Unpaid Seller and His Rights under Sale of Goods Act
Introduction
An unpaid seller plays a crucial role in protecting the interests of sellers when the buyer fails to pay the price. The Sale of Goods Act, 1930 provides several legal rights to such sellers. These rights help the seller recover money or control the goods when payment is not made.
Meaning / Definition
Unpaid Seller (Section 45)
A seller is called an unpaid seller when:
- The whole price has not been paid or offered (tendered), or
- A negotiable instrument (like cheque or bill of exchange) is received as conditional payment, but it is dishonoured (not paid)
The term “seller” also includes agents or persons acting like a seller who are responsible for the price.
Modes or Types
Rights of Unpaid Seller
The rights of an unpaid seller are divided into two types:
Rights Against Goods (Right over property)
- Right of Lien
- Right of Stoppage in Transit
- Right of Resale
Rights Against Buyer (Right against person)
- Suit for price
- Suit for damages
- Suit for interest
Right of Lien (Sections 47–49)
The right of lien means the seller can retain possession of goods until payment is made.
When lien can be exercised:
- Goods sold without credit
- Credit period has expired
- Buyer becomes insolvent (unable to pay debts)
Part Delivery (Section 48):
Seller can keep remaining goods even after partial delivery unless agreed otherwise.
When lien is lost:
- Goods delivered to carrier without reserving rights
- Buyer gets lawful possession
- Seller waives (gives up) the right
Right of Stoppage in Transit (Sections 50–52)
This right allows the seller to stop goods while they are in transit and regain possession.
Conditions:
- Buyer becomes insolvent
- Goods are in transit
- Seller has already parted with possession
How it is exercised:
- Taking actual possession, or
- Giving notice to carrier to return goods
Duration of transit (Section 51):
- Starts when goods are given to carrier
- Ends when buyer or agent receives goods
Effect:
Contract remains valid. Buyer can still get goods after payment.
Right of Resale (Section 54)
The seller can resell goods in the following cases:
- Goods are perishable
- Notice of resale is given and buyer fails to pay
- Right of resale is reserved in contract
- After exercising lien or stoppage
Effect:
- Seller can recover loss if resale price is lower
- Seller keeps profit if resale price is higher
Rights Against Buyer
- Suit for price: When ownership has passed but payment not made
- Suit for damages: For loss caused by buyer’s failure
- Suit for interest: When payment is delayed
Distinction / Comparison
| Basis | Rights Against Goods | Rights Against Buyer |
|---|---|---|
| Nature | Right over property | Right against person |
| Objective | Control or recover goods | Recover money |
| Examples | Lien, stoppage, resale | Suit for price, damages |
| Requirement | Seller must have possession or control | Buyer must be in breach |
Practical Example
A sells goods to B on credit. Before payment, B becomes insolvent.
- A can stop goods in transit and take them back
- If goods are already with A, he can retain them (lien)
- If needed, A can resell the goods
- A can also sue B for damages or price
Summary
- An unpaid seller is one who has not received full payment
- Rights are divided into rights against goods and rights against buyer
- Lien allows seller to retain possession of goods
- Stoppage in transit allows seller to stop goods during delivery
- Resale helps seller recover losses
- Seller can also sue buyer for price, damages, and interest
- These rights protect the seller from financial loss