NATIONAL LAW INSTITUTE UNIVERSITY,

BHOPAL

THIRD TRIMESTER

LAW OF CONTRACTS-II

TOPIC: RIGHTS OF UNPAID SELLER AGAINST THE GOODS

SUBMITTED TO: SUBMITTED BY:

MISS NEHA SHARMA AJIT JAISWAL
2019BALLB83

1
TABLE OF CONTENTS

Acknowledgment.......................................................................................................3

Introduction...............................................................................................................4
Statement of Problem.................................................................................................5
Method of Study.........................................................................................................5
Objectives....................................................................................................................5
Review of Literature....................................................................................................5
What Is a Lien?............................................................................................................6
Two Types of Lien.......................................................................................................8
SECTION 48. PART DELIVERY..............................................................................9
SECTION 49...........................................................................................................10
Waiver....................................................................................................................12
The Right to Stoppage in Transit...............................................................................13
Duration of Transit.....................................................................................................14
How Stoppage in Transit is Effected?.........................................................................17
RIGHT OF RE-SALE................................................................................................18
Conclusion..................................................................................................................21
Bibliography................................................................................................................22
ACKNOWLEDGMENT

I have taken efforts in this project. However, it would not have been possible
without the kind support and help of many individuals. We would like to extend our
sincere thanks to all of them.

I am highly indebted to Miss Neha Sharma for her guidance and constant
supervision as well as for providing necessary information regarding the project &
also for her support in completing the project.

I would like to express our gratitude towards our parents & seniors for their kind
co-operation and encouragement which help us in completion of this project.
We would like to express our special gratitude and thanks to the Vice-Chancellor of
National Law Institute University, Bhopal for giving us such ample time and
opportunity.

My cheers and appreciations also go to our colleagues in developing the project and
people who have willingly helped us out with their abilities.
INTRODUCTION

Under the sales of goods act, there are various rights which an unpaid seller is entitled
to under Section-46, the Sales of Goods Act, 1930. These rights are as follows :-
• A lien which is not general but is possessory in nature.
• Right to possess the goods during transit
• Right to Resale

LIEN
According to Section-47, Lien is defined as, “Right to retain possession of goods and
refuse to deliver them to the buyer until the buyer due in respect of them is paid”.

Termination of Lien
Lien can be terminated during the following circumstances, according to Section-49:-
1. On Waiver:- If the unpaid seller himself waived the right of lien.
2. If the Goods are delivered:- If during this period ,the goods are delivered or the
unpaid seller lawfully obtains possession of the goods ,the right to lien is
automatically waived. 3. Right to Disposal:- In case the seller does not reserve the
right to disposal with himself, the right to lien is automatically waived.

RIGHT OF STOPPAGE OF GOODS IN TRANSIT

According to Section-50, Sale of Goods Act, 1930, “the right to stopping in goods
in transit while they are in transit, while they are in possession and to regain the right
to get the unpaid amount”.

RIGHT OF RESALE
According to Section-54, Sale of Goods Act, 1930, an unpaid seller is entitled to the
limited right to sell the goods in the following conditions:-
• Where the goods are of a perishable nature.
• Where the right of the seller to resale is expressly reserved in the contract.
STATEMENT OF PROBLEM
The rights of unpaid seller against the goods are defined in the Sale of Goods Act,
1930. The right to lien, the right to stoppage in transit and the right to resale have
some covered interpretations which can be only be attempted through an in-depth
analysis.

METHOD OF STUDY
The method of study followed in this work is doctrinal method of study.

OBJECTIVES
The objectives of this work are:
(1) To study in depth the right to lien;
(2) To study in depth the right to stoppage in transit;
(3) and To study in depth the right to resale.

REVIEW OF LITERATURE
1. Sweet & Maxwell, Benjamin’s Sale of Goods The acceptance of the doctrine of
stoppage in transit was done in the case of Lickbarrow v Mason1 in 1793 in the
House of the Lords. The first case which was reported on the stoppage in transit was
the case of Wiseman v. Vandeputt.
2. K Kannan, Mulla The Sale of Goods Act

1
(1794) 5 TR 683
Section 54 of the Sale of Goods Act, 1930 principally deals with the re-sale of goods
by an unpaid seller who has either exercised his right of lien or right of stoppage in
transit and has resumed the possession of goods.

