Introduction
An unpaid seller is a key concept under the Sale of Goods Act, 1930. When a seller of goods has not been paid the whole price or a negotiable instrument given for payment is dishonored, he is termed an unpaid seller. The law grants specific rights to protect the interests of such sellers.
Main Body
Definition of Unpaid Seller
As per Section 45(1) of the Sale of Goods Act, an unpaid seller is:
- A seller who has not received the whole of the price, or
- A seller who has received a bill of exchange or other negotiable instrument as conditional payment, and the instrument has been dishonored
The term includes both the seller himself and any agent or consignor acting on his behalf.
Rights of an Unpaid Seller
The rights of an unpaid seller are broadly classified into two categories: Rights against the goods and rights against the buyer personally.
I. Rights Against the Goods
1. Right of Lien (Section 47-49)
When the buyer fails to pay, the seller who has possession of goods can retain them until payment is made.
- Applies when goods are sold without a credit term
- Or when the credit term expires
- Also if the buyer becomes insolvent
2. Right of Stoppage in Transit (Section 50-52)
If the seller has parted with possession but the goods are still in transit, he can stop their delivery upon the buyer’s insolvency.
Conditions:
- Buyer must be insolvent
- Goods must be in transit
3. Right of Resale (Section 54)
Seller can resell the goods under certain circumstances:
- Perishable goods
- Notice of resale given to buyer
- No response from buyer
Seller may retain profit or recover loss depending on sale price.
II. Rights Against the Buyer Personally
1. Suit for Price (Section 55)
If property has passed to the buyer and payment is not made, the seller can sue for the price.
2. Suit for Damages (Section 56)
If buyer wrongfully refuses to accept goods, the seller can sue for damages due to non-acceptance.
3. Suit for Interest (Section 61)
The seller may claim interest on the unpaid amount from the due date.
Important Case Law
Hoth v. Hoth: Established that unpaid seller has right of lien until full payment is made.
Exceptions
- Loss of lien if goods are delivered to a carrier without reserving rights
- When buyer lawfully resells goods to a bona fide third party
Conclusion
The law provides extensive protections to unpaid sellers to ensure that they are not financially harmed by the buyer’s failure or refusal to pay. These rights safeguard the seller’s interest in both goods and monetary recovery, thus promoting trust and stability in commercial transactions.