Meaning & Right Of An Unpaid Seller


According to section 45(a), The seller of goods is deemed to be an unpaid seller if:-

1) The whole of the price has not been paid (or) tendered and the seller had an immediate right of action for the price.

2) When a bill of exchange (or) other negotiable instrument was given as payment, but the same has been dishonored, unless and until this payment was an absolute and not a conditional payment.

Any person who is in a position of a seller is also a seller and may exercise the rights conferred upon an ‘Unpaid seller’ in the above-said circumstances.

Rights of an unpaid seller: An unpaid seller has been expressly given the right against the goods as well as the buyer personally which has been discussed below:- Rights of the unpaid seller may broadly be classified under two heads

(1) rights against the goods.

(2) Right against the buyer personally.

(1) Rights against the goods: Again it was classified into two types:-

(i) Where the property in the goods has passed:

(ii) Where the property in the Goods has not passed

(i) Where the property in the goods has passed: Again it has been classified into three types

(a) Right of Lien. (b) Right of stoppage in transit and

(C) Right of re-sale.

(a) Right of Lien : (Section 46(1)(a) and 47 to 49) The word ‘Lien’ means a right to retain possession. An unpaid seller, who is in possession of the goods, is entitled to remain them until payment (or) tender of the price in the following cases:-

  •  Where the goods have been sold without any stipulation as to credit (or)
  • Where the goods have been sold on credit but the terms of credit have expired (or)
  • Where the buyer becomes insolvent.

(b) Right of stoppage in transit: (section 46(1)(b) and 50 to 52) The unpaid seller has the right of stopping the goods in transit after he has parted with their possession to a carrier, in case of insolvency of the buyer. The right is exercisable by the seller only if the following conditions are fulfilled:-

1. The seller must be unpaid.

2. He must have parted with the possession of goods.

3. The goods must be in transit.

4. The buyer must have become insolvent.

5. The right is subject to provisions of the act.

(C) Right of re-sale: (Section 46(1)(C) and 54) The unpaid seller can resell the goods if:-

1) The seller has exercised the right of lien (or) stoppage of goods in transit.

2) Where the goods are of perishable nature (or)

3) When the seller has given notice to the buyer of his intention to resell the goods. However, the notice by the seller has not required if the goods are perishable.

4) The buyer fails to pay the price within a reasonable time.

(ii) where the property in the Goods has not passed: (section 46(2)) Where the property in goods has not passed to the buyer, an unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit where the property has passed to the buyer.

2. Rights against the buyer personally: An unpaid seller can enforce certain rights against the goods as well as the buyer personally. The rights which an unpaid seller may enforce against the buyer personally is called the rights in personam as against the right in rem (i.e.., rights against the goods), and are in addition to his rights against the goods. The rights in personam are as follows:-

(a) Suit for price: (Section 55) (a) 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 the price, the seller can sue the buyer for the price of the goods. (Section 55(1).

(b) Where a property has not passed under the contract of sale and 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 although the property in the Goods has not passed and the goods have not been appropriated to the contract. (Section 55(2).

(b) Suit for damages for non-acceptance: (section 56) An unpaid seller has the right to sue the buyer for recovery of damages if the seller is ready and willing to deliver the goods to the buyer as per the terms of the contract; but the buyer wrongfully neglects (or) refuses to accept the goods. As regards the measure of damages, section 73 of the Indian contract Act, 1872, applies.

(C) Suit for damages for repudiation of contract: (section 60) Where the buyer repudiates the contract before the date of delivery, the seller may either:- 1) Treat the contract as subsisting and wait till the date of delivery. 2) 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’.

(d) suit for interest: (section 61(2)(a)) In case of breach of contract on the part of the buyer, while filing a suit for the price, the seller may sue the buyer for interest from the date of the tender of the goods (or) from the date on which the price was payable.

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