UNPAID SELLER

An unpaid seller is one who has not been paid or

tendered the whole of the price or one who receivers a bill of exchange or
other negotiable instrument 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.

RIGHTS OF AN UNPAID SELLER

The rights of an unpaid seller can be
studied under two heads
1. when the property in the goods has passed to the buyer
2. when the property in the goods has not passed to the buyer

RIGHTS OF AN
WHEN THE
UNPAID SELLER
PROPERTY PASS

WHEN THE
PROPERTY NOT
PASS

1. WHEN
THE

PROPERTY IN THE GOODS HAS PASSED

WHEN THE
PROPERTY
PASS

RIGHT OF RIGHT OF
RIGHT OF
LIEN STOPPAGE IN
TRANSIT RESALE

RIGHT OF RESALE-; (Sec.54)

 When the unpaid seller has exercised his right of lien
on his retaining the possession of the goods or resumes possession of the
goods by exercising his right of stoppage in transit upon insolvency of the
buyer, he can resell the goods under the following circumstances.

1. Where the goods are of perishable nature

2. Where the seller gives notice to the buyer his intention to resell the goods
and the buyer does not pay or tender the price within a reasonable time after
the notice.
3. Where the seller has expressly reserved his right of resale in case the
buyer makes default

The seller can hold the buyer responsible for loss suffered due to breach of
contract. If on resale the unpaid seller receives any profits and he has given
notice to the buyer of resale the unpaid seller is entitled to retain the profits.
However, when the unpaid seller has not given notice to the buyer, then he
loses his right to recover damages from the buyer and also has to pay the
profits to the buyer arising from resale. If however, in a resale there is loss to
the seller, he can claim it from the buyer as damages for the breach of
contract. No notice is necessary where the seller has expressly reserved the
right of resale in case the price is not paid. The purchaser from the unpaid
seller gets an absolute and good title to the goods as against the original
buyer, even if the seller has failed to give notice to the buyer of his intention
of resale.

Rights of unpaid seller

Introduction

The topic right of unpaid seller is included in sales and good act 1930.
Unpaid seller means the seller who has not been paid the price for his good.
But this is not the only situation when the seller is said to be unpaid there are certain
specific situations as----

1) He must be unpaid and price is due.

2) He must have an immediate right and action of price.
3) If he is not accepted with the money for the price of goods
obtained by him.
Seller here means not only the actual seller, but also any person whose is in position
of seller. E.g. an agent of seller to who has heavy paid for the goods or is directly
responsible for the price.[ Sec 45(2)]

Classification and right of unpaid seller:

A right of an unpaid seller is broadly divided in to 2 major categories:-
1. Right against goods
2. Right against buyer personally.

Right against the good is divided in to 2 parts

1. Where the properly in the goods has passed{ Sec 46(1)}
2. Where the property in the goods has not been passed
{ Sec46(2)}

Now, where the property in the goods has passed is sub-divided in to

1. Right of lien { Sec 47-49}

2. Right of stoppage in transit { Sec (50-52)}
3. Right and resale { Sec 54}

While, where the property in the goods has not passed is subdivided in to-
1. Right with holding in delivery
2. Right stoppage in transit.

Further, Right against the buyer personally is sub-divided in to four Rights such as-

1. Suit for price{ Sec 55}

2. Suit for damages { Sec 56}
3. Repudiation of Contact { Sec 60}
4. Suit for interest { Sec 61}

Now lets see where the property in the goods has passed to buyer an unpaid seller
has following right against goods (sec 46(1)

Right of Lien {Sec 46(1) (a) and 47 to 49}

 The word lien means “ to contain possessions of ”..
Under [sec 47] an unpaid seller who is in possession of goods, is entitled to obtain them
in his possession until the payment of price.

There are specific situation where right of seller are available to him. It is available
to the in the following cases:-

a. Where the goods have been sold without any stipulation as to credit.
b. The goods have been sold on credit but the term of credit has expired.
c. The buyer become insolvent [ sec 47(1)]

Rules regarding lien:-

1. Lien can be exercised only for non-payment of price and not for any other
charges due against the buyer.
E.g. the seller cannot claim lien for godown charges for storing the goods in exercised of
his lien for price.

2. The possession of goods by seller must not expressly exclude the right of lien.

3. The lien of an unpaid seller is a particular lien, it is personal right which can
executed only by him and not by has assignee or his creditors.

4. The seller may execute his lien not withstanding that

He is in possession of goods as agent or bailey for buyer
{sec 47(2)}.
It he losses the possession of goods, he loose right of lien also.

5. The unpaid seller has made part of delivery of good. He may

Execute his right on the remaining goods till he is paid for the
Already delivered and the goods yet to be delivered.
[ Ex party chameus ,( 1873)]

However a part of goods is delivered under such circumstances as to show an agreement

to waive the lien, the seller cannot retain the remained (Sec 48).

Termination of lien or how unpaid seller of lien is lost?

a. When the seller delivers the goods to a bailey for the purpose of transmission
to the buyer, without receiving a right of disposal of goods to himself.
b . The buyer or his agent lawfully obtaining possession of good as buyer.
c. He waives his right of lien on the goods [sec 49(1)].He may do this either expressly
or impliedly.
 1. Express Waiver:-
When the contract of sale provides in express terms that the seller shall not retain
possession of the goods even if the price has not been paid, there is an express waiver of
lien.

2. Implied Waiver:-
When the seller sells the goods on credit, or grants a fresh term of credit on the expiry of
the original term of credit lien is waived until the expiry of the term of credit the lien
revives on the expiry of the term of credit.

Again when the seller takes a bill for the price payable at a future
date, the lien is waived during the currency of the bill. The lien revives on the dishonor of
the bill.

CASE STUDY

- X sold a quantity of wheat to Y who paid the price by cheque which

was dishonored upon presentation X gives a delivery order to Y, for wheat and ‘Y’
resold it to ‘Z’ purchases in good faith ,for consideration indorsing the delivery
order to him ‘X’ refuse to deliver the goods to ‘Z’ on the plea of non receipt of price
as a Advice ‘Z’.

Ans- 1. In this case ‘z’ is entitled to goods.

2. According to the definition of unpaid seller ‘, when a bill of exchange has been
received as a conditional payment and the instrument has been dishonored..
3. The rights of an ‘unpaid seller’ so not depend upon any agreement between
parties they arises by implication of law. An unpaid seller is having two rights
a- Right against the goods.
b- Right against the buyer.
4. according to right of lien as per sec.47, it is the right of unpaid seller to retain
the goods until the price is paid.
5. ‘Right of lien ‘can be exercised only when the seller is in possession of the
goods once the possession is lost, the lien is also lost.
6. Hence, in the present case ‘x’ can recover the price from ‘y’ but he can’t
recover the goods from ‘z’ that purchased it from (y) in goods faith.
References Book:

N.D. Kapoor.