Legal Aspects - Riddhi

8/13/2019 Legal Aspects - Riddhi

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Rights of an unpaid sellerMeaning of an unpaid seller – under section 45 of thesale of goods act defines an unpaid seller as under :

(a) When the whole of the price has not been paid or tendered.

(b) When a bill of exchange or other negotiable instrument has beenreceived as conditional payment, and the conditions on which itwas received has not been fulfilled by reason of the dishonor ofthe instrument or otherwise.

In this Chapter, the term "seller" includes any person who is in theposition of a seller, as, for instance, an agent of the seller towhom the bill of lading has been endorsed, or a consignor oragent who has himself paid, or is directly responsible for, theprice.



Right of lien or retention

Right of stoppage of goods in transit

Right of resaleRight to withhold delivery

Rights of an unpaid seller are classified under twoheads:

Rights Against thegoods

Rights against thebuyer



Right of lien or retentionA lien is a right to retain possession of goods until the buyer pays the

price. The unpaid seller can retain the goods in his possession inthe following cases:

The goods have not been sold on creditThe goods have been sold on credit but the period of credit has

expired The buyer has become insolvent [Sec. 47(1)].

It should be noted that an insolvent here means a person who iscommercially insolvent as against a person who has been adjudgedinsolvent under the Insolvency law. A person is deemed insolventwho has ceased to pay his debts as they become due or if he isunable to pay his debts in the ordinary course of dealings orbusiness, whether he has committed an act of insolvency or not[Sec. 2(8)].It should also be noted that in case the buyer becomes insolvent,the unpaid seller can exercise his right of lien even if the period of

credit has not expired



Condition under which right of lien can be exercised

1. Right of lien is a possessory right. As such, it can be exercised onlywhen the goods are in possession.

2. If the possession is lost or gone, the right of lien is also lost or gone.3. The right of lien can be exercised against the goods even if the goods

are in possession of the seller in any other capacity such as bailee ortrustee.

4. The right of lien can be exercised even if the document of title has beendelivered but the goods are in the possession of the seller.

5. Right of lien can be exercised only when the price is due and not forother expenses, e.g., godown charges, dock charges, etc.

6. Right of lien cannot be exercised on the goods repossessed after sale.

For example, when the buyer returns the goods for repair.7. Even if the seller has made part delivery, the lien may be exercised on

the goods remaining in possession. However, if the part delivery hasbeen made so as to show an intention to waive the lien, the right of liencannot be exercised (Sec. 48).



Right of stoppage of goods in Transit• The right of stoppage of goods in transit, arises to an unpaid seller

after he has parted with the possession of the goods. The seller

has the right to resume possession of the goods while they are inthe course of transit and to retain them until payment or tender ofthe price.

• When the buyer of goods becomes insolvent, the unpaid seller

who has parted with the possession of the goods has the right ofstopping them in transit.

For Example:

A, in Mumbai sends goods to a buyer in Pune through a carrier.The goods are in transit when it leaves A’s possession and B or hisagent has not taken possession

Legal Aspects - Riddhi

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