Introduction
Under the Sale of Goods Act, 1930, an unpaid seller is a seller who has not received the full price for the goods sold, or for whom the buyer has failed to perform payment obligations. The Act provides the seller with specific rights to protect their interests, recover the price, or exercise control over goods until payment is made. Understanding these rights is crucial for sellers to secure their commercial and legal interests.
Definition of Unpaid Seller
According to Section 45 of the Sale of Goods Act, 1930, a seller is considered unpaid if:
- The whole price has not been received; or
- The buyer has not performed their contractual obligation to pay or accept the goods.
This definition ensures that sellers have legal remedies against defaulting buyers.
Rights of an Unpaid Seller Against the Goods
1. Right of Lien (Section 47)
The unpaid seller has the right to retain possession of goods until payment is made. This right arises when:
- The goods are in the seller’s possession.
- The buyer becomes insolvent.
Example: A seller delivering goods to a buyer on credit may refuse further delivery until payment is received.
- Case Law: K.C. Mahajan v. Union of India (1975) – Right of lien upheld against unpaid seller.
2. Right of Stoppage in Transit (Section 50)
If goods are in transit and the buyer becomes insolvent, the unpaid seller can stop goods from being delivered to the buyer and resume possession.
- This right protects the seller from loss during transit.
- Applies to goods sent by carrier or forwarding agent.
- Case Law: Alkali Manufacturers v. Union of India (1960) – Stoppage in transit recognized as valid.
3. Right of Resale (Section 50(2))
If the buyer defaults after the goods have been resumed under lien or stoppage in transit, the seller may resell the goods to recover the unpaid price.
- The seller must give reasonable notice to the original buyer.
- Case Law: Harvey v. Facey (1893) – Resale must not result in unfair loss to the buyer.
Rights of an Unpaid Seller Against the Buyer Personally
1. Suit for Price (Section 55)
The unpaid seller can file a civil suit to recover the price of goods when:
- Property in goods has passed to the buyer.
- The buyer refuses or fails to pay the agreed price.
- Case Law: Nathulal v. State of Bihar (1968) – Seller entitled to recover price when ownership transferred.
2. Damages for Non-Acceptance (Section 56)
If the buyer wrongfully refuses to accept goods, the seller may claim damages for loss caused by such non-acceptance.
- Damages include the difference between contract price and market price.
- Case Law: Chowdhury Bros v. Union of India (1971) – Compensation for breach of contract upheld.
Rights of an Unpaid Seller Against Third Parties
- Lien and stoppage rights protect sellers from third parties claiming goods during transit or insolvency.
- These rights are enforceable against insolvent buyers and unauthorized claimants.
Distinction Between Seller’s Remedies
| Basis | Against the Goods | Against the Buyer Personally |
|---|---|---|
| Purpose | Recover or retain goods until payment | Recover price or damages |
| Legal Mechanism | Lien, stoppage in transit, resale | Civil suit for price, damages |
| Applicability | Goods in possession or transit | Property has passed to buyer |
| Case Example | Alkali Manufacturers v. Union of India | Nathulal v. State of Bihar |
Conclusion
The Sale of Goods Act, 1930 equips the unpaid seller with comprehensive rights to protect their interests. By exercising lien, stoppage in transit, resale, or civil remedies, sellers can ensure payment, minimize losses, and maintain control over goods. Knowledge of these rights is essential for traders, businesses, and legal professionals dealing with commercial contracts.
Also Read; Contract of Agency under the Indian Contract Act, 1872
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