April 16, 2021

Rights of an Unpaid Seller under Sale of Goods Act


In every contract of sale, a seller is under an obligation to deliver the products sold and buyer is under an obligation to pay the requisite amount set or quid pro quo i.e something reciprocally, under the contract of sale, by them. this can be referred to as reciprocal promise as per Section 2(f) of the Indian Contract Act. In other words, any set of promises made which forms the consideration or a part of the consideration for every other are called reciprocal promises and each contract of sale of products consists of reciprocal promises.

Who is unpaid seller under Sale of Goods Act?

 He is the seller to whom:-

  1. Whole of the price is not paid
  2. Conditional payment

Bill of exchange/ promissory note/ cheque has been received by seller but it dishonours. Till the time bill of exchange/ promissory note/ cheque is with the seller so, till that time he is only called as seller but when any of the mentioned instruments dishonours then after this seller is called unpaid seller.[1]

Rights of an Unpaid Seller under Sale of Goods Act

These rights of the unpaid seller are referred to as ‘rights in rem’. If the property within the goods has already been passed on to the customer, the unpaid seller has the subsequent rights against the goods:

Right of Lien (Section 47)

The right of lien is that the right to retain possession of the products until payment for the identical is created. Such a right is offered to the unpaid seller having possession of the products if the products are sold with none stipulation on credit or they need been sold on credit, but the term of credit has expired. Such a right is additionally available just in case the customer has become insolvent.

Rules regarding lien

  • Possession of products is vital to exercise the right of lien.
  • the proper of lien isn’t affected whether or not the vendor has parted with the document of title to the products.
  • The possession of the products by the vendor must not expressly exclude the proper of lien.
  • The lien is exercised by the unpaid seller just for the worth due and not for the other charges like warehouse rent or carriage expenses.
  • If the unpaid seller has already made part delivery of the products to the client, he may exercise lien on the rest.

Termination of Lien

The unpaid seller loses his right of lien on the products within the following circumstances:

  • If he delivers the products to a carrier or other bailee for the aim of transmission to the customer without reserving the correct of disposal of the products.
  • If the buyer or his agent lawfully obtains possession of the products.
  • If he waives his right of lien on the products. the vendor may waive his rights either expressly or impliedly. If the contract of sale itself provides in express terms that the vendor shall not retain possession of the products whether or not the value has not been paid, it’s said to be an express waiver of lien. Implied waiver of lien takes place when the vendor sells the products on credit, or grants a fresh term of credit on the expiry of the initial term of credit.

Right of stoppage in transit

It is a right of stopping the products while in transit after the unpaid seller has lost possession of the products. This right enables the vendor to regain possession. Such a right is out there to the unpaid seller when the customer becomes insolvent and when the products are in transit. Goods are deemed to be in course of transit if they’re delivered to a carrier or other bailee for the aim of transmission to the customer, until the client or his agent takes delivery of them.

Conditions for stoppage of goods:-

  • When seller is unpaid either wholly or partially
  • When the customer becomes insolvent
  • Goods must be within the course of transit- this implies that goods must not be within the possession of the vendor and haven’t reached the buyer’s possession as well.

Termination of Transit

  • By delivery to the buyer/ his agent
  • Interception by the buyer (Interception means the act of catching/ receiving)

When buyer or his agent obtains the delivery of the products before their arrival at the appointed destination hence, the transit involves an end

  • Acknowledgement to the buyer by the carrier/ courier company that they’re holding the goods on buyer’s behalf, then also transit involves an end
  • Part delivery of products

If a part of the products are delivered to the client then the transit involves an end for the remainder of the products further

Right of resale

The unpaid seller has the right to resell the products.

Conditions for resale:

  • When goods are of perishable nature- Then unpaid seller can resell them immediately without the notice to the buyer. But just in case of non-perishable items unpaid seller must send notice to the buyer for reselling them
  • Where unpaid seller gives the notice to buyer and buyer still don’t obtain it
  • Where the right of resale is reserved/ mentioned within the contract If contract clearly specifies that reselling can’t be done or contrariwise
  • Buyer becomes insolvent
  • Buyer fails to pay the worth of the products

In other words, the unpaid seller can re-sell the goods if the goods are of a perishable nature. He also can make a resale of the goods if he has given notice to the buyer of his intention to re-sell and also the buyer has not within an inexpensive time paid the worth. If on resale, the vendor incurs loss, he can claim the identical from the buyer as damages for breach of contract. If there’s a profit on resale, he’s not sure to hand it over to the client. If the property within the goods has not passed to the buyer, the unpaid seller has, additionally to all or any other remedies, the right to withhold delivery.[2]

[1] https://rajdhanicollege.ac.in/admin/ckeditor/ckfinder/userfiles/files/Ch-18%20Sale%20of%20goods%20act,%201930%20Unpaid%20seller%20and%20his%20rights.pdf

[2] https://accountlearning.com/rights-unpaid-seller-goods-lien-stoppage-transit-re-sale/

Author: Mannat Arora (Bharati Vidyapeeth Institute of Management & Research)


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