Rights of unpaid seller

News
 Poll from previous Lecture

A agreed to sell 100 quintals of groundnut oil to B.

Before, it could be delivered to B, The government
of India banned selling groundnut oil because of
COVID19 crisis. B wants to sue A. Should B do so?
a)A) Yes
b)B) No

State reasons.
 Solution
Decision: B can’t be successful as Contact of
Sales should also fulfil all the essential elements of
a valid contract.
Explanation (Hint): Impossibility to perform. The
contract become void.
 Learning Outcome
• Illustrate the concept of unpaid seller
• Explain the rights available to Unpaid seller
 What is Unpaid seller?
ACCORDING to Sec 45 of Sale of goods act, a seller is
unpaid when:
(A) Whole of the price has not been tendered or paid,
or
(B) A Bill of exchange or negotiable instrument has been
received as a conditional payment and the condition on
which it was received has not been fulfilled by reason of the
dishonor of the instrument or otherwise.
 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
Sec 46(1), 47 to 49

• Right to retain possession of the goods and refuse to deliver

them to the buyer until the price due in respect of them is
paid or tendered
• 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, even though the period of
credit has not yet expired.
 Rules regarding lien
• Can be exercised only when the property in goods has been transferred to
the buyer.
• Have not lost with the possession
• Always possessory in nature. Depends on actual possession not title
• Must not expressly waived off by seller expressively in the agreement.
• Used only for price NOT for any other charges.
• Is an indivisible right means When unpaid seller has made part delivery of
goods, he may exercise right of lien on the remainder.
• Is personal right by nature. It can be exercised by seller only.
• Unpaid seller can exercise the right of lien even if he is in possession of
goods as bailee or agent.
• Credit period suspends right of lien not destroys it.
 Termination of Lien
• When the buyer lawfully obtains the
possession of the goods.
• When seller expressly or impliedly waives his
right of lien.
• When he delivers the goods to a carrier for the
purpose of transmission to the buyer.
 Case
A seller wants to recover dock dues from the
buyer. Thus he wants to exercise right of lien
against the goods, the property of whose the
seller has transferred to buyer for such
recovery. Can seller exercise right of lien for
recovering such charges?
a)Yes
b)No
State reasons
 Solution
Decision: No
Explanation (Hint) -An unpaid seller’s can
exercise Right of lien for recovering the price
of goods only NOT other charges like dock
dues, warehouse charges etc.
 Defeat of Right of lien
The right of lien is not affected by any sale or pledge by the
buyer.
This right is defeated, if the buyer has transferred the
document of title of goods to the third person and the third
person took it in good faith. Section 53
 Right of stoppage in Transit
(Sec 50-52)
• When the seller of goods has parted with the
possession of the goods
• Right to retaining the possession during the transit
• Available when:
a) Seller should be an unpaid seller as defined in section 45.
b) The buyer should be insolvent.
c) The goods should be in transit.
d) The buyer must not have acquired the possession.
e) The seller must have lost the possession.
f) Property in goods must have transferred to buyer.
 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 his own name. It means that the carrier has the
possession of the goods in his independent capacity
as carrier. (right during transit will be applicable only
in this case)
 Termination of Stoppage in
transit
 When the buyer/agent takes delivery: section 51 (1)
 When the carrier or the other bailee acknowledges to the
buyer that he holds the goods on his behalf section 51
(3),
 When the carrier wrongfully refuses to deliver the goods
to the buyer section 51(6)
 When part delivery of goods made to the buyer/agent
section 51(7)
 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
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?
a)Right of lien
b)Right to stoppage in transit
State reasons
 Solution
• Decision: Right to stoppage in transit
• Explanation (Hint):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 (dispatched).
 Case
A (Buyer) of Delhi order B (Seller) of Mumbai to deliver
certain goods to him at Delhi. B supplies the goods, but
A delays to take the delivery. The station master at
Delhi informs A that the goods are lying at the station
at A’s risk. Before taking the delivery, A becomes
insolvent. Can B recover the goods by stopping them in
transit?
a)Yes
b)No
State reasons
 Solution
Decision: No, B cannot recover the goods by stopping
them in transit.
Explanation (Hint)- The transit comes to an end when
the station master informs A that the goods are lying at
his risk Sec 51.
 Right of Re-sale (Sec 54)
After exercising the right of lien or stoppage in transit, the
seller has a right to retain the goods until the buyer pays the
price. If within a reasonable time after the exercise of such a
right, the buyer does not pay the price, the unpaid seller may
re-sell them under any of the following circumstances:
(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.
 Right of Withholding the Delivery
• When property in goods has not passed to the
buyer, unpaid seller has a right of withholding
delivery with his the right of lien and 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 special damages and interest
Rights against the buyer personally
1.Suit for Prices (Sec 55):

Where property has passed, the seller can sue for the price.
 Rights against the buyer personally

2. Suit for Damages for Non Acceptance (Sec 56):

Where The buyer wrongfully refuse to accept and pay for goods, seller may sue him for non acceptance
 Rights against the buyer personally

3. Repudiation of the contract before due date (Sec 60):

The seller can treat the contract as subsisting and wait till delivery or he may treat the contract as rescinded and sue for damages
 Rights against the buyer personally
4. Suit for interest (Sec 61):

Where there is a specific agreement between seller and buyer as to interest on the price of the goods from the date the payment become due ,seller can recover the interest
from the buyer
 MCQ
What is the Right of lien by the unpaid seller
as per sale of goods act?
a.Retain possession
b.Regain possession
c.Recover prices and damages
d.Recover damages
 MCQ
Choose the correct option for “The lien of an
unpaid seller” depends upon?
a.Possession
b.Title
c.Ownership
d.Whether the buyer has paid the price or
not
 MCQ
Which of the following is true about Right of
stoppage in transit?
a. Seller should be an unpaid seller as
defined in section 45.
b. The buyer should be insolvent.
c. The goods should be in transit.
d. All of the above
 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.
 Solution
Buyer will bear the loss, because the
property in goods has passed to the
buyer. So, he has to pay the price.
 Case
Lease Vs Scott Bros

A sells good to B and transfers him the document of

Title of goods. B pays A through cheque. In fulfilment
of contract, B transfers that document of Title to C.
Before C could obtain the delivery of goods, B’s cheque
has been dishonoured. A gives instructions to stop
delivery of goods to C until paid by. Is A’s action
justified? Can, he enjoy the right of lien?
A)Yes
B)No
.
 Solution
Decision: No, A’s action is not justified.
Explanation (Hint)-An unpaid seller’s Right of lien is
defeated against Transferee, who takes document of
title of goods in good faith. Section 53.
 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?
A) yes
B) No
State reasons?
 Answer
• A, being an unpaid seller, can stop the delivery
of 50 bales by railway because the goods are
still in transit.