Rights of Unpaid Seller Against Buyer and Goods

Introduction

The law protects a seller when the buyer fails to pay the price of goods. Such a seller is called an unpaid seller. The Sale of Goods Act, 1930 gives him specific rights against both the buyer (person) and the goods (property). These rights ensure that the seller can recover money or protect himself from loss.

Meaning / Definition

An unpaid seller is a seller who has not received the full price of goods or whose payment through a negotiable instrument (like cheque or bill) has failed.

His rights are divided into:

• Rights against the buyer (personal rights)
• Rights against the goods (property rights)

Modes or Types

Rights Against the Buyer

Suit for Price

The seller can sue the buyer for the price of goods when:

• Ownership (property in goods) has passed to the buyer, and
• The buyer refuses or neglects to pay

Even if goods are not delivered, the seller can sue if:

• Payment date has passed, and
• Buyer refuses to pay

Suit for Damages

If the buyer refuses to accept goods or pay:

• Seller can claim compensation (money for loss)
• If goods have a market, seller should resell them
• Loss = difference between contract price and market/resale price

The seller must reduce loss where possible (duty to minimize loss).

Suit for Interest

Seller can claim interest:

• If contract provides for interest, or
• From the date he informs the buyer

Court may also grant reasonable interest.

Repudiation Before Due Date (Anticipatory Breach)

If buyer refuses before delivery date:

• Seller can cancel contract immediately and sue for damages, or
• Wait until delivery date

Rights Against the Goods

Right of Lien

Lien means the right to retain possession of goods until payment is made.

Available when:

• Goods sold without credit, or
• Credit period expired, or
• Buyer becomes insolvent (unable to pay debts)

Part delivery does not remove lien unless agreed.

Termination of Lien

Lien ends when:

• Seller delivers goods to buyer
• Seller gives goods to carrier without reserving rights
• Seller waives (gives up) the right

Right of Stoppage in Transit

If buyer becomes insolvent:

• Seller can stop goods while they are with carrier
• Seller can regain possession

Conditions:

• Seller is unpaid
• Buyer is insolvent
• Goods are in transit
• Ownership has passed to buyer

Transit ends when:

• Buyer receives goods
• Carrier acknowledges holding goods for buyer

Right of Resale

Seller can resell goods when:

• Goods are perishable, or
• Buyer fails to pay after notice, or
• Right of resale is reserved in contract

Effects:

• Seller can recover loss from buyer
• If profit is made, buyer generally cannot claim it
• New buyer gets good title

Important Case Law

• M. Lachia Shetty v Coffee Board – Explained duty to reduce loss (mitigation)
• Grice v Richardson – Seller can retain remaining goods under lien
• Valpy v Gibson – Lien lost after delivery to carrier
• Great Indian Peninsula v Hanmandas – Transit ends when buyer takes delivery
• Whitehead v Anderson – Transit continues if conditions not fulfilled
• Ward v Bignall – Resale cancels contract; seller cannot claim full price after resale

Distinction / Comparison

Lien vs Stoppage in Transit

Practical Example

A sells goods to B on credit. Before payment:

• If goods are still with A → A uses lien
• If goods are with transporter and B becomes insolvent → A stops goods in transit
• If B refuses to pay → A can resell goods and recover loss

Summary

• Unpaid seller has rights against buyer and goods
• Rights against buyer include suit for price, damages, interest
• Rights against goods include lien, stoppage, resale
• Lien requires possession; stoppage applies during transit
• Seller must reduce loss where possible
• Resale cancels contract and protects seller from loss
• Law balances protection of seller with fairness to buyer