Rights of an Unpaid Seller under Sale of Goods

Act 1930

ByEditor

June 17, 2021

Rights of an Unpaid Seller

Introduction

The agreements and contracts between two or more people related to the sale of goods
come under the sales of goods act 1930. This act was enacted on 1st July 1930. In this
act, all the laws related to the sales of goods defines. The person who buys the product
refer as the buyer, who is under the contractual obligation to pay the price which is set for
the product and the person who sells the product refer as the seller, who is under the
contractual obligation to deliver the sold goods, this refers as a contract sale. 

Who is an unpaid seller? 

In layman language, the person who buys the product and refuses or fails to pay the
required money to the person he/she buys the product refers to as an an unpaid seller.
The unpaid seller has the necessary rights and seller’s remedies if there is a breach of any
contract between the buyer and seller. Unpaid seller remedies can be against the goods
and the buyer.

According to the Sales of Goods Act,1930, Section 45(1) says that the seller can be
considered an unpaid seller when the full price has not been paid. The seller has an
immediate right of action for the price and when Bills of Exchange or other negotiable
instruments have been received as conditional payment. The pre-requisite condition has
not been fulfilled because of the dishonour of the instrument or otherwise.

For example – If Aakriti sold some goods to Aditi and received a cheque of 1000Rs. On
the presentment of the cheque in the bank, the cheque was dishonoured by the bank, then
it is said to be that Aakriti is an Unpaid Seller.
What are the rights of the Unpaid Seller?
The unpaid seller has the rights against the buyer and the goods. 

The rights against the buyer are-

A. Suit for the price

In a contract, when the goods or property which the buyer bought has been passed or
send to the buyer and after the property or goods passed buyer refuses or wrongfully
neglects to pay for the goods or property according to the terms and condition signed by
the seller and buyer then according to Section 55(1) of The Sales of Goods Act,1930 the
seller has the right to sue the buyer for the price of his/her goods or property.

In another case, when the due date of the payment is passed, and the goods hadn’t
delivered yet, then also according to Section 55(2), the seller has the right to sue the buyer
for the refusal on his/her part.

B. Suit for the damages

If the buyer refuses or not accepted the goods and payment of money, then according to
Section 56, the seller can sue the buyer for damages of non-acceptance of goods and the
payment of the money. According to the Indian Contract Act, Section 73 and 74 helps for
calculating the quantum of damages. The supreme court, in the case of M. Lachia Shetty
V Coffee Board, where a dealer who bid at an auction of coffee had been accepted,
refused to carry out the contract. Consequently, coffee was reauctioned at the next best
bidding price, and the dealer who refused the bid have to give the difference in the amount
of loss to the board. This case explains the nature of the duty of mitigation.

C. Suit for Interest

When the buyer and seller have a specific agreement with regards to the interest on the
price of the goods from the date on which the payment becomes due, then according to
Section 61, the seller can recover the interest from the buyer. And if there is no contract
between them, the seller can also charge the interest from the day he notifies the buyer.

D. Repudiation of the contract before the due date

The rule of anticipatory breach of contract applies; if the buyer refuses or repudiates the
contract before the delivery date, the seller can sue him for the damages under Section 60
and considered the contract as rescinded. According to this Section, if one party
repudiates before the due date, the other has two courses of action. Either he may
immediately accept the breach and bring the action of damages the contract is rescinded.
Damages will be assessed according to the prices then prevailing, or he can wait for the
date of delivery, and In the second case, the contract is open at risk. It will be a benefit to
both parties, maybe the party changes are mind and agree to perform, and damages will
be assessed according to prices on the day of delivery.

The rights against the goods are-

A. Right to Lien

If the buyer has not paid the price of the goods, then the seller of goods can exercise
his/her right and can retain the possession of goods as a bailee for the buyer under
Section 47. The seller can retain his possession in a different situation, like in case the
buyer is insolvent and when the terms of goods sold on credit are expired. In the case of
Grice V Richardson, the seller sells the parcels of tea. He delivered the part of the three
parcels of tea comprised in the sales, but the rest of the part has to deliver after the full
payment. This case shows the agreement to waive the lien, and the seller cannot the
remainder.

According to Section 49, the termination of a lien can take place when the seller loses
possession of the goods. The right to lien can be terminated when the buyer lawfully
obtains the possession of the goods or when there is any waiver of lien that can be
expressed or implied from the seller’s conduct.

B. Right of stoppage in transit

According to Section 50, It was stated that the unpaid seller has a right to stop the
delivery of goods while they are in transit and can retain them till he receives the full price
of the product. Unpaid seller, buyer insolvent, the property should have been passed to the
buyer, and the goods in property should be in the course of transit. These four essential
are required for the right of the unpaid seller to stooping the goods in transit.