WHAT IS A LIEN?
A lien is the right to hold the lawful possession of another person's piece of goods
until the owner satisfies a legal obligation to the person handling the goods, such as
the payment of lawful charges for obligation done on the property. A mortgage is a
general lien.
In its usual general meaning, this term covers all case in which true or personal
property is charged with the payment of either debt or duty. In a more restricted sense,
it is determined to be a right of restraining the property of another till some claim is
satisfied. The claim of lien generally occurs by process of law, but in some
circumstances, it is created by definite contract.

[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.]2

Unpaid Seller’s Lien –

The claim of an unpaid seller is a claim to maintain ownership of the goods until
tender or payment of the price. A person cannot possess a lien on his personal goods.”
On the assumption of this principle, if the statute provides a right of lien to the seller,
it assumes that the property in the goods has transferred to the buyer.3 The lien
depends on actual ownership and not on title, and is not concerned by his becoming
parted with a document fitted of transferring ownership. He may possess given a bill

2
Bare Act - The sales of goods act, 1930.
3
Nippon Yusen Kaisha v Ramjiban Semwgee, AIR 1938 PC 152, 155 : 65 IA 263 : 40 Bom LR 799‘
of shipment which transfers the legal property in the goods, or he may possess given a
delivery order which, though it does not transfer the legal ownership of property in
the goods, allows the person receiving it to receive possession of the goods and
acquire a title in that way, but whatever he has acted in that respect does not damage
his right of lien as long as he retains possession of the goods as a merchant.4
Under sub-section (2), a contributed seller could practice his right of lien yet through
his role of an unpaid merchant has terminated and he has converted into the bailee or
agent for the buyer. Accordingly, it has been believed that giving a delivery order by a
merchant to a customer does not itself give the buyer such ownership of the goods as
to take the seller’s lien for the price. But the seller’s lien may be thrown where the
circumstances of the case are such as to stop him from rejecting that payment had
been received for the goods to which the delivery order described.5

Lien extends alone to price-

The lien extends alone to the price. It does not extend to Warehouse or other prices
for keeping the goods, for they are stored on the buyer’s will. For these, the seller has
only a personal remedy toward the buyer.

Tender of price destroys lien-

The section states that the seller is empowered to a lien till payment or tender of the
amount. A tender of the payment, therefore, puts an end to the lien still if the seller
refuses to receive the payment.6
The unpaid seller is empowered to a lien only in the three circumstances mentioned in
the section. The following may be regarded in order.
No stipulation while to credit-Where goods are sold, and nothing is stated as to the
time of delivery or the time of payment, the seller is empowered to hold possession
until the payment is paid, although the property in goods may have transferred to the
buyer. The seller is accountable to deliver the goods to the buyer when obliged by the
buyer but he has no claim to have possession of the goods till he pays for the cost.7

4
Imperial Bank London and St Katherine Docks Co, (1877) 5 Ch Div 195, 200.
5
15AngIO-India Jute Mills Co v Omademull, (1910) 38 Cal 127; Kalka Prasad Ram Charan v Harts 6 ghandm, AIR
1957 All 25
6
Hazarimal v Champalal, AIR 1943
7
. Bloxham vSanders, (1825) 4 B&C 941 : 28 RR 525
Sale at credit -A sale at credit works as a waiver of the lien when the currency of the
credit. But if the goods are transmitted in the seller’s possession till the credit has
lapsed, the lien recovers even if the buyer is not insolvent.8
A sells to B, a portion of sugar in A’s warehouse. It is accepted that three months’
credit shall be granted. B enables the sugar to continue in A’s possession till the
expiry of the three months and then makes not pay for them. A may maintain the
goods for the payment. Under clause (b) the time of credit should have finished.
Insolvency of buyer.-If the buyer converts insolvent before the payment is given, and
the seller is in ownership of the goods, he is empowered to retain possession yet if the
goods are sold on credit and the time of credit has not lapsed.
A sells to B, a portion of sugar in A’s warehouse. It is acknowledged that three
months’ credit shall be granted. B enables the sugar to remain in A’s warehouse.
Before the expiry of the three months, B converts insolvent. A may maintain the
goods for the payment because, upon insolvency, B would have no right to claim
delivery although the term of credit has not terminated.

