Right of unpaid seller

The seller of the goods is deemed to be an

“unpaid seller” in the following conditions
1) When whole of the price has not been paid
or tendered.
2) Where a bill of exchange or other
Negotiable instrument has been received as a
conditional payment, that is subject to
realization of the funds and the same has
been dishonoured.
Continued
This definition emphasizes the following
characteristics of an “unpaid seller”
1) He must sell the goods on cash terms and not
on credit and must be unpaid.
2) He must be unpaid wholly or partly, even if a
small portion of the price is unpaid, he is deemed
to be unpaid seller.
3) He must not refuse to accept the payment
when tendered. If the price has been tendered by
the buyer but the seller wrongfully refuses to
take the same, he ceases to be an unpaid seller.
Rights of Unpaid seller
Rights of Unpaid
seller

Against the Against the

goods buyer Personally
Continued
Rights of unpaid seller against the Goods ,
that the fact that the property in the goods
has not passed to the buyer.
1) Right of lien. SECTION 47
2) Right of stoppage of goods in transit. SEC 50-52
3) Right of re-sale. Section 54
Right of Lien:- “Lien” is the right to retain
possession of goods and refuse to deliver
them to the buyer until the price due in
respect of them is paid or tendered.
Continued
The lien on the goods can be exercised by the
seller in the following conditions,
1) Where the goods have been sold without
any stipulation as to credit.
2) Where the goods have been sold on credit,
but the term of credit has expired.
3) Where the buyer becomes insolvent even
though the period of credit may not have yet
expired.
Continued
The unpaid sellers lien is a possessory lien, it
means the lien can be exercised as long as
the seller remains in possession of the goods.
Transfer of title or documents of the title of
the goods doesn’t affect on the right of lien,
till the goods remain n the possession of the
seller.
In the language of The sale of Goods Act, it is
also known as “Right of withholding the
delivery”.
Continued
This right of lien can be exercised only for
non payment of the price and not for any
ancillary charges.
This right of lien extends on whole of the
goods even though the part of the payment
has remain unpaid.
The lien can be lost in the following
conditions
Lien depends on physical possession of
goods. Once the possession is lost, the lien is
also lost.
Continued
The possession can be said lost in the following
situations
1) When the buyer or his agent lawfully obtains
possession of the goods.
2) 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.
3) When the seller expressly or impliedly waives
his right of lien. When the seller grants fresh
term of credit or allows the buyer to accept a bill
of exchange payable at future date.
Case Law on Right to lien
Eduljee vs John Bros AIR (1943) Nag 249
Refrigerator case.
2) Right to resale:- This right is one of the
valuable right given to the unpaid seller.
The reason is without this right the other
rights like, right to lien or right to stoppage
in the transit would be of no use.
The question is if the buyer is not paying the
price, then whether the seller should hold the
goods for unlimited time?
Seller - second hand refrigerator to buyer for a total of 350 rs - it was delivered and the
buyer was satisfied - seller got 2 more parts for repair - refused to give - asked for right
of lien becasue pending payment - court held - possession was lost can claim right of
lien
Continued
The answer is obviously no.
Section 54 gives limited sort of right to seller to
sell the goods. These conditions are as follows.
1) Where the goods are of perishable nature.
2) Where such right is expressly reserved in the
contract in case the buyer should make a default.
3) Where the seller has given the notice to the
buyer of his intention to resell and the buyer
doesn’t pay or tender the price within reasonable
time.
Continued
If on release of the goods there is loss to the
seller, the seller can recover the same from
the buyer.
But if there is surplus to the seller against the
sell, he can retain the same for himself.
The reason is the buyer must not get the
advantage of his own fault.
But if no notice is issued from the seller he
cant claim any damages from the seller even
if he sustains the loss in the contract.
Continued
3) Right of stoppage of goods in the transit::-
The right of stoppage in transit means the
right of stopping further transit of the goods
while they are with the carrier for the purpose
of transmission to the buyer.
Thus, this is an extension of the right to lien
because it entitles the seller to regain
possession even when the seller has parted
with the possession of the goods.
Following are the conditions when this right
is exercised as per section 50 of the Act
Continued
1) The buyer becomes insolvent.
Whitehead vs Anderson (1842) 9 M & W 518
Stopped by captain of the ship and then
