RIGHTS OF UNPAID

SELLER

PRESENTED BY:
T.DIVYA SREE
19074
TPS – B
SSIM
 Who is an Unpaid Seller?

A person who has sold goods to another person but has not
been paid for the goods, or has been paid partially, is called
an unpaid seller.
According to Section 45 of the Sale Of Goods Act, an
unpaid seller is one:
– Who has not been paid the price of the goods he has
supplied, or has been paid partially.
– Who has been given a negotiable instrument like a bill of
exchange that has been dishonored.
It is immaterial whether the seller is directly involved in the
transaction, or he is acting through his agent
 Rights of an Unpaid Seller

• ‡Rights Against Goods

• ‡Rights Against The Buyer Personally
 Rights Against Goods

Where the property in the goods has passed

[Sec 46(1)]
 ‡Right of Lien
 Right of stoppage the goods in transit.
 ‡Right of re-sale
• Where the property in the goods has not passed
[Sec 46 (2)]
 Withholding delivery
 Stoppage in transit
 Right of Lien

• ‡The word lien means to retain possession of.

• Under sec 47 an unpaid seller who is in possession of
goods, but ownership has been transferred to the buyer,
is entitled to retain them in his possession until payment
or tender of the price, as in the following cases:-
1. Where the goods have been sold without any
stipulation as to credit.
2. Where the goods have sold on credit, but the term of
credit has expired.
3. Where the buyer become insolvent.
 Rules Regarding Lien
• The seller may exercise his right of lien not withstanding that he
is in the possession of goods as agent or bailee for the buyer. If
he loses the possession of the goods, he loses the lien also.
• The lien depends upon the actual possession and not on title.
• The possession of goods by the seller must not expressly
exclude the right of lien.
• The lien can be exercised by the seller only for the price and not
for any other charges such as warehouse or dock charges.
• Where an unpaid seller has made part delivery of the goods, he
may exercise his right of lien on the remainder.
 Termination of Lien

According to section 49, the lien of an unpaid seller terminates in

following conditions:
• ‡When seller delivers the goods to a carrier or other bailee for the
purpose of transmission to the buyer, without reserving a right of
disposal of the goods to himself.
• ‡Where the buyer or his agent lawfully obtains possession of goods.
EXAMPLE:
P sells a lawn-mower to D and refuses to deliver it to D till he has
been paid for. But he lends it to D in order that D may cut the grass.
P does not lose his lien
• ‡By waiving the rights of lien
 Rights of Stoppage-in-Transit

• ‡Acc to sec 50 – the right of stoppage in transit is a

right of stopping the goods in transit after the
unpaid seller has parted with the possession of the
goods.
• He has the further right of resuming the possession
of goods as long as they are in course of transit, and
retaining possession until payment or tender of the
price. It is available to the unpaid seller -
 when the buyer of goods becomes insolvent,
 when the goods are in transit
 Duration of Transit [sec 51]

• According to Section 51,when the seller has

delivered the goods to the carrier or bailee for
transmission to the buyer, until the goods are
received by the buyer or his agent is the
duration of transit.
• The carrier may hold goods –
– As seller’s agent
– As buyer’s agent
– In an independent capacity
 When does transit end ?

• ‡Once the goods reach the hands of the buyer,

servant or agent.
• ‡Also, if the buyer or agent obtains delivery of
goods before they reach their destination.
• ‡Holding the goods by the carrier or bailee on
behalf of the buyer
• ‡Rejection by the buyer
• ‡Delivery to ship
 Comparison
Right of lien
• It can be exercised even when
the buyer is able to pay but
does not pay.
• It can be exercised on goods
which are in actual or
constructive possession of the
seller.
• The right comes to an end
when the possession of the
goods is surrendered by the
seller.
Right of stoppage in transit
• The right arises when the
buyer is insolvent.
• It can be executed when the
goods are in the possession of
the middlemen.
• The right of transit
commences when the goods
have left the possession of the
seller and continue until the
buyer or his agent has
acquired the possession.
 Contd..
Right of lien Right of stoppage in transit
• The right of lien is to retain • the right of stoppage in
the possession. transit is to regain or resume
possession.

EXAMPLE:
B sells and consigns certain goods to A. B being still
unpaid, A becomes insolvent and while the goods are
in transit, assigns the bill of lading for cash to C who
knows that A is insolvent. The assignment not made in
good faith. B may stop the goods in transit.
 Right of Re-Sale [sec 54]

• ‡The unpaid seller, who has retained possession

of the goods in exercise of his right of lien or who
has resumed possession from the carrier upon
insolvency of the buyer, can re-sale the goods:
 If the goods are of perishable nature, without any
notice to the buyer.
 In the other cases after notice to buyer calling upon
him to pay or tender the price within reasonable time,
and upon failure of the buyer to do so.
 Right against the buyer personally
[sec 55 to 61]

• ‡Suit for the price [sec 55]

 Where the property has passed
 Where property has not passed
• ‡Suit for damages for non- acceptance [sec
56]
 Where the buyer wrongfully neglects or refuses to
accept and pay for the goods, the seller may sue
him for the non- acceptance.
 Contd..
• ‡Repudiation of contract before due date
[sec 60]
Where the buyer repudiates the contract before the
date of delivery, the seller may either –
 Treat the contract as subsisting and wait till the date of
delivery
 He may treat the contract as rescinded and sue for
damages for the breach. This rule is known as the “ rule
for anticipatory breach of contract”.
 Contd..
• ‡Suit for Interest [sec 61]
 Where there is a specific agreement between the seller
and the buyer as to interest on the price of the goods
from the date on which payment becomes due, the
seller may recover interest from the buyer.
 If there is no specific agreement , the seller may
charge interest on the price when it becomes due
from such day as he may notify the buyer.
 In the absence of the contract the court may award
interest to the seller in a suit by him.
Remedies Of Breach Of Contract Of Sale

• Seller’s Suits
 Suit for price (Sec 55)
 Suit for damage for non-acceptance of the goods
(Sec 56)
 Suit for damages for repudiation of contract by the
buyer before due date (Sec 60)
 Suit for interest [Sec 61(2)(a)]
 Contd..
• Buyer’s suits
 Suit for damages for non-delivery of the goods
(Sec 57)
 Suit for specific performance (Sec 58)
 Suit for breach of warranty (Sec 59)
 Suit for damage for repudiation of contract by the
seller before due date (Sec 60)
 Suit for interest [Sec 61(1)(b)]