Introduction :

A seller is ‘unpaid’ so long as he has not received the whole price, also, if the buyer has given him a bill for the price and the bill is dishonoured. Section 45 to 54 of Chapter V of The Sale of Goods Act, 1930 are related to the meaning and rights of the unpaid seller against the goods.

Section 45 : “Unpaid seller” defined

As per section 45, The seller of goods is deemed to be an “unpaid seller”, When the whole of the price has not been paid or tendered; and when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise.

Here the term “seller” includes any person who is in the position of a seller, as, for instance, an agent of the seller to whom the bill of lading has been endorsed, or a consignor or agent who has himself paid, or is directly responsible for, the price.

A seller is unpaid so long as he has not received the whole price, also, if the buyer has given him a bill for the price and the bill is dishonoured. The expression ‘the whole of the price’ would mean the whole amount stipulated in respect of an entire contract and when the contract is severable, the price of the severable part. A seller partially unpaid stands on par with the one wholly unpaid.

If the seller endorses the bill of lading in favour of his agent, the agent is an “unpaid seller”, and he may exercise the rights conferred upon an “unpaid seller” eg stop the goods in transit in his own name. The reason is that the endorsement of a bill of lading vests the property in the endorsee and entitles him to possession of the goods. If before the goods are actually delivered to the buyer, the latter becomes insolvent, the seller becomes an unpaid seller.

Section 46 : Unpaid Sellers Right

Sub-section 1 provides that, where the seller has given possession of the goods to the buyer under the contract of sale, all his rights are completely gone. This section therefore deals with a case where the seller has not parted with possession of the goods for delivery thereof to the buyer and the seller continues in possession of the goods. The unpaid seller has, by implication of law , the following rights, notwithstanding that the property in the goods may have passed to the buyer namely,

(a) a lien on the goods for the price while he is in possession of them;

(b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them;

(c) a right of re-sale as limited by this Act.

As per sub-secvtion 2, Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit where the property has passed to the buyer.

The lien of an unpaid seller is a right to retain possession of the goods until tender (offer) or payment of the price.

Section 47 : Unpaid seller’s lien.

As per section 47, 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, namely:-

a. No Stipulation as to credit : Where goods are sold, and nothing is said as to the time of delivery or the time of payment, the seller is entitled to retain possession until the price is paid, although the property in goods may have passed to the buyer.

b. Sale on Credit : A sale on credit operates as a waiver of the lien during the period of the credit. But if the goods are left in the seller’s possession till the credit has expired, the lien revives even if the buyer is not insolvent.

c. Insolvency of buyer : If the buyer becomes insolvent before the price is paid, and the seller is in possession of the goods, he is entitled to retain possession even if the goods are sold on credit and the term of credit has not expired.

Section 48 : Effect of Part Delivery

If a part of the goods are delivered but the payment is to be made against full delivery, the seller has no lien under this section.

Section 49 : Termination of Lien

Termination of Lien : This section deals with the termination of the lien of the unpaid seller. The lien is lost in any of the three cases mentioned in the section. Unpaid seller’s lien is a possessory lien and hence this right is available to the seller so long as he is in possession but the moment he parts with possession, that right is lost. It is this principle which is implied in clauses (a) & (b). Without reserving the right of disposal : If the right of disposal is reserved to the seller, the seller constitutes the carrier as his agent and bailee and the carrier would have to act according to the directions of the seller. If the seller does not reserve the right of disposal, the seller constitutes the carrier as an agent of the buyer, the carrier holding the goods as bailee for the buyer (Reference section 25). Clause (c) : Waiver :The lien may be waived expressely or by implication Express waiver : Where the contract of sale provides in express terms that the seller shall not be entitled to retain possession until payment of the price, the case is one of express waiver. Implied waiver : example : i) if the seller wrongfully refuses to deliver the goods, such a refusal being a repudiation of the contract; or if the seller wrongfully converts the remaining goods for his own use. ii) when goods have been sold on credit; during the period of credit. (but the lien revives on the expiry of the credit.

Section 50 : Right of stoppage in transit.

This is the second of the three rights of an unpaid seller (sec 46) . When the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transit

The exercise of the right of stoppage in transit does not mean that the seller cancels the sale or that the property re-vests in him. The seller gets the right to repossess the goods.

Essence of lien is to retain possession whereas, the essence of ‘stoppage in transit’ is to regain possession.

Section 51 : Duration of Transit.

As per section 51, Goods are deemed to be in course of transit from the time when they are delivered to a carrier or other bailee for the purpose of transmission to the buyer, till the buyer or his agent in that behalf takes delivery of them from such carrier or other bailee.

Section 52 : How stoppage in transit is effected

Sectio 52 provides for mode of stoppage in transit : The two modes are either taking actual possession of the goods or giving notice to the carrier or bailee or his agent not to deliver the goods to the buyer or his agent. The section does not provide any form of notice, it may be oral or in writing. Telegram stating ‘don’t deliver may be sufficient’. Section provides that notice be given to the person who is actually in possession.

Section 53 : Effect of sub-sale or pledge by buyer

Section 53 provides that, the unpaid seller’s right of lien or stoppage in transit is not affected by any sale or other disposition of the goods which the buyer may have made, except when the seller has assented.

Section 54 : Sale not generally rescinded by lien or stoppage in transit (Re-sale by unpaid seller)

This section deals principally with re-sale by an unpaid seller who has exercised his right of lien, or has exercised the right of stoppage in transit and resumed possession of the goods.

Conditions for resale:

i) When goods are of perishable nature- Then unpaid seller can resell them immediately without the notice to the buyer. But in case of non-perishable items unpaid seller needs to send notice to the buyer for reselling them. ii) Where unpaid seller gives the notice to buyer and buyer still don’t pay for it. iii) Where the right of resale is reserved/ mentioned in the contract.