TWO TYPES OF LIEN

There are two kinds of liens: particular and general. When a person demands a right to
retain property, in regard to money or labor expended on so particular property, this is
a particular lien. Liens may occur in three ways:
(a) By express agreement,
(b) From implied agreement,
(c) as from general or particular method of trade.

By legal relationship among the parties, which may be formed in three ways,
When the law determines an obligation on an individual to do a particular
performance and in return for which, to ensure his payment, it provides him such lien;
general carriers and innkeepers are amongst this number.
When goods are transferred to a merchant or any other person to expend his labor
upon, he is empowered to keep those goods until he is remunerated for the labor
which he so expands.
8
Bunney vPoyntz, (1833) 4 B&Ad 586 : 38 RR 309.
General liens arise in three ways:
(a) By the agreement of the individuals,
(b) By the general method of trade,
(c) By particular method of trade,

SECTION 48. PART DELIVERY

Where an unpaid seller has made part delivery of the goods, he may pm delivery
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. Lien and part
delivery- The unpaid seller may exercise his right of lien, after a part delivery, over
the remainder of the goods, unless such part delivery has been made under such
circumstances as to show an agreement to waive the lien. Such an agreement will be
implied where the delivery of part is made under such circumstances as to operate as a
delivery of the whole. Generally a delivery of part of the goods sold is not equivalent
to a delivery of the whole as to destroy the seller’s lien9 nor could the seller be
presumed to abandon his lien on the residue. If a part of the goods are delivered but
the payment is to be made against full delivery, the seller has no lien under this
section. But this lien may be exercised upon the insolvency of the buyer under the
preceding section.10 Where the buyer of a parcel of hay took delivery of part thereof
with the seller permission, it was held that the intention of both the parties was to
separate the part delivered from the residue and the vendee took possession of a part
only.11 But where the goods sold were lying at a wharf, and a delivery order for all
the goods was given to the buyer, and the buyer after weighing the whole took
possession of part at the wharf, it was held that the part delivery operated as a delivery
of the whole so as to destroy the seller’s lien, and the seller was not entitled to
countermand the delivery order after the part delivery was made.14 Lien and part
delivery under instalment contract.--Where the goods are deliverable by instalments
which are to be separately paid for, the seller cannot retain the instalments paid for by
reason of the non-payment of the price of the residue of the goods, though he may, on

9
Kempp v Folk, (1882) 7 App Cas 573, p 583.
10
Ex Parte Carnforth Haematite Iron Co, (I876) 4 Ch Div 108 (113).

11
Bunney v Poyntz, (1833) 4 B&Ad 568 z 38 RR 309
the buyer’s insolvency, retain any instalment unpaid for till he is paid the price of that
and of any other instalment previously delivered, as his lien revives by implication of
law.12 A agrees to sell goods to B by five monthly instalments, payment to be made
by cash in 14 days from the date of each delivery. The first three instalments are
delivered and pal_ for. The fourth instalment is delivered but not paid for. B then
becomes insolvent. A is entitled to retain the fifth instalment till he has been paid for
both the fourth and the fifth instalments16 Suppose the third instalment was paid for
but not delivered, can A retain that instalment‘? No; he must deliver it, though B is
insolvent.

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 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
This section deals with the termination of the lien of the unpaid seller. The lien is lost
in any of the three cases mentioned in the section. Unpaid seller’s lien is a possessory
lien and hence this right is available to the seller so long as he is in possession but the
moment he parts with possession, that right is lost. It is this principle which is implied
in clauses (a) and (b).

