission to the buyer. The transit continues until the
buyer or his Agent in that behalf takes delivery of them from such
carrier or other bailee. It means that so long as the goods are with a
carrier, the transit continues. The position was thus explained by
Cave, J
In Schotmans v. Lancashire & Yorkshire Ry. Co., there was
delivery of the goods by the seller on board a ship belonging to the
buyer. The bill of lading was also taken in the buyer's order. It was
held that in this case it amounted to the delivery of the goods to the
buyer so that the seller was precluded from exercising his right of
stoppage in transit
In Turner v. The Trustees of Liverpool Docks, the cargo of cotton
was put on the board of the vessel belonging to the buyers, but the
goods were made deliverable to the sellers or their order. Patterson, J.
giving judgment of the Court observed that "there is no doubt that the
delivery to him, unless the vendor protects himself by special terms,
restraining the effect of such delivery. In the present case, the
vendors, by the terms of the bill of lading, made the cotton deliverable
at Liverpool, to their order or assigns, and there was not, therefore, a
delivery of the cotton to the purchasers as owners, although there was
a delivery on board their ship. The vendors still reserved to
themselves, at the time of delivery to the Captain, the jus disponendi
of the goods, which he by signing the bill of lading acknowledged."
SECTION 52
The unpaid seller may exercise his right of stoppage in transit either by taking
actual possession of the goods, or by giving notice of his claim to the carrier or
other bailee in whose possession the goods are. Such notice may be given either
to the person in actual possession of the goods or to his principal. In the latter
case the notice, to be effectual, shall be given at such time and in such
circumstances, that the principal, by the exerciseof reasonable diligence, may
communicate it to his servant or agent in time to prevent a delivery to the buyer.

(2) When notice of stoppage in transit is given by the seller to the carrier or
other bailee in possession of the goods, he shall re-deliver the goods to, or
according to the directions of, the seller. The expenses of such re-delivery shall
be borne by the seller.
 WHEN TRANSIT COMES TO AN END
 WHEN THE BUYER TAKE THE DELIVERY
In whitehead v. Anderson, Parke B. Said:
The law is clearly settled that the unpaid vendor has a right
to retake the goods before they have arrived at the
destination originally contemplated by the purchaser,
unless in the meantime, they have come to the actual or
constructive possession of the vendee. If the vendee takes
them out of the possession of the carrier into his own
before their arrival, with or without the consent of the
carrier, there seems to be no doubt that the transit would
be at an end, though, in the case of the absence of the
carrier's consent, it may be a wrong to him, for which he
would have a right of action”
 WHEN THE CARRIER OR OTHER BAILEE
ACKNOWLEDGES TO THE OTHER BUYER
In Whitehead v. Anderson,' on arrival of the ship, the
assignee of the buyer, who had become insolvent, went to
take the delivery of the timber. They only saw and touched
the timber. The Captain refused to deliver the same until
the freight had been paid. The seller subsequently gave a
notice of stoppage in transit. It was held that neither the
buyer's assignee had taken the actual possession, nor had
the Captain of the ship contracted to hold the timber as the
buyer's Agent, the seller's right of stoppage in transit had
not come to an end
 WHEN THE CARRIER WRONGFULLY REFUSES TO
DELIVER THE GOODS
In Bird v. Brown, a notice to stop goods in transit was
given by a certain stranger, who had no authority from the
seller to do so. On a demand for the delivery of the goods
by the assignees of the insolvent buyer, the carrier refused
to deliver the goods to them. Subsequently, the seller tried
to ratify the in transit made by the stranger. It was held that
 the transit had come to an end when the buyer's assignees
demanded the stoppage delivery of the goods because the
carrier's refusal to deliver the goods to them was a
wrongful one and the right of stoppage, which had come to
an end, could not be revived by subsequent ratification of
an ineffectual notice to stop.

C) TRANSFER BY BUYER AND SELLER

Section 53
Subject to the provisions of this Act, the unpaid seller's right of lien or stoppage
in transit 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 issued, or 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
consideration, then, if such last mentioned transfer was by way of sale, the
unpaid seller's right of lien or stoppage in transit 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 stoppage in transit can only be exercised subject
to the rights of the transferee.
(2) Where the transfer is by way of pledge, the unpaid seller may require the
pledgee to have the amount secured by the pledge satisfied in the first instance,
as far as possible, out of any other goods or securities of the buyer in the hands
of the pledgee and available against the buyer.