realesed
2) The property has passed to the buyer.
3) The goods are in the course of transit, it
means the goods are not with the seller, nor
with the buyer nor with the agent. They
should be in custody of the middleman that is
carriers who are in transportation of
business.
Continued
According to section 51 of the Act, right of
stoppage in transit can be exercised only so
long as the goods are in the course of transit.
When the transit comes to an end the right of
stoppage in transit also comes to an end.
According to section 51 goods are deemed to
be in the course of transit from the time,
when they are delivered to a carrier or to the
bailee for the purpose of transmission to the
buyer, until the buyer or his agent takes
delivery of them.
Continued
In the following conditions the transit is
deemed to be at end and the seller cannot
exercise his right of stoppage in the following
cases
1) When the buyer or his agent takes the
delivery after the goods have reached he
destination.
2) When the buyer or his agent obtains
delivery of the goods before their arrival at
the appointed destination.
Continued
3) When the goods have arrived at their
destination and the carrier acknowledges to the
buyer or his agent that he is holding the goods
on behalf of the buyer.
4) When the carrier wrongfully refuses to deliver
the goods to the buyer or his agent.
5) When the goods have arrived at their
destination but the buyer instead of taking the
possession of the goods request to carry the
goods for further destination and the carrier
agrees to take the goods to the new destination.
Continued
When part delivery of the goods has been
made to the buyer with an intention of
delivering the whole of the goods, transit will
be at an end for the reminder of the goods
also which are yet in the course of the transit.
Section 52 talks on the exercise of the rights
of stoppage of transit in the following ways
1) By giving notice of his claim to the carrier
or other bailee in whose possession the
goods are.
2) By taking actual possession of the goods.
Continued
It is the duty of the carrier, after receiving
due notice not to deliver the goods to the
buyer.
But to redeliver the same to the seller.
If by mistake he delivers the goods to the
buyer, he can be made liable for the
conversion.
The expenses are to be borne by the seller.
Thus, the Carrier has to follow certain norms
or else he will be made liable.
Difference between lien and
stoppage in Transit
1)The sellers lien is attaches when the buyer is in
default, whether he is solvent or insolvent. The
right of stoppage in transit arises only when the
buyer is insolvent.
2) Lien is available only when the goods are in
actual possession of the seller while right of
stoppage is available when the seller has parted
with the possession and the goods are in the
custody of an independent carrier.
3) The right of lein consists in retaining the
possession of the goods while the right of
stoppage consists in regaining possession of the
goods
Continued
The right of lien comes to an end once the
seller hands over the possession of the goods
to the carrier for the purpose of transmission
to the buyer. On the other hand, the right of
stoppage in transit commences after the
seller has delivered the goods to a carrier for
the purpose of transmission to the buyer and
continues until the buyer has acquired their
possession.
Rights of Unpaid seller against
the Buyer personally
After from the right available to the seller
against the goods, he is enjoying the right
against the buyer personally.
Following are Three rights available to the
unpaid seller against the buyer.
1) Suit for price:- ( Sec 55)
2) Suit for damages for non acceptance of the
goods:- (sec 56), as per sec 56 where the
buyer wrongfully neglects or refuses to
accept the goods, the seller may sue him for
damages.
Continued
The damages are calculated in accordance
with sec 73 of the Indian Contract Act.
That is the measure of the damages is the
estimated loss arising directly and naturally
from the breach of contract by the buyer.
Damages may vary from case to case.
Even if the goods have been manufactured to
some special order and they are unsalable
and have no value at all for other buyers, then
the seller may be allowed to full price of the
goods as damges.
Continued
3) Suit for special damages and interest:- Sec
61, this section allows the seller to sue the
buyer for special damages also for such loss,
“ while the parties know while they formed
the contract”.
This section is only explanatory in nature
regarding the principle laid down in section
73 of the Indian Contract Act regarding the
special damages.
Continued
In case of Telu Ram jam vs Agganwal and
sons AIR (1991) P & H 140., it was held that
this section also recognizes unpaid sellers
right to get interest at a reasonable rate on
the total unpaid price of the goods sold from
time it was due until it is actually paid.