Delivery to carrier
The ordinary rule is that a delivery of the goods to a common carrier for conveyance
[to the buyer] is such a delivery of actual possession to the buyer through his agent,

12
Hammond v Anderson, (l803) l B&PNR 69 2 8 RR 763
the carrier, as suffices to put an end to the seller’s lien.13 The seller may, however,
reserve the right of disposal of the goods, which he prima facie does when, on
shipment, he takes a bill of lading making the goods deliverable to the order of
himself19 or of his agent. This reserves not only the right of property, but also the
possession, for such a delivery is not a delivery to the buyer, but to the captain of the
vessel on behalf of the person indicated by the bill of lading, and it is by the
endorsement and delivery only of the bill of lading that a symbolical delivery of the
whole is effected.20 Where the right of disposal is reserved, and the buyer becomes
insolvent while the goods are in transit, the right of lien becomes changed into a right
of stoppage in transit. Without reserving right of disposal -The expression “without
reserving the right of disposal of the goods” is very important and significant. If the
right of disposal is reserved to the seller, the seller constitutes the carrier as his agent
and bailee and the carrier would have to act according to the directions of the seller.
If the seller does not reserve the right of disposal, the seller constitutes the carrier as
agent of the buyer, the carrier holding the goods as bailee for the buyer (for modes of
reserving right of disposal, see commentary under section 25).

Lawful possession by buyer- The second case is where possession has been lawfully
obtained the buyer. The lien is lost by delivery of the goods to the buyer. No delivery,
however, is necessary where the goods are at the time of the contract of sale actually
in the possession of the buyer as agent or bailee of the seller. In such a case the mere
completion of the contract operates as a delivery of possession.” Where the
second-hand refrigerator was sold and delivered to a buyer but later on the two parts
of the refrigerator, i.e., the thermostat and engine Were taken away by the seller for
timber repairs, it was held that the seller had no lien over the two parts on the ground
that the original cost of the repairs had not been fully paid.

Where a seller gave share certificates and a blank transfer form to his share broker
who handed over the same to the buyer against the latter’s cheque for the price thereof,
there was complete delivery to the buyer although the cheque was subsequently
dishonoured and therefore there could not be any lien or stoppage in transit.

13
Bolton v L&Y Rly, (1866) LR 1 CP 431, 439
WAIVER
The third case is where the lien is lost by waiver. The lien may be waived expressly or
by implication. First, as to express waiver-Where the contract of sale provides in
express terms that the seller shall not be entitled to retain possession until payment of
the price, the case is one of express waiver. Next, as to implied waiver-The lien is
waived by implication:
(1) when goods have been sold on credit, during the currency of the credit; but the
lien revives on the expiry of the credit;
(2) when the seller takes a bill of exchange for the price payable at a future day,
during the currency of the bill; but the lien revives if the bill is dishonoured; the
same principle will apply if the seller accepts negotiable instrument or other security
for payment of price;
(3) if the seller assents to a sub-sale;
(4) if the seller parts with the documents of title so as to exclude his title by estoppel
under the provisions of section 27 above; or which are negotiable by custom of trade
and according to parties;
(5) if the seller wrongfully refuses to deliver the goods, such a refusal being a
repudiation of the contract; or if the seller wrongfully converts the remaining
goods for his own use.
THE RIGHT TO STOPPAGE IN TRANSIT

