Rights of an Unpaid Seller Against Goods
An unpaid seller is one who is not paid for the goods sold by him. Any seller would be deemed to be an unpaid seller if:
A. The whole price is not paid or tendered.
B. The credit period allowed has passed and the payment is due.
C. The negotiable instrument issued against payment has been dishonoured.
D. The buyer is declared insolvent.
His rights against goods are:
A. Rights when the property is passed to the buyer:
- Right of lien.
- Right of stoppage in transit.
- Right of resale.
B. Rights when the property has not passed to the buyer
- Right of withholding delivery.
- Right of stoppage in transit.
Rights of an unpaid seller against the buyer.
If the goods are delivered to the buyer, the unpaid seller has a right to sue the buyer for recovery of price, including costs of suit, customary interest and damages, if any.
If the buyer takes the delivery of the goods from the seller, by issuing a cheque and later the cheque gets bounced, the unpaid seller can sue the buyer under the Negotiable Instruments Act, 1881. Such a buyer is liable for punishment with imprisonment or a fine.
Seller’s lien refers to the seller’s right to retain the possession of goods until certain charges due in respect of them are paid. The unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases:
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.
Stoppage in Transit
Stoppage in transit is one of the rights of an unpaid seller. This right consists of stopping the goods while they are in the possession of a carrier or lodged at any place in the course of transmission to the buyer. The seller can resume the possession of the goods and retain until the price is tendered or paid.
Rights of an unpaid seller to stop the goods in transit. They are:
A. The buyer of goods must have become insolvent.
B. The goods should be in possession of a middleman or some person intervening between the vendor who has parted with the goods and a buyer who has not received them.
C. The goods must be in transit or in possession of a middleman for the purpose of transit.
D. The seller’s right of stoppage in transit can be exercised as long as the goods are in transit and not yet delivered to the buyer.
The seller may retain the goods until price is tendered or paid.
Right of Resale by a Seller
When a seller exercises his right of lien or right of stoppage in transit over goods, he cannot resale them as he wishes because of the existence of the original contract between the seller and buyer. The buyer has the right to pay for the goods and have them. If the seller resells them without notice of the buyer, he has to give the profit accrued on the resale to the buyer. Therefore the seller has limited right to resell the goods.
The seller can resell the goods that are under his lien or stopped in transit in the following cases:
If the goods are perishable in nature; the seller has given a notice to the defaulting buyer granting reasonable time for the payment. The buyer fails to pay the price within the specified time; the seller can sell the goods and also retain the profits, if any.
The original contract can provide the right to resale in case the buyer fails to pay the price and in such a case the seller need not send a notice to the buyer.
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