REMEDIAL MEASURES

Remedial Measures – When a seller and buyer have entered into sales contract, each
party must perform the promises made. If one of the parties does not perform one or
more of his promises, that party breaches the contract and the other party is entitled
to a remedy.

Buyer’s Breach:

The buyer can breach a sales contract in any of the following ways:
(i) He fails to make payment when it is due, or

(ii) He repudiates (refuse to perform in advance) a contract in whole or in part, or

(iii) He wrongfully rejects the goods, or

(iv) He wrongfully revokes acceptance of the goods.

Whatever is the mode of breach committed by the buyer, the seller gets affected when
he is not paid price of the goods.
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When a buyer breaches a sales contract, a number of remedies are available to the unpaid
seller. Depending upon the situation, a seller may opt for one or more of the remedies
available under the Act.
Unpaid Seller’s Remedies:
When a buyer commits a breach, seller becomes aggrieved party. But in any case grievance
of the seller would be that he has not received full price of the goods sold, thus he is termed
as unpaid seller by law.
Who is an unpaid seller – When a seller is not paid the price of the goods, he is termed as
‘unpaid seller’ under the act.
As per Section 45 of the Act – The seller of goods is deemed to be an unpaid seller within
the meaning of this Act –
(a) When the whole of the price has not been paid or tendered to, or

(b) When a bill of exchange or other negotiable instrument has been received as conditional
payment and the condition on which it was received has not been fulfilled by reason of
the dishonour of the instrument or otherwise.
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Rights of an unpaid seller:

1. Rights against the goods

2. Rights against the buyer

Right of an unpaid seller against the goods –

i. When ownership of goods is transferred to the buyer

ii. When ownership of goods has not been transferred to the buyer

(1) When ownership of goods is transferred to the buyer

i. Right of lien

ii. Right of stoppage in transit

iii. Right of resale

(a) Right of lien [Section 47] – A lien is a right of retaining property until a debt due to
the person retaining it has been satisfied. Thus it is a possessory right which allows the
seller to retain possession of the goods in respect of which the price has not been paid
by the buyer.
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This right can be exercised if the following conditions are satisfied.

i. Where goods have been sold for cash, not on credit, but the buyer has not been
paid by the buyer.

ii. Where although the goods were sold on credit, but the buyer has not been made
payment even after the expiry of the period of credit, or

iii. Where the buyer becomes insolvent, even if the credit term has not been expired.
In the case of insolvency it is presumed that the buyer will not be able to pay the
price. The seller has a right to demand full price before making delivery of goods
to the buyer.

(b) Right of stoppage of goods in transit – Another remedy which an ‘unpaid seller’
has against the goods is to stop them while they are in transit. This right arises solely
upon the ‘insolvency’ of the buyer and is based on the plain reason of justice that one
man’s goods shall not be applied to pay other man’s debt.
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It may retake the goods if he can, before they reach in the buyer’s possession, and
may retain them until the price is paid or tendered for the same

When the right of stoppage can be exercised – Right of stoppage in transit can be
exercised by the seller only if the following conditions are met:

1. The seller id ‘unpaid’ seller.

2. The buyer is insolvent.

3. The property in the goods has already been passed to the buyer.

4. The seller has parted with the possession and the buyer has not acquired it i.e.,
the possession is with some independent entity like railways, or a shipping
company.

(c) Right of resale – When a seller exercises his right of lien or stoppage of goods, it
does not amount to rescinding of contract. The property in goods remain with the
buyer only. All the sellers can do is to enforce the payment of price by keeping the
goods with him.
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However, if the buyer does not pay the price even after the lapse of considerable time,
the seller will have to resort to resale of goods.

In this case the original contract of sale gets rescinded. The right of resale is governed by
the provision of Section 54 of the Act. It provide that the ‘unpaid seller’ can exercise his
right to resell the goods in the following circumstances.

(i) Where the goods are of perishable nature, or

(ii) Where the seller expressly reserves a right of resale in case the buyer make a
default, or

(iii) Where the seller gives notice to the buyer about his intention to resell the goods
in case of non-payment of price by him within a reasonable time, and after
receipt of such notice, the buyer does not pay the price within reasonable time.

In such a case, the seller is entitled to –

(a) Recover any shortage between contract price and resale price from the
original buyer, and
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(b) Retain any surplus of resale price over the contract price.