Section 50 of the Sale of Goods Act, 1930 provides for the right of the unpaid seller to
stop the goods in transit. Section 50 reads thus:
50. Right of stoppage in transit.- Subject to the provisions of this Act14, when the
buyer of goods becomes insolvent, the unpaid seller15 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.
After having a simple read of this provision, one can identify that there are basically
two ingredients which are necessary for the exercise of this right of unpaid seller.
These two are:
The buyer must become insolvent; and The seller must not be in possession of
the goods, i.e., the goods must be in the transit.
The acceptance of the doctrine of stoppage in transit was done in the case of
Lickbarrow v Mason16 in 1793 in the House of the Lords. The first case which was
reported on the stoppage in transit was the case of Wiseman v. Vandeputt.17 Lord
Abinger in Gibson v. Carruthers18 reviewed the history of this doctrine. It was
initiated as the custom of merchants and later developed into an equitable right.
However, after the coming into force of this Act, the right of stoppage now arises by
implication of law unless there is a provision to the contrary.
When the good are delivered to the carrier for the purpose of transmission to the
buyer by the unpaid seller, the right of lien is waived by the seller but he may regain
his right to lien by exercising his right of stoppage on transit if the buyer is insolvent.
The whole purpose of this right is to help the seller to regain the possession of the
goods and to have priority with respect to the goods over the creditors of the insolvent
14
“Act” here means the Sale of Goods Act, 1930
15
As defined under section 45 of the Sale of Goods Act, 1930
16
(1794) 5 TR 683
17
(1690) 2 Vern. 203
18
(1841) 8 M. & W. 321 at pp. 327
buyer. An obligation is put upon the carrier as per which he is to deliver the goods to
the seller so as to enable the right to lien of the seller. This right however does not
terminate the contract but merely prevents the buyer from obtaining the possession of
the goods. For this right to come into play, the insolvency of the buyer, after the
transmission process has begun, is important.
A lot many scholars have tried explaining the existence of such a doctrine. They have
gone onto justifying the doctrine in their own ways. In 176128, it was said that the
goods of one man should not be used by another man to pay his debts. This reason
however was not very popular since it gave preferential treatment to one creditor
despite allowing debtor to acquire goods on credit. In 182529, another justification
was put forward as per which the seller’s delivery to the buyer via the carrier is a
conditional delivery of the possession to the buyer, provided that the buyer is solvent
till the time the buyer has actual possession of the goods from the carrier. This
justification is in line with the statutory rules developed later and functional now.
Talking about who can exercise this right, the seller, agent acting on the seller’s
behalf and also the surety of the buyer can also exercise the right to stoppage in
transit.

DURATION OF TRANSIT
All the provisions related to the duration of transit are there in the section 51 of the
Sale of Goods Act, 1930. It contains 7 subsections describing various rules of the
duration of transit for the requirements of the right to stoppage in transit. The entire
section 51 indicates that the carrier must be independent of both the buyer and seller
since he is not an agent of either buyer or seller, even though he may have been there
as the carrier appointed by the either of them. If the carrier is the agent of the buyer,
then the right of lien of the seller is said to have terminated as soon as the goods are
delivered to the carrier. If, on the other hand, the carrier is the agent of the seller then
the seller retains the right to possession till it is finally taken by the buyer.
Sub-section (1) provides the definition for the duration of transit so as to make it clear
when the transmission period starts and when it ends. The moment the goods are
delivered to the carrier by the seller so as to carry the goods to the buyer, the transit
begins. Similarly, when the goods are there at the destination and are delivered to the
buyer or his representative, the transit is said to have come to an end. After this period,
the seller cannot exercise his right of stoppage in transit.
The transit is between the seller and the buyer. Once the possession is gained by the
buyer or his representative, the transit ends and it cannot restart on fresh instructions
by the buyer to deliver it to another destination. The buyer’s bankruptcy does not
affect the termination of the contract. The delivery of the goods to the buyer after the
insolvency of him will complete the transit and prevent the right to stoppage in transit.
However, if the buyer, who is now insolvent, rejects the delivery of the goods, then
the seller’s right is preserved.
Sub-section (2) provides for the taking of the delivery of the goods before the
appointed destination by the buyer or his agent. The buyer, by taking the delivery of
the goods, which are still in transit at a place which is not the appointed place of
delivery, may terminate the right to stoppage of the unpaid seller. It is a general rule
that in the absence of anything to the contrary the buyer may terminate the right to
stoppage in transit of the seller by taking the delivery of the goods en route to the
appointed destination. It was earlier held that if the buyer, without the consent of the
carrier, takes away the possession of the goods before the appointed destination, the
transit is completed although this action of the buyer is actionable at the option of the
carrier. But;, by a combined reading of the section 51 (6) and 51 (1), it can be
concluded that the buyer’ taking away of possession in such a manner do not
terminate the transit.

