Q. Who is unpaid seller? Explain the rights of an unpaid seller.
Ans. Who is an Unpaid Seller? A person who has sold goods to another person but has not been paid for the goods or has been paid partially is called an unpaid seller. According to Section 45 of sale of good act, an unpaid seller is one:
(1) Who has not been the price of the goods he has supplied, or has been partially paid for the goods.
(2) Who has been given a negotiable instrument like a bill of exchange that has been dishonored.
Rights of an unpaid seller: The unpaid seller has the following rights:
(1) Rights against the goods: According to Section 46, when the buyer has not paid the full or partial price of the goods supplied to him, then the seller who has transferred the ownership of goods to the buyer has the following rights with regard to the goods:
(a) Right of lien: According to Section 47, if the seller of goods has not been paid, and the ownership of goods has been transferred to the buyer but the goods are in possession of the seller, the seller has the right to retain the goods till he receives the price of the goods from the buyer. The seller has this right under the following circumstances:
(i) When the goods have not been sold on credit.
(ii) When the payment has not been made on the promised date, if the goods were sold on credit and credit period is expired.
(iii) When the buyer has become insolvent.
Even if the seller has the possession of goods as an agent or bailee of the buyer, he still has the right of lien of the goods. When an unpaid seller has made partial delivery of goods, he can exercise his right of lien on the goods not delivered unless the part of delivery was made in circumstances to show an intention to waive the lien.
Termination of lien: According to Section 49, the lien of an unpaid seller terminates in the following circumstances.
(i) When the seller delivers the goods to a carrier or any other bailee, right of lien terminates.
(ii) When the buyer or his agent lawfully obtains the possession of goods.
(iii) When the seller has waived the lien on the goods.
(b) Right of stoppage of goods in transit: According to Section 50, when the seller has delivered the goods to a carrier for transmission to the buyer and the goods are in transit, if he receives information that the buyer has become insolvent, the seller has the right to stop the goods in transit and retain their possession till such time as he is not paid the price of goods. The seller has the right of stoppage of goods in the following circumstances:
(i) When the price of goods has totally or partially not been paid.
(ii) When the buyer has become insolvent before paying for the goods.
(iii) When the goods are in transit.
Duration of transit: According to Section 51, when the seller has delivered the goods to the carrier or bailee for transmission to the buyer, until the goods are received by the buyer or his agent is the duration of transit. Even if the goods have reached the destination, the seller’s right of lien does not terminate till the buyer or his agent has taken the possession of goods. The rules as to determine when goods are deemed to be in transit are:
(i) Delivery of goods to the carrier or bailee: The goods are deemed to be in transit when they have been delivered by the seller to the carrier or bailee for transmission to the buyer, and the duration of the period in transit is till the buyer or his agent takes possession of the goods.
(ii) The buyer taking delivery before destination: If the buyer or his agents takes the delivery of goods before the good reaches the destination, the duration of the transist, lawfully ended.
(iii) Holding the goods by the carrier on behalf of the buyer: If, after the goods have reached the destination, the carrier is holding the goods on behalf of the buyer, the duration of transit is deemed to have ended.
(iv) When the goods are rejected by the buyer: If the buyer rejects the goods and the possession of goods remains with the career or bailee, the duration of transit is deemed to have ended.
(v) When the goods are delivered to a ship chartered (hired) by the buyer: When the goods are delivered on board a ship chartered by the buyer, it depends upon the circumstance of the case whether the ship’s owner (i.e. the shipping company) accepts the goods in the capacity of the carrier or an agent of the buyer. If the shipping company accepts the goods as an agent of the buyer, the duration of transit terminates.
(vi) When the carrier or bailee refuses to deliver the goods: When the carrier or bailee, with malafide (दुर्भावना, जानबूझ के) intention, refuses to deliver the goods to the buyer or his agent, the duration of transit is deemed to end.
(vii) When partial delivery has been made to the buyer: In case a part of goods has been delivered to the buyer or his agent, and the rest of goods are in transit, and if the partial delivery is made with the intention that it is not deemed to be total delivery, the seller has the right to stop the remaining goods in transit.
How Stoppage of Goods in Transit is Affected?
According to Section 52, the stoppage of goods in transit is affected by:
(i) taking actual possession of goods.
(ii) giving notice of the seller’s claim to the carrier or any other person having the control of goods.
(c) Right of Re-sale:
(i) Besides the right of lien and stoppage of goods in transit, an unpaid seller has the right to re-sell the goods, if the goods are perishable.
(ii) When the unpaid seller has acquired the possession of goods by lien or stoppage of goods in transit, and has given notice to the buyer of his interaction to re-sell the goods, and if the buyer does not pay for the goods, the unpaid seller can re-sell the goods. The seller is also entitled to claim from the buyer any loss that he may suffer in re-selling the goods. If the unpaid seller makes a profit by reselling the goods, the defaulting buyer has no claim on such profit, because the law does not permit a defaulter to profit by his default.
(iii) In case of a default on the part of the buyer, when the seller has secured the right to re-sell in a clear and certain procedure, he can proceed with the resale of goods.
When an unpaid seller plans to re-sell the goods, he is obliged by law to give one last opportunity to the buyer by informing him of his intention to do so, so that the buyer can assure himself, if he desires, that the goods are sold at a reasonable price. If the unpaid seller does not inform the buyer of his intention to re-sell the goods and is put to a loss in the re-sale, he cannot later claim such loss from the defaulting buyer or keep with himself any profit that may result from the re-sale.
(2) Rights Against the Buyer: An unpaid seller has the following rights against the buyer:
(a) Suit for price: According to Section 55, if the ownership of goods has been transferred to the buyer and he refuses to make the payment for the goods, the seller has the right to file a suit against the buyer.
According to Section 55(2), if, according to the terms of the contract of sale, the payment for the goods is to be made by a certain time or date by the buyer and such payment has not been made, the seller has the right to sue the buyer even if the ownership of goods has been transferred to the latter.
(b) Suit for damages: According to Section 56, [if the buyer] refuses to accept the goods or defaults in making the payment for them with a malafide intention, or [refuses to accept the goods or to pay for the same, the seller has the right to file a suit against the buyer for damages.]
(c) Repudiation of contract before due date: According to Section 60, [if the buyer repudiates the contract before the due date] for the delivery of goods [and the seller does not accept the repudiation and waits for the due date] to make the delivery, [he reserves the right to sue the buyer for repudiating the contract.]
(d) Suit for interest: The unpaid seller, according to Section 61, has the right to be paid interest by the buyer for any delay in making the payment. Such interest is affective on the amount of payment for the period of delay after the due date.
Or
Such interest is charge after due date of payment and if there is agreement interest will be charge from due date.
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