Rights of an UNPAID SELLER

Sale of Goods Act - 1930

Vanessa Dsouza Roll No. 657 MMS - I

Unpaid Seller The seller of goods is deemed to be an unpaid seller within the meaning of the Sale of Goods Act i. when the whole of the price has not been paid of tendered. when the bill of exchange or negotiable instrument has been received as a condition of payment and the condition on which it was received has not been fulfilled by the reason on dishonor of the instrument or otherwise. The seller remains as unpaid seller as long as any portion of the price, however small, remain unpaid. Where the whole of price has been tendered, and the seller refused to accept such a tender, seller ceases to be an unpaid seller. In such a case the seller loses all rights against the goods. If there is a period of credit then the seller is not unpaid until the price become due. Against if there is a condition attached to payment it must be fulfilled. The unpaid sellers right can be exercised by an agent of the seller to whom the bill of leading has been endorsed, or a consignor or an agent who has himself paid, or is directly responsible for the price. The unpaid seller has two types of rights under the Sale of Goods act. This includes the sellers right against the goods and the sellers right against the buyer personally. 1) Rights Against The Goods Subject to the provisions of this Act and of any law for the time being in force, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law a lien on the goods for the price while he is in possession of them; in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them; a right of re-sale as limited by this Act. Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and coextensive with his rights of lien and stoppage in transit where the property has passed to the buyer. A. When the property in the goods has been transferred: i) Right of lien - A lien is a right to retain possession of goods until payment of the price. Rules of Lien Subject to the provisions of this Act, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely:a) where the goods have been sold without any stipulation as to credit ii.

b) where the goods have been sold on credit, but the term of credit has expired; c) where the buyer becomes insolvent. The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer. Where an unpaid seller has made part delivery of the goods, he may exercise his right of lien on the remainder, unless such part delivery has been made under such circumstances as to show an agreement to waive the lien. Termination of lien The unpaid seller of goods loses his lien thereona) when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods; b) when the buyer or his agent lawfully obtains possession of the goods; by waiver thereof. c) when the seller expressly or implied waives his rights of lien. The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he has obtained a decree for the price of the goods. ii) Right of stoppage in transit: Subject to the provisions of this Act, when the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transit, that is to say, he may resume possession of the goods as long as they are in the course of transit, and may retain them until payment or tender of the price. An unpaid seller can exercise right of stoppage of goods in transit when each of the following conditions are satisfied: a) Seller had parted with the possession of the goods. b) Goods are in the course of transmission to the buyer. c) The buyer of the goods has become insolvent. Duration of transit Goods are deemed to be in course of transit from the time when they are delivered to a carrier or other bailee for the purpose of transmission to the buyer, until the buyer or his agent in that behalf takes delivery of them from such carrier or other bailee. Following are the cases where transit is presumed to be an end the sellers right of stopping the goods in transit terminates: a) If the buyer or his agent in that behalf obtains delivery of the goods before their arrival at the appointed destination, the transit is at an end. b) If, after the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges to the buyer or his agent that he holds the

goods on his behalf and continues in possession of them as bailee for the buyer or his agent, the transit is at an end and it is immaterial that a further destination for the goods may have been indicated by the buyer. c) If the goods are rejected by the buyer and the carrier or other bailee continues in possession of them, the transit is not deemed to be at an end, even if the seller has refused to receive them back. d) Where the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that behalf, the transit is deemed to be at an end. e) Where part delivery of the goods has been made to the buyer or his agent in that behalf, the remainder of the goods may be stopped in transit, unless such part delivery has been given in such circumstances as to show an agreement to give up possession of the whole of the goods. How stoppage in transit is effected There are two modes of effecting stoppages of the delivery of the goods to the buyer which are in the course of transmission: a) by the seller taking actual possession of the goods, or b) by the seller giving notice of his claim to the carrier or other bailee who has the actual possession over the goods. Where the goods are in the actual possession of a person (servant or agent) other than the principal carrier, notice to be effective must be given at such time and under such circumstances that the principal or the employer, by the exercise of reasonable diligence may communicate it to his servant or agent in time to prevent the delivery of the goods to the buyer. Effect of sub-sale or pledge by buyer Subject to the provisions of this Act, the unpaid seller's right of lien or stoppage in transit is not affected by any sale or other disposition of the goods which the buyer may have made, unless the seller has assented thereto: Provided that where a document of title to goods has been issued or lawfully transferred to any person as buyer or owner of the goods, and that person transfers the documents to a person who takes the documents in good faith and for consideration, then, if such last mentioned transfer was by way of sale, the unpaid seller's right of lien or stoppage in transit is defeated, and if such last mentioned transfer was by way of pledge or other disposition for value, the unpaid seller's right of lien or stoppage in transit can only be exercised subject to the rights of the transferee. Where the transfer is by way of pledge, the unpaid seller may require the pledgee to have the amount secured by the pledge satisfied in the first instance, as far as possible, out of any other goods or securities of the buyer in the hands of the pledgee and available against the buyer.

iii) Right of resale An unpaid seller who has the possession of goods can resell them under the following circumstances: (a) when the goods are of perishable in nature: though it has not been defined in the Act, but it means perishable not only physically but also commercially. (b) when the unpaid seller gives notice to the buyer of his intension to resell the goods (c) when the seller expressly reserves right of resale in case the buyer should make default, the seller may resell the goods in the event of such a default. B. When the property in the goods has not been transferred: (i) Right of withholding delivery: If the property in the goods has not passed to the buyer, the unpaid seller cannot exercise right of lien, but gets a right of withholding the delivery of goods, similar to and co-extensive with lien

2) Rights Against buyer personally These are the rights which an unpaid seller may enforce against the buyer personally. These rights of the seller against the buyer are called rights in personam and are in addition to his rights against the goods. The rights in personam are as follows: i. Suit for price: a) where property has passed : where under a contract of sale the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods, the seller may sue him for the price of the goods. b) where property has not been passed : where under a contract of sale the price is payable on a certain day irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may sue him for the price. It makes no difference even if the property in the goods has not passed and the goods have not been appropriated to the contract. ii. Suit for damages for non-acceptance: where the buyer wrongfully neglects or refuses to pay for the goods, the seller may sue him for the price of the goods. iii. Repudiation of contract before due date: where the buyer repudiates the contract before the date of delivery, the seller may either treat the contract as subsisting and wait till the date of delivery or he may treat the contract as rescinded and sue for damages for the breach. This rule is known as the rule of anticipatory breach of contract. iv. Suit for interest: where there is a spescific agreement between the seller and the buyer as to interest on the price of the goods from the date on which payment, becomes due, the seller may charge interest on the price when it becomes due from such day as he may notify to the buyer.

Bibliography Taxmanns General & Commercial Laws 2010 Legal Aspects of Business Akhileshwar Pathak Business Law for Managers Prof. P.K.Goel Institute of Chartered Accountants of India Website - http://icai.org/post.html? post_id=4792 Kachwaha & Partners Advocates Website http://www.kaplegal.com/statutes/sales_of_goods.html Preserve Articles.com - http://www.preservearticles.com/201104065107/whois-unpaid-seller-and-what-are-its-rights.html Slideshare.net - http://www.slideshare.net/biswajit_86/lawrights-of-an-unpaidseller-condtion-and-warrenties Updates on Indian Taxation & Corporate Laws Website http://www.dateyvs.com/gener12.htm