Sub-section (3) provides for the attornment by carrier to buyer. This deals with an
acknowledgment by the carrier to the buyer creating a bailment sort of relationship
between the carrier and the buyer. This codifies the common law which came into
play in 1866.19 The buyer’s request to the carrier to keep the goods in his possession is
a strong evidence that the carrier has now become the buyer’s agent and the transit is
now at an end. Both the parties here must assent to the constructive possession by the
carrier. If the purchaser gives fresh orders that the goods are to be delivered at a
particular place and to be kept there till orders are provided regarding the delivery of
the goods at a new destination, the original transit is at an end when they have reached
that place.20

19
Bolton v. Lancs and Yorks Railway (1866) L.R. 1 C.P. 431 at p.438
20
Bethell v. Clark (1888) 20 Q.B.D. 615 at p.617
Sub-section (4) provides for the condition when the goods are rejected by the buyer.
When the goods are rejected by the buyer and the possession is still with the carrier or
bailee, the transit is not deemed to have come to an end. This position does not change
even when the seller is not accepting the goods. The buyer may exclusively pitch for
the rejection of the goods and this rejection would preserve the right to stoppage in
transit of the seller. If the buyer has agreed to the attornment of the goods by the
carrier, then the buyer cannot reject the goods for it would be too late on behalf of the
buyer so as to prevent the culmination of the transit.
Sub-section (5) provides for the delivery of the goods to a ship chartered by the buyer.
It is provided in the section that when goods are delivered to the ship chartered by the
buyer it depends on the facts and circumstances of the particular case which helps in
the decision related to the possession. It depends on the intention of the parties which
is shown by the charter-party and by the bill of lading. The proper test is whether the
master of the ship is an employee of the owner or of the buyer as a charterer. If the
charterer is the owner for the voyage, then the master and his crew are treated as the
employee of the charterer. Here, if the goods are transferred to the ship then they are
deemed to be in possession of the buyer. The seller, if he wants to have a control over
the goods during such a transit, then he must make such specifications in the bill of

lading. In Berndtson v. Strang21, a similar situation arose and the seller was allowed
the right to stoppage during the voyage.
Sub-section (6) provides for the condition when the carrier wrongfully refuses to
deliver the goods to the buyer or his agent. In such a case, the transit is deemed to
have come at an end. Wrongfully here means that the carrier is bound to deliver the
goods to the buyer but he is acting to the contrary without any legal justification, for
e.g., no valid notice of stoppage in transit has reached him. However, it is not binding
upon the carrier to attorn the goods on behalf of the buyer in the course of transit.
Thus, the carrier’s refusal in this case will not amount to any wrongful refusal.
Sub-section (7) provides for the part delivery of the goods. When there is a part
delivery of the goods to the buyer, the remaining goods may be stopped by the seller
in transit unless there are circumstances as per which part delivery of the goods
amounts to the complete give away of the possession of the entire goods. For example,
where the goods to be transferred is one entire machine and the consignee has taken

21
(1867) 4 Eq. 481
one essential part of the machine, then this transfer might be equivalent to the transfer
of the whole machine.

HOW STOPPAGE IN TRANSIT IS EFFECTED?

