Under the Sale of Goods Act, 1930, an 'unpaid seller' is a seller who has not received the full price of the goods sold, or who has received a cheque or bill that has been dishonoured. To protect such a seller, the law gives them certain rights. These rights are divided into two groups — rights against the goods and rights against the buyer personally. This guide explains who an unpaid seller is and lists all the rights available to them.
An unpaid seller is one who has not received the full price, or whose cheque/bill is dishonoured.
The rights are given under the Sale of Goods Act, 1930.
Rights are of two kinds: against the goods and against the buyer.
Rights against the goods: lien, stoppage in transit, and resale.
Right of lien = right to keep the goods until paid.
Stoppage in transit applies when the buyer becomes insolvent.
Rights against the buyer: suit for price, damages, interest and repudiation.
According to the Sale of Goods Act, 1930, a seller is called an 'unpaid seller' when:
The term 'seller' here also includes an agent of the seller, such as a person who has paid or is responsible for the price.
So, an unpaid seller is one who has not been fully paid and therefore has certain legal rights to recover the price or protect the goods.
When the ownership of the goods has passed to the buyer, the unpaid seller has the following rights against the goods:
Right of Lien: The right to keep possession of the goods until the price is paid. The seller can retain the goods if the price is unpaid, even though the buyer owns them.
Right of Stoppage in Transit: If the buyer becomes insolvent and the goods are still in transit (with a carrier), the seller can stop the goods and regain possession before they reach the buyer.
Right of Resale: The unpaid seller can resell the goods in certain cases — for example, if the goods are perishable, or if the seller has given notice and the buyer still does not pay.
(When the ownership has not passed to the buyer, the seller also has a 'right of withholding delivery'.)
Besides rights against the goods, the unpaid seller has personal rights against the buyer:
Suit for Price: If the ownership has passed to the buyer and the buyer refuses to pay, the seller can sue the buyer for the price of the goods.
Suit for Damages for Non-acceptance: If the buyer wrongfully refuses to accept and pay for the goods, the seller can sue for damages (the loss suffered).
Suit for Interest: The seller can claim interest on the unpaid price from the date it became due.
Suit for Damages for Repudiation: If the buyer cancels the contract before the date of delivery, the seller can treat the contract as broken and sue for damages.
Under the Sale of Goods Act, 1930, an unpaid seller is a seller who has not received the whole of the price of the goods, or who received a bill of exchange or cheque as conditional payment that was later dishonoured. The term also includes an agent of the seller in a similar position.
The unpaid seller has three main rights against the goods: (1) the right of lien — to keep possession of the goods until paid; (2) the right of stoppage in transit — to stop the goods while in transit if the buyer becomes insolvent; and (3) the right of resale — to resell the goods in certain cases, such as when they are perishable or after giving notice to the buyer.
Against the buyer personally, the unpaid seller can: (1) sue for the price if ownership has passed and the buyer does not pay; (2) sue for damages for non-acceptance if the buyer wrongfully refuses the goods; (3) sue for interest on the unpaid price; and (4) sue for damages for repudiation if the buyer cancels the contract before delivery.
The right of stoppage in transit allows an unpaid seller to stop the goods while they are still in the hands of a carrier (in transit) and regain possession of them, if the buyer becomes insolvent before the goods reach them. This right can be used until the goods reach the buyer.
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