The right of stoppage transit can exercise by the seller wither by taking the actual
possession of the sold goods and by sending notice of claim to the carrier or other agent
or bailee in possession of the sold goods.
C. Rights of Resale

Every unpaid seller has this right to resell the goods only when the goods are perishable in
nature. In this, the unpaid seller can directly sell the goods to another buyer without the
notice to the actual buyer. And if the goods are non-perishable in nature, then the seller
needs to inform or send a notice to the actual buyer for reselling them. The goods can be
resale in the situation where the unpaid seller gives the notice to the buyer, and the buyer
still doesn’t pay for it. The seller can also resale the goods where the right of resale is
reserved or mentioned in the contract.

If in the contract it was clearly mentioned or specified that reselling can’t be done or vice
versa, then in this situation, the seller only resale the goods when the buyer becomes
insolvent or fails to pay the price of the buyer goods.

Mysore Sugar Co Ltd., Bangalore v. Manohar Metal Industries, In this case, the buyer has
made some default in taking the goods, and the seller gave him a notice that if the buyer
did not lift the goods within three days, the contract would be cancelled. But after the
notice also the buyer did not lift the goods, and the seller resale the goods after three
months. And because of the delay in the resale, the seller suffered a loss because of the
falling market. And if the proper resale had been done, then the seller would have suffered
no loss and therefore seller’s claim for compensation from the buyer was rejected. 

If the seller makes undue delay in making resale and suffers more loss than he would
have suffered if the resale had been made within a reasonable time, he would be entitled
to claim compensation equal to the difference between the contract price and the market
price on the date when the resale ought to have been made. 

Conclusion
The above article shows that the seller can become an unpaid seller in cases, first when
the buyer does not pay the full amount to the seller and second when the buyer fails to
meet the maturity of the bill. Under all the situation, the seller can resale the goods or
possess the good if he has the right to lien, stoppage, or give the notice to the buyer. In all
the above situation, the unpaid seller has the right to sue the buyer for the failure in
payments of the goods. And if the seller fails to deliver the goods, the buyers can directly
sue the seller for non-performance and claim compensation for the damages.

Reference

 The Sales of Goods Act,1930,No.3, Acts of Parliament,1930 (India).

 Mysore Sugar Co Ltd., Bangalore v. Manohar Metal Industries, A.I.R 1982 Kant.283
(India).
This article has been written by Aakriti Gupta, Amity Law School, Noida, Uttar Pradesh

https://www.ourlegalworld.com/unpaid-seller-under-the-sale-of-goods-act/

Unpaid seller under the Sale of Goods Act

By

 Sushmita Mishra 

 July 20, 2020 

0
 Unpaid seller under the Sale of Goods Act

Table of contents

1. Introduction
2. Unpaid seller under the Sale of Goods Act
3. Rights of unpaid seller
4. Duties of unpaid seller
5. Case law
6. Conclusion
7. References

Table of Contents
 Introduction
 Unpaid seller under the Sale of Goods Act
 Rights of unpaid seller
 Duties of an unpaid seller
 Case law
 CONCLUSION

Introduction
The Sale of Goods Act, 1930 also deals with the rights and duties of unpaid seller as well with the
rights and duties of the seller and the buyer. It is the duty of the buyer to pay the price for the goods
delivered if he fails to do so, the seller remains unpaid. In this article, we are going to discuss the
duties of unpaid seller under the Sale of Goods Act, 1930.

Unpaid seller under the Sale of Goods Act

Unpaid seller is the person who sold the goods but has not received the full payment for the same.
Here the unpaid seller receives the half payment and half is remaining he is also unpaid seller. Under
the Sale of Goods Act, 1930, an unpaid seller is a seller who has not been paid full price of the goods
sold or if he has received a bill of exchange or other negotiable instrument as conditional payment,
the condition for the same has not been fulfilled. An unpaid seller is defined under section 45(1) of
the Sale of Goods Act, 1930.

Rights of unpaid seller

The rights of an unpaid seller are given under the Sale of Goods Act on the basis of position of the
goods delivered and the performance of the seller. The rights of an unpaid seller are as following:-

1. Right to lien:- The seller has the right to lien the goods until the fulfillment of the price of
the goods. The right to lien means to retain the goods or possession of the goods. The right
to lien of an unpaid seller is given under section 47 of the Sale of Goods Act 1930.
According to this section, an unpaid seller can retain the possession of the goods until the
payment in following cases:-
• When goods are sold without any stipulation as to credit.
• When goods are sold on credit but the term of credit expires.
• When the buyer becomes insolvent.
According to the section 49 of the Sale of Goods Act 1930, an unpaid seller loses his right
to lien in the following cases:-
• When he delivers the goods to the carrier or other bailee for the transmission to the
buyer without reserving the right to disposal of the goods.
• When the buyer lawfully obtains the possession of the goods.
• When the seller waives the right to lien.
2. Right to stoppage transit :-  This right is the extension of the right to lien. An unpaid
seller has the right to stop the goods during transit and retain until the payment. And if in
any case the buyer becomes insolvent, an unpaid seller can retain the goods.
3. Right to re-sale:- An unpaid seller has the right to re-sale the goods after retaining the
goods under circumstances:-
• Where the goods are perishable.
• Where he gave notice of his intention to re-sale the goods and the buyer has not pay the
price within the reasonable time.
• Where he has expressly reserved the right to re-sale in case of default.
4. Right to sue:- An unpaid seller has a right to sue the buyer for the price of goods. He can
also sue for the damages to the buyer for refusing to accept the goods.
Duties of an unpaid seller