SECTION 54
(1) Subject to the provisions of this section, a contract of sale is not rescinded
by the mere exercise by an unpaid seller of his right of lien or stoppage in
transit.
(2) Where the goods are of a perishable nature, or where the unpaid seller who
has exercised his right of lien or stoppage in transit gives notice to the buyer of
his intention to re-sell, the unpaid seller may, if the buyer does not within a
reasonable time pay or tender the price, re-sell the goods within a reasonable
time and recover from the original buyer damages for any loss occasioned byhis
breach of contract, but the buyer shall not be entitled to any profit which may
occur on the re-sale. If such notice is not given, the unpaid seller shall notbe
entitled to recover such damages and the buyer shall be entitled to the profit, if
any, on the re-sale.
(3) Where an unpaid seller who has exercised his right of lien or stoppage in
transit re-sells the goods, the buyer acquires a good title thereto as against the
original buyer, notwithstanding that no notice of the re-sale has been given to
the original buyer.
(4) Where the seller expressly reserves a right of re-sale in case the buyer
should make default, and, on the buyer making default, re-sells the goods, the
original contract of sale is thereby rescinded, but without prejudice to any claim
which the seller may have for damages.

LOSS OR PROFIT ON RESALE

On re-sale, the seller may either suffer loss, i.e., by the re-sale, the
seller may obtain less price than the original buyer had agreed to pay,
or he may make profit, by obtaining higher amount than the original
buyer had agreed to pay. The question which arises is, can the seller
recover such loss from the original buyer, or can he retain the profit
made on resale. In this context, Section 54(2) provides that if the re-
sale is properly made, i.e., after due notice to the buyer (except when
the goods are of a perishable nature), and within a reasonable time,
the unpaid seller can "recover from the original buyer damages for
any loss occasioned by his breach of contract, but the buyer shall not
be entitled to any profit which may occur on re-sale."
Thus, if for certain goods, the original buyer had agreed to pay Rs.
20,000 but on re-sale, the seller recovers only Rs. 15,000, he can
recover the loss of Rs. 5,000 from the original buyer.
In Mysore Sugar Co. Ltd., Bangalore v. Manohar Metal
Industries, the buyer having made a default in taking the goods, the
seller gave him a notice on 12.9.66 that if the buyer did not lift the
goods within three days, the contract would be treated as cancelled.
The buyer did not lift the goods. The ler made a re-sale of the goods
on 30.12.1966. The seller sought to recover the loss arising on re-sale.
It was held that there was ordinate delay of over 3 months in making
the re-sale after notice to the buyer and due to such delay, particularly
in the falling market as in the present case, the value realized on re-
sale did not afford a good ground to fix the damages. If the re-sale had
been properly made in September, 1966, the seller would have
suffered no loss, and, therefore, the seller's claim for compensation
was rejected.
As states in sheo Narain v. New Seven Sugar and Gur Refining Co.
Ltd., AIR 1038, If the delay in reselling the goods is not due to the
fault on the part of the seller, eg., the buyer from time to time
requested for the extension of time for making the payment, and
ultimately did not pay and thus there was some delay in re-selling the
goods, the delay in making the re-sale is not unreasonable.
MEASURE OF DAMAGE ON RE-SALE
According to Section 54(2), on the re-sale being properly made, the
unpaid seller can recover from the original buyer damages for any
loss occasioned by his breach of contract. The loss which, in such a
case, is occasioned to the seller is the difference between the contract
price and the re-sale price, and the measure of damages, therefore, is
the difference between the contract price and the re-sale price. It may
be noted that the measure of damages in case of resale is different
from that for breach of any other contract, because in other cases, the
damages are governed by the provision contained in Section 73 of the
Indian Contract Act, according to which the measure of damages is
the difference between the contract price and the market price
prevailing on the date of breach of contract. Since the re-sale is to be
made after giving notice to the buyer, the re-sale may not be made on
the date of breach of contract, and on re-sale, the seller may recover
different price than prevailing on the date of breach of contract.
WHEN IS THE RE-SALE PROPERLY MADE
In various decisions, the High Courts' and in P.S.NS. Ambalavana
Chettiar & Co. v. Express Newspapers Ltd. the Supreme Court,
have held that for the purpose of measure of damages under the Sale
of Goods Act, the re-sale is properly made if the property in the goods
re-sold had passed to the original buyer On the other hand, if the
property in the goods has not passed to the original buyer, the re-sale
is not properly made, and, therefore, the damages are not awarded
according to the Sale of Goods Act (difference between the contract
price and the re-sale price), but they are awarded according to the
formula under the Indian Contract Act (difference between the
contract price and the market price on the date of breach of contract).
CONCLUSION
Hence, rights of unpaid seller and provisions related to them are
explained from section 45 to section 54, going over the rights that a
unpaid seller has like RIGHT TO LIEN, RIGHT TO RESELL,
RIGHT TO STOPPAGE. For a seller to protect his rights from
unpaying buyer he can exercise these rights and remedies available to
him by lawful means.