Section 52 of the Sale of Goods Act, 1930 provides for the ways by which the
stoppage in transit is effected. Sub-section (1) says that the unpaid seller may exercise
this right by either directly taking away the possession of the goods or by giving a
notice to the carrier or bailee who possesses the goods. The subsequent part of this
subsection provides us that the notice may be given either to the person who is
actually possessing the goods or to the person who is the principal of the former.
If there are certain circumstances under which the notice is given to the principal, then
for the notice to be effective the principal must be given sufficient time so as to enable
him to communicate to his agent on time so that the delivery of the goods could be
prevented to the buyer. If the principal fails to prevent the goods from getting in
possession of the insolvent buyer, then the principal is liable to the seller.
The use of word “may” in the first line signifies that there can be more than the
described two ways of stopping the goods in transit. The seller has to take the risk if
the stoppage is unjustified. For this situation, the carrier is bound to act as per the
directions of the seller. The carrier however need not stop the goods in transit if
there are certain reasons which make him believe that there is a legal defect in the
seller’s claim to stop the goods in transit. If he is uncertain about what he should do,
he has the option to defend himself by interpleading.
Sub-section (2) provides for the situation after the notice is issued to the carrier or
bailee. After the notice is delivered to the carrier or bailee, he shall act as per the
directions of the seller and the cost of such re-delivery has to be paid by the seller.
The seller has the power to not only prevent the goods from reaching the insolvent
buyer but also to ask the carrier to re-deliver the goods to him. If the seller fails to
furnish any further directions to the carrier after the stoppage is effected, he shall be
liable to the latter for damages for demurrage or landing charges.
RIGHT OF RE-SALE
Section 54 of the Sale of Goods Act, 1930 principally deals with the re-sale of goods
by an unpaid seller who has either exercised his right of lien or right of stoppage in
transit and has resumed the possession of goods.
Sub-Section 1 of Section 54 of the act deals with sale which is not rescinded by either
lien or stoppage in transit. It is a fundamental principle in a contract involving sale of
goods, the seller cannot rescind the contract of sale merely on the basis of default on
the part of buyer in payment of the price of goods, unless such right is reserved
explicitly. The position is not altered even if the unpaid seller exercises his right of
lien in order to entitle him to have the possession of goods until the price is paid, or if
he has exercised his right of stoppage in transit. Therefore, a contract of sale is not
rescinded merely by the fact that the unpaid seller has exercised his right of lien or
stoppage in transit. In Baldeo Doss v. Howe22, it was held that in such cases, the only
remedy available to him is to resale the goods and claim the damages that arise out of
the re-sale. The damages in this case mean the difference between the price of
contract and the price realised by re-sale.
Sub-Section 2 of Section 54 deals with re-sale of the goods. Regarding the remedies
and rights of an unpaid seller, who has exercised right of stoppage in transit or lien,
Lord Blackburn expressed his views in Kemp v. Falk 23that the most convenient
doctrine is considering the vendor entitled in all the cases to keep the goods as a
security until he gets the price, and right to exercise of re-sale of the goods if the delay
in payment is unreasonably long, in a manner which is fair and reasonable.
The statutory right of re-sale under Sec 54(2) of the Sale of Goods Act arises if the
property in goods has already been passed to the buyer. If the property in goods has
not been passed to the buyer, no right of re-sale arises under Sec 54(2). Therefore,
no right of re-sale arises under Sec 54(2) if the goods are unascertained. But in such
exceptional cases, although the claim to recover deficiency of re-sale cannot be
22
Baldeo Doss v. Howe, (1880)6Cal 64.
23
Kemp v. Falk, (1882) 7 App Cas 573,581
sustained, the seller may claim by the way of difference between the price of contract
and the market price prevailing on the date of breach of the contract, i.e., the day
when buyer refused to take the goods.24 In the cases where the right of re-sale is
expressly reserved by the contract, there is no requirement of the condition of the
passing of property. The seller should give the buyer a notice that he is going to
re-sale the goods and give him a reasonable opportunity to pay and take delivery of
the goods. The goods should be sold within a reasonable amount of time after the
delay and the notice should be given without any unreasonable delay after the breach,
failing to which the seller will not be entitled to the damages on re-sale, rather to the
damage between price of contract and market price prevailing at the date of breach of
contract.25 If there is a re-sale without giving notice to the buyer and it results in
profit, the difference between the price of the contract and the price which is realised
on re-sale is payable to the buyer. But a cause of action by the buyer is not rendition
of the accounts.26 This section is not applicable to cases where there has been no sale
owing to non-payment of money, if it is a condition in the contract. Consequently, the
title still vests with the unpaid seller and he could still sell are not governed by the
rights provided in this section.
In cases where the goods are perishable, there is no such requirement of giving notice
of intention to re-sale. The term “Perishable” is not clearly defined anywhere but it
means perishable both physically and in a commercial sense, and becoming
unmerchantable. For eg. Dates becomes impregnated with sewage and in such
condition as to be no longer merchantable as dates40, or the cement if becomes wet
loses its properties. 27While exercising the right of re-sale, the seller continues to be
an unpaid seller and does not become an agent of the buyer. A vendor who has made
himself liable personally for the price of goods purchased from the principal seller has
the same rights of re-sell and of stoppage in transit as that of a vendorThis section
basically lays emphasis on the requirement of “reasonable time” for exercising right
of re-sale by unpaid seller after notice. Therefore, the seller should not delay in giving
the notice. In the cases where the buyer continuously asked for timely extensions to
enable himself to pay for the goods, and the seller had to ultimately re-sell the goods,
it was held that delay caused by seller was completely justified, as the seller by delay