However, if the notice of resale is not given to the buyer, the situation is reverse. If the
seller resell the goods without giving notice to the buyer, he is obliged to –

(a) Pay any surplus of resale price over the contract price to the original buyer,
and

(b) Bear himself shortage in resale price as compared to the price of original
contract.

(d) When the rights of lien and stoppage in transit of an unpaid seller can be
intervened by the buyer – Sometimes the seller is unpaid, and the buyer further sells
or pledges the goods to some other person. Such further sale or pledge does not
effect the seller’s right of ‘lien’ and ‘stoppage in transit’.
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(2) Rights of ‘unpaid seller’ where the ownership of goods is not transferred to the
buyer – Where a buyer fails to pay or tender the price when the payment becomes
due, or goes insolvent, while the property in the goods is yet to pass to the buyer, the
‘unpaid seller’ has absolute right to withdraw delivery of such goods. Thus when a
contract is executory, the ‘unpaid seller’ is under no obligation to deliver the goods to
the buyer, and he will not be liable for the non-delivery of the goods until the price of
the goods is not tendered to him by the buyer.

(2)b. Rights of ‘unpaid seller’ against the buyer – The buyer may commit breach of a
sales contract in various ways. The Act has accordingly provided remedies to the
‘unpaid seller’ to be exercised against the buyer.

(1) Suit for price – When the property in goods has passed to the buyer, and the buyer
wrongfully neglects or refuses to pay, the seller can always sue for the price whether
the goods are in possession of the seller or buyer.
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Even if the property in the goods is not passed to the buyer, but according to the
contract of sale the buyer is to pay the price at a certain date irrespective of the day of
delivery, and the buyer wrongfully neglects or refuses to pay, the seller can sue the
buyer for the price.

It may be noted here that the seller cannot sue for the price unless the buyer
wrongfully neglects or refuses to pay. For e.g. where sales is on credit, no suits is
competent until expiry of credit period.

(2) Suit for damages for non-acceptance [Section 56] - When a buyer wrongfully
neglects or refuses to accept and pay for the goods, the seller may sue him for
damages incurred because of the buyer’s non-acceptance.

(3) Suit for special damages and interest [Section 61] – In the absence of the contract
to the contrary, the seller can claim special damages, and reasonable interest from the
buyer in case of repudiation of contract by him.
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Seller’s Breach: Buyer’s Remedies

Ways in which a seller may breach – A seller may breach the contract in any of the
following ways:

i. He fails to deliver the goods at the time or in the manner called for in the
contract.

ii. He repudiates the contract

iii. He delivers non-conforming goods and the buyer rightfully rejects the goods
or properly revokes acceptance.

Remedies available to a buyer – The Sale of Goods Act 1930 provides for the various
remedies available to the buyer which he can opt depending upon the kind of problem
he faces:

(1) Suit for repudiation of a contract on breach of condition – The breach of condition
entitles the buyer to treat the contract as repudiated [Section 12(2)].
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Thus when a condition is breached by a seller, the buyer can sue for rescinding a
contract.

(2) Suit for damages in case of breach of warranty [Section 59] – When a seller
breaches warranty in a sales contract, the buyer does not have a right to reject the
goods, but he can claim the damages arising therefrom. There may be tqo possible
circumstances –
i. Where the buyer has already paid the price

ii. Where the price is yet to be paid, he may ask the seller for reasonable
reduction of the price

(3) Suit for damages for non-delivery [Section 57] – Wheer the seller wrongfully
neglects or refuses to deliver the goods to the buyer, the biyer may sue the seller for
damages for non-delivery.
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(4) Suit for special damages and interest [Section 61] – The buyer may recover special
damages from the seller, i.e., damages resulting from special circumstances about
which the seller knew at the time of the contract. And if any price has already been
paid to the seller, the buyer can claim the interest thereon. The rate of interest is at
the discretion of the court and it is to be calculated from the date on which the
payment was made by the buyer.
(5) Suit for specific performance [Section 58] – Where monetary compensation is not
as adequate remedy, the buyer may enforce specific performance of the contract. This
provision applies to all cases where goods are specific or ascertained, whether the
property therein has passed to the buyer or not.

‘Specific’ means goods identifies and agreed upon at the time of sale, and
‘ascertained’ means goods identified in accordance with the agreement after the time
a contract of sale is made.