Unpaid Seller, Rights of an Unpaid seller against the Goods and against the Buyer

An unpaid seller, as defined in the Sale of Goods Act, 1930, refers to 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 condition on which it was received has not been fulfilled due to the dishonor of the instrument. This definition encompasses situations where the seller has part or none of the payment for the goods sold, highlighting the seller’s rights to seek remedies under the Act for the recovery of the unpaid price of the goods.

Rights of an Unpaid seller against the Goods

The rights of an unpaid seller against the goods are critical elements of the Sale of Goods Act, 1930, offering protection and recourse to sellers when buyers fail to fulfill their payment obligations. These rights are pivotal in ensuring that sellers have leverage to recover the cost of goods or retain possession until payment is made. The rights of an unpaid seller against the goods can be broadly categorized into two: rights before the passing of property to the buyer and rights after the passing of property to the buyer.

Rights Before the Passing of Property to the Buyer

1. Withholding Delivery:

If the property in the goods has not yet passed to the buyer, the unpaid seller has the right to withhold delivery. This is akin to the seller exercising a lien on the goods for the price while he is in possession of them.

Rights After the Passing of Property to the Buyer

Once the property in the goods has passed to the buyer, the unpaid seller’s rights are more defined and can be exercised under specific conditions:

1. Lien:

The unpaid seller who is in possession of the goods is entitled to retain possession until payment is made, under certain conditions. This right is available:

• Where the goods have been sold without any stipulation as to credit;
• Where the goods have been sold on credit, but the term of credit has expired;
• Where the buyer becomes insolvent.

2. Stoppage in Transit:

If the buyer becomes insolvent and the goods are in transit, the unpaid seller can take steps to stop the goods and resume possession. This right is crucial for protecting the seller when the buyer’s insolvency becomes apparent after the goods have left the seller’s possession but have not yet been delivered to the buyer.

3. Resale:

Under certain conditions, an unpaid seller who has exercised his right of lien or stoppage in transit may resell the goods. This right is particularly important to mitigate losses when it becomes clear that the buyer will not fulfill their payment obligations. The right to resell may be subject to specific conditions laid down in the Act or the original contract of sale.

4. Recession of the Contract:

In cases where the goods are perishable or where the unpaid seller has given notice to the buyer of his intention to resell and the buyer does not within a reasonable time pay or tender the price, the seller may rescind the contract and sell the goods.

Special Provisions

• The rights of an unpaid seller are subject to the terms of the contract and the provisions of the Sale of Goods Act, 1930.
• The exercise of these rights by the unpaid seller does not necessarily discharge the buyer’s obligation to pay for the goods, except in cases where the contract is rescinded.
• The unpaid seller’s right to lien, stoppage in transit, and resale are remedies that enable the seller to either secure payment or mitigate loss but must be exercised according to the procedures and limitations established by the law.

Rights of an Unpaid seller against the Buyer

The rights of an unpaid seller against the buyer, as outlined in the Sale of Goods Act, 1930, are designed to provide recourse for sellers when buyers fail to fulfill their payment obligations. These rights complement the rights against the goods themselves and focus on personal remedies that the unpaid seller can pursue directly against the buyer. These rights are crucial for ensuring that the seller has avenues to recover the money owed for the goods supplied.

1. Suit for Price

The most straightforward right of an unpaid seller is to sue the buyer for the price of the goods. This right arises:

• When the property in the goods has passed to the buyer, and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract.
• When the price is payable on a certain day, irrespective of delivery, and the buyer fails to pay.

The suit for price enables the seller to demand the payment that is due, offering a legal pathway to recover the funds for the goods that have been sold and delivered.

2. Damages for Non-Acceptance

If the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue for damages for non-acceptance. This right is particularly relevant in situations where:

• The contract is for the sale of goods for a price.
• The buyer fails to fulfill their obligation to accept the goods and make payment.

The calculation of damages may be guided by the difference between the contract price and the market price at the time when the goods ought to have been accepted, or at the time of refusal.

3. Suit for Repudiation

Before the due date of performance, if the buyer repudiates (rejects) the contract, the seller has the right to sue for damages for repudiation. This preemptive right allows the seller to seek compensation when it becomes clear that the buyer intends not to honor the contract, even before the actual time for performance has arrived.

4. Suit for Interest

In cases where the sale contract stipulates interest to be paid on the price from a specific date until payment or where there is a course of dealing between the parties that establishes such a term, the seller may sue for interest. Furthermore, in the absence of a specific contract term, the court may, in its discretion, award interest at a rate it deems reasonable, from the date of tender of the goods or from the date the price was payable to the date of actual payment.