24
PSNS Ambalavana Chettiar & Co. Ltd. v. Express Newspapers Ltd., AIR 1968 SC 741.
25
Prag Narain v. Mul Chand, (1897) 19 All 535
26
UOI V. Munna Lal, AIR 1956 P&H 34.
27
Duthie v. Hilton, (1868) LR 4 CP 138. 42 Dhanrajmal Govindram v. Shamji Khalidas & Co., AIR 1961 SC 1285.
was mainly due to unfair attitude of buyer with a view to gaining time. Hence, there
was no undue delay by seller by not exercising immediate resell.28
According to decisions of the Supreme Court, an unpaid seller cannot exercise right of
re-sale under this section without giving a notice. If such notice is not given and
goods are sold, the seller must content himself with what is fetched by the goods and
he cannot ask for more. But as soon as a notice is given, right of re-sale arises and if
for any reason, if re-sale is not done properly doesn’t mean that seller is deprived of
the damages contemplated by this section. In such cases, damages are calculated by
the court through the seller on proper re-sale and purchase-price.
Sub-Section 3 of Section 54 states that when there is a re-sale by the unpaid seller, the
purchaser acquires a good title as against original buyer, even if he has given no
notice of re-sale. This is for the original buyer being in default, not entitled to
possession of goods, and therefore has no right to sue for recovery of goods or their
value.
Sub-Section 4 of Section 54 deals with the express reservation of the right of re-sale.
A re-sale by a seller, where right of re-sale is reserved expressly in a contract of sale,
it has effect of rescinding contract, but does not prejudice any claim by seller for
damages against buyer. Briefly stating, exercise of expressly reserved power of
re-sale terminated the contract of sale in which the power is contained.
A common type of cases, where expressed right of re-sale is reserved is afforded by
contracts of “indents.” They are in printed forms and contain a clause that the seller
should be at liberty to resell the goods and buyer should pay all loss arising on re-sale
with interest, on default on the part of the buyer to pay for and take delivery of the
goods within a specified time . In such cases, even if the property in the goods has not
passed to the buyer, the seller is entitled to re-sell the goods on default by buyer and
to sue the buyer for loss on re-sale. But while exercising this power, it is necessary
that the goods which are contracted for should have been appropriated for the purpose
of contract. In the absence of any such appropriation, there is nothing to which power
of re-sale can attach , and seller cannot claim right on re-sale , but to difference
between market price and the price on breach.53 It was held that it is competent to
parties to exercise power of re-sale by a clause even if no goods are appropriated by
contract.

28
Sheo Narain v. New Sevan Sugar and Gur Refining Co. Ltd., AIR 1938 All 272. 47 Hirji Bharma
The recession is something less than a complete annulment of the contract and
arbitration clause contained in contract of sale is not wiped out and seller’s claim as to
damages can be referred to arbitration despite recession

CONCLUSION
Chapter 5 of Sale of Goods Act, 1930 deals with the rights of unpaid seller against the
goods. The first right is that of the lien defined in Section 47-49 of the act. They deal
with the seller’s lien, part delivery and termination of lien respectively. Section 50-52
of the act deal with right of stoppage in transit. Section 51 deals with various
provisions regarding the provision and section 52 deals with how stoppage in transit is
affected. Section 54 deals with the right of re-sale, that tells that a notice should be
given to buyer before re-selling, except in case of perishable goods.
BIBLIOGRAPHY

Books
1. Sweet & Maxwell, Benjamin’s Sale of Goods 2. K Kannan, Mulla The Sale of
Goods Act
Websites
1. https://www.thebalancesmb.com/what-is-a-lien-and-how-does-it-work-398313
2. https://www.toppr.com/guides/business-laws/the-sale-goods-act-1930/rights-of-un
paidseller-against-goods/
3. https://accountlearning.com/rights-unpaid-seller-goods-lien-stoppage-transit-re-sal
e/
4. https://www.lawsofbusiness.com/2016/12/what-are-rights-of-unpaid-seller.html