UNPAID SELLER IN BUSINESS LAW: MEANING, RIGHTS AND DUTIES OF UNPAID SELLER, CLAIM FOR DAMAGES

 MEANING OF 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 the sale of goods act,

·       An unpaid seller is one:

a) Who has not been paid the price of the goods he has supplied, or has been partially paid for the goods?

b) Who has been given a negotiable instrument like a bill of exchange that has been dishonored? It is immaterial whether the seller is directly involved in the transaction, or he is acting through his agent.

RIGHTS OF AN UNPAID SELLER

 1. Rights against the goods.

 2. Rights against the buyer of goods.

1) RIGHTS OF UNPAID SELLER AGAINST GOODS

A) Rights of Lien

 According to subsection (1) of Section 47 of the Sale of Goods Act, 1930, an unpaid seller, who is in possession of the goods, can retain their possession until payment. This is possible in the following cases:

He sells the goods without any stipulation for credit.

·       The goods are sold on credit but the credit term has expired.

·        The buyer becomes insolvent.

B) Right of Stoppage in Transit:

• This right is an extension to the right of lien. The right of stoppage in transit means that an unpaid seller has the right to stop the goods while they are in transit, regain possession, and retain them till he receives the full price.

• If an unpaid seller has parted with the possession of the goods and the buyer becomes insolvent, then the seller can ask the carrier to return the goods back. This is subject to the provisions of the Act.

• The seller has the right of stoppage of goods in the following circumstances:

a) when the price of goods has totally or partially not been paid.

b) When the buyer has become insolvent before paying for the goods.

 c) 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. The rules determining as to when the goods are deemed to be in transit are discussed as:

a) Delivery of goods to the carrier or bailee.

b) The buyer taking delivery before destination.

c) Holding the goods by the carrier on behalf of the buyer.

d) When the goods are delivered to a ship chartered by the buyer.

e) When the goods are rejected by the buyer.

f) When partial delivery has been made to the buyer.

c) RIGHT OF RE-SALE (Section 54)

• The right of resale is an important right for an unpaid seller. If he does not have this right, then the right of lien and stoppage won’t make sense. An unpaid seller can exercise his right of resale under the following conditions:

1) Goods are perishable in nature.

2) Seller gives a notice to the buyer of his intention of resale:

3) Unpaid seller resells the goods post exercising his right of lien or

4) Resale where the right of resale is reserved in the contract of sale:

5) Property in the goods has not passed to the buyer:

2) RIGHTS AGAINST THE BUYER

1) Suit for price: According to section 55, if the ownership of goods has been transferred to the buyer and he retires to make the payment for the goods, the seller has the right to file a suit against the buyer.

2) 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 mollified intention, or refuses or to accepts the goods or to pay for the same, the seller has the right to file a suit against the buyer for damages.

3) 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.