Define unpaid seller. Discuss Rights of unpaid seller again goods.

Definition of an Unpaid Seller

An unpaid seller is defined under the Sale of Goods Act, 1930, which governs the sale and purchase of goods in India. Section 45 of the Act defines an unpaid seller as a person who has sold goods but has not received the whole of the price or has received a negotiable instrument (like a cheque or bill of exchange) that has not been honored.

In other words, a seller is considered unpaid in two circumstances:

1. When the full payment for the goods has not been made.
2. When a negotiable instrument given as payment is dishonored or refused.

Example: If A sells goods to B for ₹50,000 and B has paid only ₹30,000, A is an unpaid seller. Similarly, if B gave A a cheque for ₹50,000 and the cheque is dishonored, A remains an unpaid seller.

An unpaid seller has certain rights against both the goods sold and the buyer, which ensures the seller's protection if payment is not made.

Rights of an Unpaid Seller Against the Goods

The rights of an unpaid seller against the goods can be exercised when the buyer fails to pay the price as agreed. These rights are classified into three categories:

1. Right of Lien
2. Right of Stoppage in Transit
3. Right of Resale

1. Right of Lien (Section 47-49)

Definition:

The right of lien allows the unpaid seller to retain possession of the goods until the price has been fully paid or tendered. This right arises only when the seller is in actual possession of the goods.

Conditions for Exercising the Right of Lien:

• The seller must be unpaid.
• The goods must be in the possession of the seller or an agent of the seller.
• The sale should be unconditional.

Termination of Right of Lien:

This right is lost under certain conditions:

• If the goods are delivered to the buyer or a carrier without reserving the right of disposal.
• If the buyer or their agent lawfully obtains possession of the goods.
• If the seller waives their right to lien.

Example: A sells goods to B and is supposed to receive payment on delivery. If B fails to pay, A can retain possession of the goods until payment is made.

2. Right of Stoppage in Transit (Section 50-52)

Definition:

If the goods have been dispatched and are in transit, the unpaid seller has the right to stop the goods and regain possession before they are delivered to the buyer. This right can be exercised if the buyer becomes insolvent.

Conditions for Exercising the Right of Stoppage:

• The seller must be unpaid.
• The buyer must be insolvent.
• The goods must be in transit.

When are Goods Considered to be in Transit?

Goods are considered to be in transit from the time they are delivered to a carrier or other bailee for transmission to the buyer until the buyer or their agent takes delivery.

Termination of Right of Stoppage in Transit:

• When the goods are delivered to the buyer.
• If the buyer or their agent takes possession of the goods before their arrival.
• If the carrier acknowledges that they are holding the goods on behalf of the buyer.

Example: A sells goods to B and sends them via a transporter. Before the goods are delivered, A discovers that B has become insolvent. A can instruct the transporter to stop the goods and return them.

3. Right of Resale (Section 54)

Definition:

The unpaid seller has the right to resell the goods under certain conditions. This right is generally exercised after the right of lien or stoppage in transit has been executed and the buyer has not made payment within a reasonable time.

Conditions for Exercising the Right of Resale:

• If the goods are perishable in nature, the unpaid seller can resell them immediately.
• If the seller has given notice to the buyer of their intention to resell and the buyer still fails to pay, the seller can resell the goods.

Consequences of Resale:

• If the seller resells the goods, they can recover any deficiency in the original price from the buyer.
• If there is a surplus from the resale, the unpaid seller must return it to the buyer.

Example: A sells perishable goods to B. B fails to make the payment on the agreed date. A informs B of the intention to resell the goods but does not receive any payment. A can resell the goods and claim the balance from B if the resale price is lower.

Rights of an Unpaid Seller Against the Buyer

Apart from the rights against the goods, the unpaid seller also has rights against the buyer, which include:

1. Right to Sue for Price (Section 55):
   The unpaid seller can sue the buyer for the price of the goods if ownership has already passed to the buyer and they refuse to pay.

2. Right to Sue for Damages (Section 56):
   The unpaid seller can sue the buyer for damages if the buyer wrongfully neglects or refuses to accept and pay for the goods.

3. Right to Repudiate the Contract:
   If the buyer fails to pay within the stipulated time, the seller can repudiate the contract and refuse further performance.

Conclusion

The rights of an unpaid seller are vital for protecting sellers in commercial transactions, ensuring they are not left uncompensated when buyers fail to meet their obligations. The right of lien allows the seller to hold the goods, stoppage in transit enables them to regain possession if the buyer becomes insolvent, and the right of resale allows them to recover losses. Furthermore, these rights provide legal recourse, allowing the seller to sue for the price or damages, safeguarding the seller's interests comprehensively.

Subscribe on YouTube - NotesWorld

For PDF copy of Solved Assignment

Any University Assignment Solution

WhatsApp - 9113311883 (Paid)