In a contract of sale, the buyer has an obligation to pay the price of the goods to the seller. If the buyer fails to pay the price, the seller may have several remedies under the law. One of the remedies available to the seller is the right to retain the goods until the price is paid. This right is known as the right of an unpaid seller. In this article, we will discuss the concept of an unpaid seller and the various rights available to an unpaid seller under the Sale of Goods Act, 1930.
Who is an Unpaid Seller?
According to the Sale of Goods Act, 1930, an unpaid seller is a seller who has not been paid the full price of the goods or the price has not been paid at all. The seller becomes an unpaid seller when the buyer fails to pay the price of the goods on the due date.
The Sale of Goods Act defines an unpaid seller as follows:
“Where the whole of the price has not been paid or tendered, the seller is deemed to be an unpaid seller within the meaning of this Act, except where the buyer has obtained possession of the goods or documents of title to the goods in good faith, and without notice of the seller’s lien or other right to retain possession thereof.”
In simple terms, if the buyer has not paid the full price of the goods, the seller is an unpaid seller, and he has certain rights against the goods.
Rights of Unpaid Seller:
The Sale of Goods Act, 1930, provides various rights to an unpaid seller against the goods. These rights are as follows:
Right of Lien:
The right of lien is a right to retain possession of the goods until the price is paid. According to Section 47 of the Sale of Goods Act, 1930, an unpaid seller who is in possession of the goods has a right to retain them until the full price is paid or tendered by the buyer. The seller can retain possession of the goods even if the property in the goods has passed to the buyer.
The right of lien can be exercised only in the following cases:
- Where the goods have been sold without any stipulation as to credit.
- Where the goods have been sold on credit, but the credit period has expired.
- Where the buyer becomes insolvent.
- Where the buyer has not taken delivery of the goods.
If the seller exercises the right of lien, he cannot sell the goods. However, if the goods are perishable in nature, the seller can sell them after giving notice to the buyer.
Right of Stoppage in Transit:
The right of stoppage in transit is a right to stop the goods while they are in transit and before they reach the buyer. According to Section 50 of the Sale of Goods Act, 1930, an unpaid seller has the right to stop the goods in transit if the following conditions are satisfied:
- The buyer is insolvent.
- The goods are in transit.
- The seller has parted with the possession of the goods.
- The seller has not received the full price of the goods.
The right of stoppage in transit can be exercised only in the following cases:
- Where the buyer becomes insolvent.
- Where the goods are in transit.
- Where the seller has parted with the possession of the goods.
- Where the seller has not received the full price of the goods.
If the seller exercises the right of stoppage in transit, he can demand the delivery of the goods from the carrier. The carrier is bound to deliver the goods to the seller, and the buyer has to bear the expenses of the seller.
Right to stoppage in transit:
When the seller has delivered the goods to a carrier for the purpose of transmission to the buyer and the buyer has not yet received the goods, the seller may exercise his right of stoppage in transit. In this case, the seller can take back the goods from the carrier if he finds out that the buyer is insolvent or if the buyer has not paid the price.
The right of stoppage in transit is available to the seller only if the goods are in transit and the buyer is insolvent. The right of stoppage is automatically terminated when the goods are delivered to the buyer or to any other person authorized to receive them on behalf of the buyer.
Right to Resell the goods:
The unpaid seller has the right to resell the goods if the buyer defaults in making payment of the price. The seller must give reasonable notice to the buyer of his intention to resell the goods.
The seller can sell the goods either by public auction or by private sale. If the seller resells the goods, he is entitled to recover from the buyer the difference between the contract price and the price realized on resale, after deducting the expenses of resale. If the seller is unable to sell the goods at a reasonable price, he can sue the buyer for the recovery of the price.
Right to sue for damages:
The unpaid seller has the right to sue the buyer for damages if the buyer wrongfully refuses to accept the goods or repudiates the contract before the delivery of the goods. The seller can claim damages for any loss suffered due to the breach of the contract by the buyer.
The seller can also sue the buyer for damages if the buyer wrongfully neglects or refuses to pay the price. In such a case, the seller can claim damages for any loss suffered due to the non-payment of the price by the buyer.