1. Duty to deliver the goods as per the contract:- Is is the duty of an unpaid seller to
deliver the goods as according to the condition mentioned in the contract. If the goods are
not delivered as per the contract, he is not entitled to get full price of the goods.
2. Duty to wait for another installment:- If there is a condition as per the contract to pay
in installments, the seller has a duty to wait till the expiry of the period of installment.
Without wait or before the expiry of the period of installment he can not exercise the right
to lien or re-sale the goods and he is not entitled to sue for price.
3. Duty to exercise the right to lien only when the goods are in his possession:- An
unpaid seller cannot exercise the right to lien over the goods which are not in his
possession. And is entitled to pass the title of the goods to the buyer on the full payment.
4. Duty to inform the buyer on the dishonor of cheque or other negotiable
instrument:-  On the dishonor of the cheque or other negotiable instrument an unpaid
seller has a duty to inform the buyer for the same within the reasonable time, so he can do
arrangements for another cheque or negotiable instrument or arrange any other way of
payment. The provision of the dishonor of the cheque is given under section 138 of the
Negotiable Instruments Act.
5. Duty to give notice of his intention of re-sale to the buyer:-  An unpaid seller has a
duty to give notice of his intention to re-sale the goods before reselling the same. And he is
entitled to re-sale the goods only when the buyer is unable to give full price of the goods.
6. Duty to give reasonable time before sue:-  he has a duty to give reasonable time and
notice to the buyer for arrange the price of the goods before sue. And has a duty to wait
for the reply or response of the buyer too.
7. Duty to give notice for stoppage of transit:- An unpaid seller has a duty to give notice
to the carrier or the Bailee who is in the possession of the goods within a reasonable time.
Here the term reasonable time means that there is sufficient time to communicate or
understand the circumstances before the delivery of the goods. After the stoppage of the
goods, the carrier or other Bailee re-delivers the goods to the seller as his directions. It is
also the duty of an unpaid seller to bear the expenses of re-delivery of the goods.
8. Duty to ensure that the goods supplied are as per the conditions and
warranties:-  If the goods are not same to the quantity and quality as per the contract he
is not entitled to claim his right to lien or sue for damages.

Case law
• Ram Saran Das Raja Ram And Anr. vs Lala Ram Chander on 5 May, 1967

Where, however, the unpaid seller, who has exercised his right of lien or stoppage in transit. Where,
however, the unpaid seller, who has exercised his right of lien or stoppage in transit, gives notice to
buyer of his intention to sell, the unpaid seller may, if the buyer does not within a reasonable time
pay or tender the price, resell the goods within a reasonable time and recovery from the original
buyer damages for any loss occasioned by his breach of contract, but the buyer is not entitled to any
profit which may occur on the re-sale. In case of re-sale, pursuant to the exercise of the right of lien
or stoppage in transit, the buyer acquires a good title thereto as against the original buyer
notwithstanding want of notice of the resale to the latter.

• Suchetan Exports P.Ltd vs Gupta Coal India Limited & Ors on 2 August, 2011
Unpaid Seller” as defined in Section 45(1)(a) of the aforesaid Act, and would be entitled only to
recovery of cost of the goods supplied. It was further stipulated that the seller would thereupon
transfer the rights in respect of the goods to the buyer by endorsing in favor of the buyer a set of
negotiable documents and hand over the same to the latter.

• M.P.V. Sundararama Iyer And … vs V.V.C.R. Murugesa Mudaliar on 11 April, 1956

The seller being entitled to delivery at any time during the delivery month, he must notify the buyer
when he is prepared to glop delivery and if there Is non compliance with this notice he has the right
to resell, thus treating the contract as terminated. This condition contemplates that the seller shall
notify the buyer when he requires him to take delivery and the buyer must accept delivery at any
time during the month. Since the buyer must take delivery in accordance with the seller’s
requirements, application by, him for delivery is not contemplated. Elsewhere, the contract provides
that the buyer must pay for the goods against delivery and therefore on receipt of notice from the
seller he must be ready to pay the price and to take delivery in accordance with the requirements in
the notice. Since these things must be one when notified by the seller, application for delivery to
unnecessary and is not contemplated in the contract.

CONCLUSION
If a person sells something to the another, he is expecting some consideration for the same by that
person. If he has not received anything or received half of the price of that goods he is called as an
unpaid seller. The word unpaid seller is defined under section 45 of the Sale of Goods Act,1930. The
rights and duties of an unpaid seller are also given under this Act. If a person enjoys the rights on a
property, he is also entitled to take some responsibilities for the same. If an unpaid seller has not
received the full price of the goods he can claim for the same by the buyer but before claiming he
has to perform his duties towards that.

References

1. The Sale of Goods Act, 1930

2. The Negotiable Instruments Act
3. www.indiankanoon.org