Rights of an Unpaid Seller under Sale of Goods Act
Rights of an Unpaid Seller under the Sale of Goods Act, 1930
1. Meaning of Unpaid Seller
Section 45 of the Sale of Goods Act, 1930 defines an “unpaid seller” as a person who has sold goods but:
Has not received the whole or any part of the price; or
Has received a bill of exchange or other negotiable instrument for the price but it has been dishonored.
2. Rights of an Unpaid Seller
The rights of an unpaid seller are broadly classified into three categories:
A. Rights against the Goods
These are rights exercisable while the seller retains possession of the goods.
Right of Lien (Section 47)
Seller can retain possession of goods until payment is made.
Applies when:
Seller has delivered goods but retains possession lawfully.
Payment is not made according to contract.
Case Law:
K. C. Varghese v. Indian Oil Corp Ltd. (1993, Kerala HC) – Seller entitled to retain possession of goods until price is paid, even against the buyer.
Right of Stoppage in Transit (Section 48)
If goods are in transit and buyer becomes insolvent, unpaid seller can stop goods from reaching the buyer.
Can reclaim goods from carrier or transport agency.
Case Law:
Mohinder Singh v. Lalit Mohan (1965, Punjab HC) – Seller successfully stopped goods in transit upon buyer’s insolvency.
Right of Resale (Section 50)
Seller can resell the goods if:
Buyer defaults in payment;
The resale is conducted after giving reasonable notice.
Case Law:
R.C. Chhapgar v. Bombay Oil Mills Ltd. (1969, Bom HC) – Resale of goods valid when buyer defaulted, seller followed statutory notice requirement.
B. Rights against the Buyer Personally
Even if goods have been delivered, the unpaid seller can sue the buyer for the price.
Section 55: Seller can claim the price as a debt or damages for non-acceptance.
Case Law:
Bhatia & Co. v. Maharashtra Sugar Mills Ltd. (1971, SC) – Seller entitled to recover price by legal action even after goods delivered if buyer fails to pay.
C. Rights Against the Goods for Securing Payment
Lien – Seller retains possession until payment.
Stoppage in Transit – Prevents buyer (or buyer’s agent) from taking possession if insolvency occurs.
Resale – Right to sell goods to recover price when buyer defaults.
Note: These rights are cumulative; seller may exercise multiple remedies concurrently.
3. Conditions for Exercising Rights
Goods must be specific or ascertained – Rights apply to goods already identified.
Buyer must be insolvent for stoppage in transit.
Seller must have lawful possession of goods to exercise lien.
Reasonable notice is required for resale.
4. Illustrations / Examples
Lien:
Seller delivers 100 bags of rice to buyer but retains warehouse possession. Buyer fails to pay. Seller can retain bags until payment.
Stoppage in Transit:
Seller ships goods by rail. Before delivery, buyer becomes insolvent. Seller can stop goods at station or return to warehouse.
Resale:
Buyer defaults on payment. Seller gives reasonable notice and sells goods to another party. Proceeds offset buyer’s debt.
Suing Buyer:
Seller can sue buyer for unpaid price even if goods are delivered, under contract law.
5. Key Principles from Case Law
Lien is dependent on possession – Seller cannot assert lien after voluntarily delivering goods without conditions (K.C. Varghese case).
Stoppage in transit requires insolvency – Right arises only when buyer becomes insolvent (Mohinder Singh case).
Resale must be reasonable – Seller must act fairly and give notice (R.C. Chhapgar case).
Right to sue is independent – Seller can sue for price even after delivery (Bhatia & Co. case).
6. Conclusion
Unpaid seller has three primary sets of rights under the Sale of Goods Act, 1930:
Rights against the goods – Lien, stoppage in transit, resale.
Rights against the buyer personally – Recovery of price by legal action.
Cumulative enforcement – Seller can combine remedies depending on circumstances.
These rights protect the seller’s interest and ensure payment while balancing buyer’s property rights.
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