Rights of Unpaid Seller

Learning Outcome
• To develop understanding of the concept of
unpaid seller
• To know the rights available to Unpaid seller
 Unpaid Seller
• The seller of the goods is deemed to be an
‘unpaid seller’
(a) when the whole of the price has not been
paid; or
(b) where a bill of exchange or other
negotiable instrument has been received as
a conditional payment and the same has
been dishonored.
 Rights of Unpaid Seller
1. Rights of unpaid seller against the goods
2. Rights of unpaid seller against the buyer
personally
 Rights Against the goods
• Where the Property in goods has passed.
• Where the property in goods has not passed.
 Rights Against the goods
• Where the Property in goods has passed.
1) Right of Lien
2) Stoppage in transit
3) Re-sale
 Right of Lien
• Right to retain possession of the goods until payment of the
price.
• It is available to the unpaid seller who is in possession of them
where:
i) The goods have been sold without any stipulation to credit.
ii) The goods have been sold on credit, but the term of the
credit has expired.
iii) The buyer becomes insolvent.
 Rules regarding lien
• Have not lost with the possession
• Depends on actual possession not title
• Must not expressly exclude lien
• Used only for price
• When unpaid seller has made part delivery of
goods, he may exercise right of lien on the
remainder.
 Termination of Lien
• When the buyer lawfully obtains the
possession of the goods.
• When seller expressly waives his right of lien.
• When he delivers the goods to a carrier for
the purpose of transmission to the buyer.
 Right of stoppage in Transit
• When the seller of goods has parted with the
possession of the goods
• Right to retaining the possession during the transit
• Available when:
- buyer has become insolvent
 Duration of Transit
Carrier may hold goods -
• As seller’s Agent (Seller has lien on goods)
• As Buyer’s Agent (Goods are in buyers possession)
• In an independent capacity (right during transit will
be applicable only in this case)
 Termination of Stoppage in
transit
• when buyer takes the delivery of goods before the
goods reaches to destination.
• Carrier’s acknowledgement to the buyer.
 Lien Vs. Stoppage in Transit
1. Activation of Right (Does not pay /Buyer Insolvent)

2. Possession of goods (Possession/Parted with Possession)

3. End/start to right (When Lien ends right of stoppage in

transit starts)

4. Purpose of right (Retain Possession/Regain or Resume

Possession)
 Case Analysis
• R agrees to sell 100 pieces of computers with
M. M promises to pay the price when R will
dispatch the goods. R made a contract with XY
transporters to deliver the goods and dispatch
the goods. Afterwards, when goods were in
transit, M became insolvent. What are the
remedies available to R under the sale of
goods act?
 Answer
• R is an unpaid seller. R, being an unpaid seller
can stop the goods in transit, because M, the
buyer has become insolvent and goods are
still in transit.
 Case Analysis
• A sells 100 bales of Jute to B and sends 50 bales by
motor and 50 bales by railway. B receives delivery of
the bales sent by motor, but before he receives the
delivery of the bales sent by railway he becomes
insolvent. Can A stop the goods in transit? Why?
 Answer
• A, being an unpaid seller, can stop the
delivery of 50 bales by railway because the
goods are still in transit.
 Right of Re-sale
Right can be exercised when :
(i) Where goods are of perishable nature;
(ii)Where the seller gives notice to the buyer of his
intention to resell and the buyer does not pay within
a reasonable time after notice;
(iii) Where the seller has expressly reserved his right
of re-sale in case the buyer should make default.
 Where the property in goods has not
passed
• Right of withholding delivery gets active when
the property in goods has not passed to the
buyer
• Right of stoppage in transit
Rights against the buyer personally
(i) suit for price
(ii) suit for damages for non-acceptance
(iii) repudiation of contract before due date of delivery
by buyer ( seller can treat the contract as rescinded)
(iv) Suit for interest
 Case Analysis
• B select certain books in a book shop. The
price is settled. He arranges to take the
delivery of the books on next day through his
servant and agrees to pay for the books on
the first of the next month. The books are
destroyed by fire on the same evening. Who
will bear the loss under the sale of goods act?
Give reason.
 Answer
• Buyer will bear the loss, because the property
in goods has passed to the buyer. So, he has
to pay the price.